Equitrans Midstream Corp (ETRN) 2018 Q4 法說會逐字稿

Good morning.

My name is Lindsay, and I will be your conference operator today.

At this time, I would like to welcome everyone to the ETRN and EQM Fourth Quarter and Year-End Earnings Conference Call.

(Operator Instructions)

Thank you.

Nate Tetlow, Vice President, Corporate Development and Investor Relations, you may begin your conference.

Thank you.

Good morning, and welcome to the fourth quarter and year-end 2018 earnings call for ETRN and EQM.

A replay of this call will be available for 14 days beginning this evening.

The phone number for the replay is (855) 859-2056 and the conference ID is 7984534.

Today's call may contain forward-looking statements related to future events and expectations.

Factors that could cause the actual results to differ materially from these forward-looking statements are listed in today's news release, and under risk factors in both ETRN and EQM's Form 10-K for the year ended December 31, 2018, both of which are expected to be filed with the SEC later today.

Today's call may also contain certain non-GAAP financial measures.

Please refer to this morning's news release and our analyst presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure.

Joining me on the call today are Tom Karam, President and CEO; Diana Charletta, Executive Vice President and Chief Operating Officer; and Kirk Oliver, Senior Vice President and Chief Financial Officer.

After our prepared remarks, we will open the call to questions.

With that, I'll turn it over to Tom.

Thanks, Nate.

Good morning, everyone.

This morning, EQM reported full year adjusted EBITDA of $998 million and distributable cash flow of $809 million.

Kirk will join shortly to provide some detail behind those numbers.

We launched E-Train in mid-November, November 13, to be exact.

And I'm happy with what we've accomplished in the few short months since the separation.

Our first priority was to address the incentive distribution rights.

Given market dynamics, we were able to take a creative approach to the simplification and do it quickly.

First, we purchased the outstanding units of EQGP held by the public.

This step closed in early January.

The second step was to exchange the IDRs for EQM units.

Today, we announce that E-Train has entered into a definitive agreement with EQM to exchange the IDRs for 80 million newly issued EQM common units and 7 million newly issued EQM Class B units.

The Class B units will not receive distributions from EQM until they are convertible into EQM common units, which will occur over 3 years, beginning in 2021.

This structure allows us to protect the EQM balance sheet by providing the necessary financial flexibility, while we complete the several large growth projects we have in flight.

Our goal is to balance the interest of both EQM and E-Train.

We believe this deal strikes that right balance.

The IDR transaction is expected to close later this month, at which point, E-Train will own approximately 60% of EQM.

This process, from start to closing, took about 75 days, a much shorter time of transition than most precedent MLP simplification deals of this type.

I'll now turn it over to Kirk for the financial report and then to Diana Charletta to provide operations update, and I'll come back and touch a little bit on strategy and initiatives before answering your questions.

Kirk?

Thanks, Tom, and good morning, everyone.

Before getting to the results, I wanted to remind you of an accounting item to keep in mind.

On July 23, 2018, EQM closed the acquisition of Rice Midstream Partners.

And on May 1, 2018, we completed the acquisition of the Ohio gathering assets from EQT.

As a result of these transactions, our financial statements have been recast to include the preacquisition results for these assets, dating back to November 13 of 2017, which is when EQT completed the acquisition of Rice Energy.

One other accounting item, during the fourth quarter, we took a $262 million impairment charge to goodwill, which impacts the quarter and full year GAAP results for both EQM and ETRN.

The goodwill was primarily driven by production curtailments behind the Rice Energy midstream assets, which were acquired by EQT in 2017 and subsequently purchased by EQM in 2018.

Moving on to the results.

EQM reported full year 2018 adjusted EBITDA of $998 million and distributable cash flow of $809 million.

For the fourth quarter 2018, EQM adjusted EBITDA was $302 million and distributable cash flow was $228 million.

In 2018, EQM operating revenues were $1.5 billion, a 67% increase from the prior year.

$532 million of the increase was driven from the increased revenue as a result of the RMP acquisition and the drop-down assets.

For the year, EQM generated 92% of transmission operating revenue and 45% of gathering operating revenue from firm reservation fees.

On the expense side, 2018 operating expenses, excluding the impairment charge were $507 million, an increase of $232 million versus the prior year, which was primarily driven by the acquired assets.

EQM's fourth quarter 2018 operating revenue were $385 million, an increase of $92 million versus the prior year quarter.

The RMP acquisition and the drop-down transaction accounted for $86 million of the increase with the remaining increase resulting from higher contracted firm transmission and gathering capacities.

Fourth quarter 2018 operating expenses, excluding the impairment charge increased by $37 million versus the prior year quarter.

The acquired assets accounted for $23 million of the increase and we had approximately $5 million of other nonrecurring costs.

The remaining increase was primarily related to higher system throughput and additional assets placed in service, which is consistent with the growth in the business.

As a result of the separation of EQT, EQM will incur certain SG&A expenses related to standing up independent functions and systems that had previously been used to support both EQM's midstream business and EQT's production business.

For 2019, EQM forecast quarterly SG&A expenses of approximately $30 million to $35 million, excluding any nonrecurring items.

During the fourth quarter, ETRN incurred $37 million of nonrecurring expenses relating to the separation from EQT and other transaction costs related to the buy-in of EQGP.

E-Train had approximately $2 million of SG&A expenses related to public company costs.

Moving forward, we expect to incur about $5 million per year at ETRN and public company cost.

In addition to these run-rate expenses, we do anticipate about $5 million of transaction cost in the first quarter of 2019, related to the limited call right and the IDR transaction.

At EQM, we paid a quarterly cash distribution of $1.13 per unit.

2019, we intend to grow the EQM distribution per unit at 6% versus 2018.

For the fourth quarter, ETRN received a $117 million in cash from its ownership in EQM, which consisted of $37.2 million limited partnership units, a general partner interest and a 100% of the incentive distribution rights.

We also announced the initial quarterly ETRN dividend of $0.41 per share, which will be paid on February 27 to E-Train shareholders of record at the close of business on February 15.

For 2019, E-Train will pay a quarterly dividend of $0.45 per share, resulting in an annual dividend of $1.80 per share.

Our intention is to make increases to the quarterly dividend once a year during each first quarter.

In terms of liquidity, EQM had $625 million drawn on its $3 billion credit facility at year-end so we have ample liquidity to fund our organic growth projects.

I'll now turn the call over to Diana for the operational update.

Thanks, Kirk.

Our team had a very busy and successful year integrating the RMP Strike Force and Olympus gathering systems, in addition to completing many growth projects to serve our customers.

In fact, for the full year 2018, we put into service over 65 separate growth projects, which totaled about $490 million of investment.

The team proved its execution capabilities by remaining within the approved budget for these projects.

During the fourth quarter, we gathered an average of 7 bcf per day, which is a new record.

We also moved 3 bcf a day through our Equitrans transmission system.

During 2018, we completed approximately 80 miles of gathering pipe and added 6 compressor stations.

We have made progress on many of our in-flight projects.

Let's start with the Mountain Valley Pipeline.

As of year-end 2018, the MVP project team completed approximately 70% of its construction activities, which included the welding of nearly 175 miles of pipelines and the majority of construction on all compressor stations and interconnects.

We are currently running a scaled-back construction effort, which is consistent with our plan for the winter.

We continue to target full in-service during the fourth quarter of 2019 and maintain the overall project cost estimate of $4.6 billion.

We are working through the projects remaining legal challenges and are closely monitoring developments related to the Atlantic Coast Pipeline as the outcome of these issues could impact MVP's project schedule and cost estimate.

Moving on to MVP Southgate.

During the fourth quarter, MVP Southgate filed its certificate application with the FERC.

Southgate will move gas from MVP about 70 miles south into North Carolina and is backed by a 300 million per day firm capacity commitment from PSNC Energy.

We elected to upsize the pipe diameter which will provide capacity for expansion of up to 900 million per day.

The project cost estimate is $450 million to $500 million and the target in-service date is Q4 2020.

EQM recently increased its equity interest in Southgate by acquiring a portion of Con Edison and PSNC's ownership interest.

As a result, EQM now has 47.2% ownership interest in Southgate.

On the business development side, the team has been successful in securing additional commitments across our gathering, transmission and water businesses.

We recently signed a contract to construct a gathering system for a natural gas producer in the area, which we estimate to generate about $125 million of incremental gathering investment over the next 5 years.

On the transmission side, we executed a precedent agreement with ESC Brooke County Power to construct a natural gas pipeline for connection to propose 830-megawatt power plant in Brooke County, West Virginia.

The agreement includes a 10-year firm reservation commitment for a 140 million per day of capacity.

We expect to invest approximately $80 million on the 16-mile pipeline.

The project has a targeted in-service date of mid-year 2022.

On the water side, we continued to develop our water services business by expanding our Pennsylvania and Ohio freshwater assets.

As we've previously discussed, there is a significant cost advantage to freshwater pipeline delivery versus trucking and equally, if not more important, there is a significant safety and environmental advantage to getting water trucks off the roads.

Our water team recently finalized agreements with EGP and 4 additional producers to provide freshwater services.

The water services business segment is expected to generate about $100 million of EBITDA in 2019, which is a 64% increase over 2018.

Lastly, an update on our plan to integrate and optimize our Pennsylvania gathering systems.

We have completed our hydraulic study and are beginning the design work.

We are coordinating with EQT so that we are in sync with their development plans and service expectations, which is really the critical phase to proper implementation.

As soon as we finalize design and priorities with EQT, we can begin the integration process, which we estimate to take 18 months from the start to in-service.

With that, I turn the call back to Tom.

Thanks, Diana.

To be successful as an independent midstream company, we must consistently be a solutions partner for our customers.

This starts with a commercially driven culture.

To accomplish this, we made a number of organizational changes last fall and the new team has embraced this and executed well.

We secured new gathering and transmission commitments, we expanded freshwater services to additional producers in Pennsylvania and Ohio, and completed the initial hydraulic study, as Diana just mentioned, for integrating our Pennsylvania gathering system.

Additionally, our Mountain Valley Pipeline project is approximately 70% complete, and we've made progress on the Mountain Valley Pipeline Southgate extension by upsizing the pipe size and filing the FERC certificate application.

Our strategy to achieve the scale and scope of a top-tier midstream company begins with execution.

And I'm very proud of Diana and our team's success in 2018.

We remain committed to leveraging the benefits of our asset base for additional growth, and we will be aggressive in doing so.

We will remain focused on completing MVP and our Hammerhead project to curing an MVP expansion, growing the Southgate customer commitments, implementing our Pennsylvania gathering system integration and building on the early success of our nationed water business, including produced water systems.

As we look back on 2018, there are a few key lessons learned.

First and foremost, separating a company is much more difficult than integrating one.

Second, balance sheet strength is critical, and we remain committed to our long-term metrics of 3.5 to 4x debt-to-EBITDA and coverage ratio in excess of 1.2x.

Lastly, transparency with our investor community has been our commitment and will remain our commitment as we deliver value to our shareholders.

In closing, I would like to command and thank our dedicated colleagues, who've gone above and beyond the call of duty in a challenging 2018 to set up E-Train to be successful in 2019.

So with that, we're happy to take your questions.

(Operator Instructions) Our first question comes from the line of Jeremy Tonet with JPMorgan.

Just want to start off on the water business there.

It's quite a nice step up that you guys see in '19 versus '18.

Just wondering if you could dive a little bit more as far as what gives you guys the confidence in that level of step up?

Jeremy, this is Tom.

Well, first of all, the numbers that we talk about for 2019, I think it's about $100 million worth of EBITDA is largely already contracted and it's a 100% freshwater.

So I think that we've got a very high degree of confidence that we're going to deliver those revenues.

I think beyond that, what we're seeing is an opportunity for us to lean in a little bit more aggressively on the produced water side of the business, and you'll hear from us during the course of the year that we're going to be a little bit more forthcoming and transparent as to how we think about developing that produced water business.

We look at it and think about it, analogous to a gas gathering business because of the flow backwater coming out of the wells, as you know, relatively certain with the type curves of the flow back of the water.

We think that's a good business that will give us another arrow in our quiver to be the low-cost provider for midstream services, to all of our customers in the basin.

So we like that aspect of the business.

That's helpful.

And I just want to pick up on a comment.

I think I heard when you guys were talking about Atlanta coast pipe earlier in issues there, if that would impact MVP.

I was wondering, if I heard that right, if you could expand upon, what you're seeing with that project in the -- any potential impacts on MVP?

Yes, our situation is not directly the same as ACP's.

But clearly, when you're talking about crossing the Appalachian Trail, we're keeping our eye very closely attuned to that.

As you may have seen, we filed an amicus brief with the court last week and the Department of Justice filed one on Monday with which we concur and support.

So I think they were just in a wait-and-see now.

And clearly the government nor the court never intended for the potential adverse impacts of this.

So we're just going to keep our eye closely attuned to that and see what transpires there.

That's helpful.

And just one last one, if I could.

Just want to see, you've seen a lot of guys in Appalachia kind of pulling their horns a bit as far as production growth is concerned, EQT as well, and it seems like there's a bigger pivot towards free cash flow generation.

And could you just kind of build in a bit more there as far as kind of how you guys see the impact to your business over time, based on the latest plans you've heard from your producer customers?

Sure.

And I think you're right and I think it's -- we concur with our upstream customers trying to maintain the integrity of their balance sheets and drill within their cash flow, we think that's prudent.

Who knows what the future strip pricing will be.

But from our standpoint as a midstream provider, I think we need to redouble our effort to -- and our focus to be the low-cost provider in all aspects of our business, which is part of the reason why we think a produced water solution will not only be a near-term benefit to us and our customers but a long-term staple of sustainability in our portfolio of business.

So we're built for steady growth, not volatile peak growth and then cut back.

So we're pretty confident that we're going to do just fine in this environment.

And then on top of that too, Jeremy, don't forget, we've got a pretty good line of sight with MVP and our Hammerhead business to really substantial growth in the transmission and takeaway business, which is not only important to Equitrans and EQM, but I think it's very important for the basin.

Because once MVP comes online, we're hopeful and confident that you will see a reduction in the basis differential between our basin and Henry Hub, which with this additional liquidity, will make it more profitable for the upstream companies in the basin to drill.

Our next question come from the line of TJ Schultz with RBC capital market.

On MVP, related to the water crossings, once the comment period over and then how long from that point would it take to get the right permits in place, assuming that the semi to our role is modified?

TJ, the comment period concludes on March 4, and we expect that in or about June that we'll have the total process complete.

Okay.

And then just a kind of follow-up on what Jeremy was asking on the ACP.

I know you filed a brief last week and as you monitor that, I'm just trying to understand really what the next step is in that particular process, on rulings for trail crossings that would give you any line of sight on impact that could spill over into MVP?

Well the purpose of filing the amicus briefs by ourselves and the Department of Justice was in support of the ACP brief requesting an on-bank hearing.

So I think that's the next stop in terms of visibility is that at the point, which the court, the Fourth Circuit would determine whether they will have a rehearing on bank or not.

Okay.

I guess, as I think about the in-service for 4Q '19, there's certainly these legal challenges that you've got some line of sight on, on when this gets put away.

But as we think about it potentially causing some delay on in-service, is that something that would get measured in a manner of a few months?

Or do those decisions mean just given any windows where you can or cannot do certain work that a delay would push it out into call it later next year even?

Yes.

I think, TJ, until we have clarity and visibility as to what's in front of us, we're still guiding to 4Q '19 $4.6 billion.

The 2 issues that we've repeatedly discussed as it relates to the Jefferson National Forest and the nationwide 12 permit, we've got factored into our schedule.

And I don't think it does anyone any good for us to hypothesize or speculate beyond that.

So I think where we were right now is where we are until we have better or different information.

Our next question come from the line of Dennis Coleman with Bank of America.

This is Derek Walker for Dennis.

May be just a -- on the IDR transaction, maybe just -- probably a little bit color around some of those discussions there?

And how you've determined the number of Class B units and sort of the scaling of that?

Was there any sort of the discussions just to have those on a Class B, just not pay cash for a certain period of time or just -- how did you come up with the sort of the tearing of it?

So Derek, I think, there was a lot of discussion back and forth.

And one of the unfortunate things that occurred because of the way we were creative and going about this is that the discussions or negotiations actually took place in public, right?

So we knew all along, and we've said all along to everyone that we needed to find the right balance in executing this transaction so that EQM remained strong, was able to have coverage and would continue to be the singular growth engine because Equitrans right now, after the transaction, is simply a levered tracker to EQM.

So we think the structure of 87 million units with 80 million immediate cash pay and then 7 million phasing in and cash pay overtime is in fact the right balance for both value and for maintaining the strong balance sheet at EQM, which was always the paramount issue for us.

Great.

And then maybe just a quick one on these kind of 18-month sort of integration process, I guess.

How do you kind of view that for unfolding over those 18 months and sort of -- anything that we should be kind of looking for as sort of -- you kind of do the quarterly updates?

How does the benefit kind of pull-through on the gathering side?

It's really a length of permitting in construction, which is what we do every day, normal buildout for us.

So really not any milestones that I can give you to kind of keep track of.

It's our normal business.

What we can get done faster and provide some relief for EQT, we'll certainly do that.

But it's really permitting from a timing perspective.

Our next question come from the line of Tim Howard with Stifel.

Just one clarification on the Class B. So those will not be paid in kind distributions, is your distributions for those?

Until they're convertible, that's correct, yes.

They're not picked units, they're just straight deferred units.

Great.

And then just on the impairment, would you discuss what's driving that further?

And I assume it's related to the Olympus and Strike Force gathering systems and just how that impacts your kind of cash flow outlook in 2019?

Yes, that's primarily the Rice Pennsylvania gathering system, and it's driven by really 2 things when you do the impairment testing.

One is just the market value of midstream stocks, which are down, of course, so that pushes you more towards an impairment.

And then also the fact that producers are revising downward their production forecasts so that's what's really causing that.

And then as we go forward, we will look at that again on an annual basis.

Okay.

And then any impact to like 2019 expectations or?

No.

It's all noncash.

It's all noncash and factored down.

Our next question comes from the line of David Amoss with Heikkinen Energy.

Just want to start by saying congratulations for coming up with what looks like a very fair transaction between EQM and ETRN for the IDRs.

I wanted to follow-up on the produced water comments earlier.

If I heard you correctly, you're saying that the water -- the produced water that you're getting out of the wells does kind of stay in the same ratio to the hydrocarbons you're getting over the life of the well, is that a fair assessment?

No.

David, that's not what I said.

I said it's analogous because flow back water comes out with a type curve, and it's not the same type curve as gas comes out of the water and it's clearly not in the same quantities.

The point being, it's sustainable, recurring business that you can model and create a contract that would also be analogous to a gas gathering contract as it relates to rates and volumes.

That's all.

Okay.

Thanks for the clarification.

And then second question, just looking at the Southgate cost estimate looks to be a little bit higher at the midpoint.

Can you just touch on the driver of that?

Yes.

I don't think that we've changed the range of cost on Southgate.

What we did say was that we were upsizing the pipe, but we would still be able to build it within the range that we gave.

We might end up slightly at the higher end of that range, but it's a pretty good trade-off for us because the smaller diameter pipe would have a max daily capacity of, I think, about 500 million a day and with the up-sized pipe, we'll be able to have a max daily capacity of about 800 million or 900 million a day, which clearly, creates some commercial opportunities for us.

And Dave, we also increased our percent ownership up to 47%, so when you're looking at the slide, that shows the EQM portion of the CapEx, which increased from last quarter because of the ownership increase.

Yes.

Good point, Nate.

Our next question come from the line of Michael Blum with Wells Fargo.

Just 2 quick ones for me.

One, does -- what I guess I will refer to as the noise going on at EQT right now, does that impact your ability to timing of your integration optimization plans you have for the 2 legacy EQM and RICE systems to combine those, both in terms of the capital savings target and the timing?

Short answer, Michael, is no.

The larger issue for us as it relates to the integration and optimization of those systems is because it will provide benefit intrinsically to us so that we can have a much more efficient up -- system, Pennsylvania gathering system, to operate and manage.

But it also is going to provide benefits to all of our customers within and around that footprint.

By increasing the number of delivery points from anywhere on the system, by eliminating CapEx over a period of time for us and allowing us the opportunity in response to any of our customers, including EQT as it relates to high and low pressure system development over time.

So we're moving ahead full steam.

Okay, great.

I appreciate that.

And then it's kind of subtle, but I just want to know if there's anything behind it, at EQM, it looks like you kind of slightly tweaked the distribution growth target, and I just wanted to see if you have any comments in terms of the thought process behind that?

So we had previously said at EQM that we were going to grow our distribution 6% to 8%.

And the purpose of giving the range was to provide some time for us to understand what our cash flow was going to be with the ultimate priority of maintaining coverage in the balance sheet.

And we thought that -- we still think that 6% is a prudent distribution growth rate and still making sure that we preserve the integrity of the balance sheet.

Our next question comes from the line of Barrett Blaschke with MUFG Securities.

Just one for me.

Just wondering if there were to be further delays in MVP, how would that impact Southgate and Hammerhead?

Well, Southgate is an extension of MVP mainline so clearly, they're tied together.

Hammerhead will continue under construction, probably more closely mirror the in-service date of MVP.

But they wouldn't be directly connected in terms of in-service date.

That would be within our control to determine that.

(Operator Instructions) Our next question come from the line of Chris Sighinolfi with Jefferies.

Circling back on the IFRS changes, I just had, I think, 2 questions.

If I take a look at what the terms of that agreement are and factor in the conversion of the additional Class B units on the schedule that you outlined in the release and flow those distributions up to ETRN and strip off the SG&A you know in the term loan B cost, I do see an excess of $40 million, $50 million a year, sort of the annual cash buffer.

And I guess, related 2 questions.

One, do you see the same or are there other costing items that I'm overlooking?

And two, if you do, what do you intend to do with that balance?

So Chris, I think -- I understand your question.

The way we approached it is that the coverage has to be maintained at EQM.

So that we're going to build coverage at EQM and then just flow through whatever we ultimately, intend to pay out in dividends at E-Train.

As we're sitting here today, we don't anticipate or have a need to build excess cash at E-Train beyond covering our cash expenses.

So that the real philosophy is to rapidly build coverage at EQM.

Well, I guess, Tom, because at the Analyst Day, one of the points that we had discussed, and don't get me wrong, I'm not objecting to this, if in fact there's buffer at both levels, I personally would look at that as a beneficial tenant to the story.

I guess all I'm saying is, at the Analyst Day in October, it was a sort of a full payout model, but there was also no standalone debt.

Now there's a term loan B and it seems like a little bit of excess cash.

So I'm just wondering, is the idea to reserve that cash to just just pay down the term loan B?

Or to provide added security at both levels to maybe create a situation where you can invest additionally in EQM?

That's kind of the flavor what I'm trying to ask.

Right.

And that's -- so that's a pretty complicated question for us to answer today.

I think -- if to the extent there is excess cash at E-Train, then I think the first 2 stops of what we would look at would be to have debt paid down or share buyback.

I think I would revert back to my earlier answer, which is, our plan is to ensure that we've got rapid distribution coverage growth at EQM, and not to allow too much excess to flow up the E-Train at this point.

Okay.

If I could ask 2 more, one would just be on operating costs in the quarter.

I know you addressed some of this already, obviously it was a bit of a surprise for us relative to what we were anticipating and with this faster pace of growth and the revenues.

You mentioned some of the cost associated with separating from EQT and creating your own systems.

I'm just wondering, did some of those difficulties impact both OpEx and SG&A?

Or were they -- was that commentary referenced only to OpEx?

I don't know that we've referenced any difficulties.

Clearly there were onetime separation costs and the friction of separating a company.

I think my comments were that in terms of the degree of difficulty and the fatigue on our workforce, it was -- it's much more significant separating a company than integrating it.

I don't think that there were any quantifiable operating costs in excess of what we did.

Although, you give me an opportunity, Chris, to touch on a point, just a little nit midpoint that I had.

I've read a bunch of the notes that were put out this morning by people, and they're signaling that we were a slight miss to our EBITDA numbers.

And I respectfully would take issue with that because in our numbers there was a onetime nonrecurring costs that were defined as other SG&A costs that were really triggered by the separation, or I think that amounted to just like $5 million.

So that if you add that back in, there really was not a miss, even to the street consensus, so I appreciate the question.

No, there were no extraordinary operating cost issues.

And no, I don't think we did miss the street consensus.

I think that we hit it, so thanks for the question.

Yes.

And the difficulties, fray, that's clearly my terminology not what was in your release, so apologies if I said that in error or casually.

No.

It's a fact, it's a reality, though.

I mean, you think about when you're trying to break off from a larger company, we had to stand up all new systems and the team did a fantastic job standing that up.

We had to set up an SG&A run rate to put in our guidance.

And believe me, our board is pushing us to say, you need to right size that as quickly as you can and we will.

So we actually think there may be some opportunities there moving forward.

But in terms of difficulty, yes, there was a lot of difficulty, but it didn't impact it -- it didn't have an impact on the numbers that we reported.

Okay.

And I guess, new final point on this point is that the way you've guided clearly for the first quarter, which is an expected run rate for EQM and then it's an additional costing item carrying on from 4Q in this separation cost so that -- so you can move it, model it, and it won't be a surprise, is that fair?

Yes, that is.

Yes.

Okay.

And then, I guess, my final question is just about the MVP Southgate, the additional interest that you had noted being acquired, just wondering the motivation around that.

Were those parties just actively looking to exit?

Or is it something that you saw as attractive -- sort of doubling down that project?

Well, yes to both of those.

I think that we -- the interest that we bought, the owner of the interest just felt there's -- no longer within their core business model to hold that, and we were fine with that and we were actually excited to be able to pick up that additional interest.

We think that long-term, MVP and MVP Southgate and other additional opportunities that will flow from that pipe will be very meaningful.

Our next question comes of the line of Dave Amoss with Heikkinen Energy.

Tom, just wanted to ask on the share buyback comment that you made.

Would you mind just kind of laying out a scenario and the criteria that you'll use to make a decision like that over time?

Sure, David.

I knew I shouldn't have said that.

Yes, so it's in the context of to the extent that there is a buildup of excess cash flow at E-Train, and we're able to comfortably support the term loan B that's there and our cost, what would be the potential uses?

And I was simply trying to prioritize that rather than increase the dividend growth rate at E-Train right now, we would prioritize the use of that cash more toward debt paydown or share repurchase.

It is not something that we're trying to manage the business to create at this point.

It was really in the context of trying to answer the question.

And what should also signal, though, David, that we're not opposed that if we're in the position to execute on share buybacks in the future, we're not opposed to that.

And there are no further questions in the queue.

I'll turn the call back over to our presenters.

So on behalf of the team, we'd like to thank everybody for joining us today.

I just want to reiterate something I said in my comments and had a chance to talk about on the Q&A a little bit.

The workforce, the colleagues that we work with every day here at E-Train and EQM, have really done an exceptional job to not only operate the business and continue to execute on building pipe and moving gas, but to separate a very large enterprise from our mothership EQT and do it seamlessly to The Street.

So I just want to take the extra second to thank everybody who we work with, and to reassure the investors that we're working hard every day to create shareholder value.

And with that, I'll thank everyone for joining, and look forward to speaking with you again.

This concludes today's conference call.

You may now disconnect.