Equitrans’ Q4 Results Are Decent, but MVP’s Outlook Is Now Cloudy

Equitrans’ ETRN fourth-quarter financial results generally met our expectations, as full-year adjusted EBITDA of $1.07 billion compared with our forecast $1.1 billion. However, the Mountain Valley Pipeline, or MVP, remains under a substantial amount of uncertainty, and there was little Equitrans management could do to dispel it. In short, while Equitrans continues to collect agency authorizations and resubmit permits to the U.S. Fourth Circuit Court of Appeals, it no longer has too much in the way of confidence, in our view, of being successful via this route. At first glance, while we reevaluate our scenarios for Equitrans, we will hold our $14 fair value estimate and narrow moat rating intact.

Instead of the legal route, Equitrans is looking for Congress to enact federal permitting reform that would specifically require the completion of the MVP project. We’ve seen several proposals for this type of reform from Democrats and Republicans, including one recently highlighting the need to expedite U.S. LNG project approvals. We continue to think there is bipartisan support for the reform, especially as it typically also addresses the need to expedite the permitting process for solar and wind projects. It is not just narrowly focused on addressing a small subset of oil and gas infrastructure and the MVP project, which we think makes the legislation palatable to a large range of stakeholders.

Given the reliance on a political process that is not directly under its control, Equitrans has introduced two versions of 2023 guidance while remaining committed to the MVP process. Assuming the MVP enters services in the second half of 2023, EBITDA is expected to range between $1.06 billion to $1.14 billion. For context, with the MVP in service, we expect full-year EBITDA to be around $1.4 billion-$1.7 billion (the range reflects additional projects linked to MVP entering service), so this guidance assumes a very late start.