Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

or

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                TO     

COMMISSION FILE NUMBER 1-35574

EQT Midstream Partners, LP

(Exact name of registrant as specified in its charter)

(412) 553-5700

(Registrant’s telephone number, including area code)

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  ý  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ý  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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  o  No  ý

As of June 30, 2013, there were 17,339,718 Common Units, 17,339,718 Subordinated Units and 707,744 General Partner Units outstanding.

Table of Contents

EQT MIDSTREAM PARTNERS, LP

Index

2

Table of Contents

Glossary of Commonly Used Terms, Abbreviations and Measurements

adjusted EBITDA - a supplemental non-GAAP financial measure defined by the Company as net income plus net interest expense, income tax expense (if applicable), depreciation and amortization expense, non-cash long-term compensation expense and other non-cash adjustments (if applicable) less other income and the Sunrise Pipeline lease payment.

AFUDC – Allowance for Funds Used During Construction - carrying costs for the construction of certain long-term 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.

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.

British thermal unit – a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.

distributable cash flow – a supplemental non-GAAP financial measure defined by the Company as adjusted EBITDA less net cash paid for interest expense, ongoing maintenance capital expenditures, reimbursable maintenance capital expenditures and income taxes (if applicable) plus reimbursable maintenance capital expenditures expected to be reimbursed by EQT.

firm contract – a contract for transportation services that obligates a customer to pay a fixed monthly charge to reserve an agreed upon amount of pipeline capacity regardless of the actual pipeline capacity used by the customer during each month.

gas – all references to “gas” in this report refer to natural gas.

omnibus agreement - the agreement entered into among the Company, its general partner and EQT Corporation (EQT) in connection with the Company’s initial public offering, pursuant to which EQT agreed to provide the Company with certain general and administrative services and a license to use the name “EQT” and related marks in connection with the Company’s business. The omnibus agreement also provides for certain indemnification and reimbursement obligations between the Company and EQT.

play - a proven geological formation that contains commercial amounts of hydrocarbons.

reservoir - a porous and permeable underground formation containing an individual and separate natural accumulation of producible hydrocarbons (crude oil and/or natural gas) which is confined by impermeable rock or water barriers and is characterized by a single natural pressure system.

throughput - the volume of natural gas transported or passing through a pipeline, plant, terminal or other facility during a particular period.

working gas – the volume of natural gas in the storage reservoir that can be extracted during the normal operation of the storage facility.

Abbreviations

FERC – Federal Energy Regulatory Commission

GAAP – Generally Accepted Accounting Principles

IRS – Internal Revenue Service

SEC – Securities and Exchange Commission

3

Table of Contents

Glossary of Commonly Used Terms, Abbreviations and Measurements

Measurements

Btu = one British thermal unit

BBtu  = billion British thermal units

Bcf    = billion cubic feet

Dth  =  million British thermal units

Mcf    = thousand cubic feet

MMBtu  = million British thermal units

MMcf   = million cubic feet

TBtu = trillion British thermal units

Tcf = one trillion cubic feet

4

Table of Contents

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

EQT MIDSTREAM PARTNERS, LP

Statements of Consolidated Operations (Unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

5

Table of Contents

EQT MIDSTREAM PARTNERS, LP

Statements of Consolidated Cash Flows (Unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

6

Table of Contents

EQT MIDSTREAM PARTNERS, LP

Consolidated Balance Sheets (Unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

7

Table of Contents

EQT MIDSTREAM PARTNERS, LP

Consolidated Statements of Partners’ Capital (Unaudited)

The accompanying notes are an integral part of these Consolidated Financial Statements.

8

Table of Contents

EQT Midstream Partners, LP

Notes to Consolidated Financial Statements (Unaudited)

A.        Financial Statements

Organization

EQT Midstream Partners, LP (the Partnership, EQT Midstream Partners or the Company), which closed its initial public offering (IPO) on July 2, 2012, is a growth-oriented Delaware limited partnership formed by EQT Corporation in January 2012.  Equitrans, L.P. (Equitrans) is a Pennsylvania limited partnership and the predecessor for accounting purposes (the Predecessor) of EQT Midstream Partners. EQT Midstream Services, LLC is the Company’s general partner. References in these consolidated financial statements to the “Company,” when used for periods prior to the IPO, refer to Equitrans. References in these consolidated financial statements to the “Company,” when used for periods beginning at or following the IPO, refer collectively to the Partnership and its consolidated subsidiaries. References in these consolidated financial statements to ‘‘EQT’’ refer collectively to EQT Corporation and its consolidated subsidiaries. For periods prior to the IPO, the accompanying consolidated financial statements and related notes include the assets, liabilities and results of operations of Equitrans presented on a carve-out basis prior to the contribution by EQT of all of the partnership interests in Equitrans to EQT Midstream Partners, in connection with the Partnership’s IPO.

The Company does not have any employees. Operational support for the Company is provided by EQT Gathering, LLC (EQT Gathering), one of EQT’s operating subsidiaries engaged in certain midstream business operations. EQT Gathering’s employees manage and conduct the Company’s daily business operations.

Immediately prior to the closing of the IPO, EQT contributed all of the partnership interests in Equitrans to the Partnership. The Company issued 14,375,000 common units in the IPO, which represented 40.6% of the Company’s outstanding equity. EQT retained a 59.4% equity interest in the Company, including 2,964,718 common units, 17,339,718 subordinated units, and a 2% general partner interest. EQT also holds the incentive distribution rights.

On July 22, 2013, the Company completed an underwritten public offering of 12,650,000 common units, which included the full exercise of the underwriters’ over-allotment option, representing limited partner interests in the Company.  Net proceeds from the offering were used to finance the cash consideration paid by the Company to EQT in connection with the July 22, 2013 merger of Sunrise Pipeline, LLC (Sunrise) into Equitrans. Following the offering and Sunrise merger, EQT retained a 44.6% equity interest in the Company, which includes 3,443,902 common units, 17,339,718 subordinated units, and a 2% general partner interest.  For further information regarding the offering and Sunrise merger, please see Note I below.

Nature of Business

The Company is a growth-oriented limited partnership formed by EQT to own, operate, acquire and develop midstream assets in the Appalachian Basin. The Company provides midstream services to EQT and third parties in the Appalachian Basin across 22 counties in Pennsylvania and West Virginia through two primary assets: the transmission and storage system and the gathering system.

The Company’s transmission and storage system includes an approximately 700 mile FERC-regulated interstate pipeline that connects to five long-haul interstate pipelines and multiple distribution companies. The transmission and storage system is supported by 14 associated natural gas storage reservoirs with approximately 400 MMcf per day of peak withdrawal capability and 32 Bcf of working gas capacity. As of June 30, 2013, the transmission assets had total throughput capacity of approximately 1.7 TBtu per day. Revenues are primarily driven by the Company’s firm transmission and storage contracts.

The Company’s gathering system consists of approximately 2,000 miles of FERC-regulated low-pressure gathering lines. Substantially all of the revenues associated with the Company’s gathering system are generated under interruptible gathering service contracts.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles 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

9

Table of Contents

EQT Midstream Partners, LP

Notes to Consolidated Financial Statements (Unaudited)

United States generally accepted accounting principles for complete financial statements.  In the opinion of management, these statements include all adjustments (consisting of only normal recurring accruals, unless otherwise disclosed in this Form 10-Q) necessary for a fair presentation of the financial position of the Company as of June 30, 2013 and December 31, 2012, the results of its operations for the three and six months ended June 30, 2013 and 2012 and its cash flows for the six months ended June 30, 2013 and 2012.  Certain previously reported amounts have been reclassified to conform to the current year presentation.

The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.

Due to the seasonal nature of the Company’s utility customer contracts, the interim statements for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Operating revenues are currently expected to be higher in the first and fourth quarters of each year.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 16 of this Form 10-Q.

B.            Financial Information by Business Segment

Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally and subject to evaluation by the chief operating decision maker in deciding how to allocate resources.

The Company reports its operations in two segments, which reflect its lines of business. Transmission and storage includes the Company’s FERC-regulated interstate pipeline and storage business. Gathering includes the FERC-regulated, low-pressure gathering system. The operating segments are evaluated on their contribution to the Company’s results based on operating income.

All of the Company’s operating revenues, income from operations and assets are generated or located in the United States.

10

Table of Contents

EQT Midstream Partners, LP

Notes to Consolidated Financial Statements (Unaudited)

C.        Related-Party Transactions

In the ordinary course of business, the Company has transactions with affiliated companies. The Company has various contracts with affiliates including, but not limited to, Transportation Service and Precedent Agreements, Storage Agreements and Gas Gathering Agreements.

In connection with the IPO, the Company entered into various agreements with EQT. For instance, the Company entered into an omnibus agreement by and among the Company, its general partner and EQT. Pursuant to the omnibus agreement, EQT or its affiliates perform centralized corporate, general and administrative services for the Company, such as legal, corporate recordkeeping, planning, budgeting, regulatory, accounting, billing, business development, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, investor relations, cash management and banking, payroll, internal audit, taxes and engineering. In exchange, the Company reimburses EQT and its affiliates for the expenses incurred by them in providing these services, except for any expenses associated with EQT’s long-term incentive programs. The omnibus agreement further requires that the Company reimburse EQT and its affiliates for the Company’s allocable portion of the premiums on any insurance policies covering the Company’s assets. EQT does not record any profit or margin for the administrative and operational services charged to the Company.

The Company also entered into an operation and management services agreement with EQT Gathering, pursuant to which EQT Gathering provides the Company’s pipelines and storage facilities with certain operational and management services.  The Company reimburses EQT Gathering for such services pursuant to the terms of the omnibus agreement as described above.

D.        Income Taxes

The Predecessor’s financial statements for the period prior to the IPO include U.S. federal and state income tax as its income was reported and included as part of EQT’s consolidated federal tax return.  In conjunction with the contribution by EQT of the ownership of Equitrans to the Partnership immediately prior to the IPO, approximately $143.6 million of net current and deferred income tax liabilities were eliminated through equity. Effective July 2, 2012, as a result of its limited partnership structure, the Company is no longer subject to federal and state income taxes. For federal and state income tax purposes, all income, expenses, gains, losses and tax credits generated by the Company flow through to the unitholders, and accordingly, do not result in a provision for income taxes for the Company.

11

Table of Contents

EQT Midstream Partners, LP

Notes to Consolidated Financial Statements (Unaudited)

E.        Debt

Prior to the IPO, EQT provided financing to the Company directly or indirectly through EQT Capital Corporation (EQT Capital), EQT’s subsidiary finance company. Such financing was generally provided through intercompany term and demand loans that were entered into between EQT Capital and EQT’s subsidiaries.

On July 2, 2012, in connection with the IPO, the Company entered into a $350 million credit facility with Wells Fargo Bank, National Association, as administrative agent, and a syndicate of lenders, which will mature on July 2, 2017. The credit facility is available to fund working capital requirements and capital expenditures, to purchase assets, to pay distributions and repurchase units and for general partnership purposes.

There were no amounts outstanding under the credit facility at June 30, 2013 or December 31, 2012. Additionally, the Company did not have any short-term loans outstanding at any time during the three or six months ended June 30, 2013. For the three and six months ended June 30, 2013, commitment fees of approximately $0.2 million and $0.4 million, respectively, were paid to maintain credit availability under the Company’s revolving credit facility at an annual rate of 25 basis points.

F.        Lease Obligations

On June 18, 2012, the Company transferred ownership of the Sunrise Pipeline, an approximately 40 mile, FERC-regulated transmission pipeline which was under construction at the time and placed into service on July 28, 2012, to EQT. Concurrent with the transfer, the Company entered into a lease agreement with EQT for the lease of the Sunrise Pipeline. Under the lease, Equitrans operates the pipeline as part of its transmission and storage system under the rates, terms, and conditions of its FERC-approved tariff. While the lease agreement was effective June 18, 2012, no lease payments were due pursuant to this lease agreement until the Sunrise Pipeline was placed into service. The lease payment due each month is the lesser of the following alternatives: (1) a revenue-based payment reflecting the revenues generated by the operation of the Sunrise Pipeline minus the actual costs of operating the Sunrise Pipeline and (2) a payment based on depreciation expense and pre-tax return on invested capital for the Sunrise Pipeline. As a result, the payments to be made under the Sunrise Pipeline lease will be variable and are not expected to have a net positive or negative impact on distributable cash flow.

At the time the lease was entered into, management determined that the lease was a capital lease for GAAP purposes as the present value of the estimated minimum lease payments exceeded the fair value of the leased property. Thus, the gross capital lease assets and obligations recorded in 2012 were approximately $216 million, which represented the costs incurred through December 31, 2012 to construct the pipeline and was estimated to be the fair value of the leased property.  Additional closeout construction costs of approximately $8 million were incurred by EQT during the first six months of 2013, which increased the fair value of the leased property. Completion of the pipeline closeout construction will further increase the fair value of the leased property. Once closeout construction is complete, management will finalize the estimate of the fair value of the asset and will revise the estimates of the lease obligation and related asset as necessary.

For the three months ended June 30, 2013, interest expense of $6.3 million and depreciation expense of $4.0 million was recorded related to this capital lease. For the six months ended June 30, 2013, interest expense of $10.2 million and depreciation expense of $7.7 million was recorded related to this capital lease.  Additionally, Sunrise lease payments totaled $8.3 million and $15.2 million, related to the three and six months ended June 30, 2013, respectively.

The lease terminated on July 22, 2013 in connection with the transaction described in Note I below.

G.        Net Income per Limited Partner Unit and Cash Distributions

Net income per limited partner unit is calculated utilizing the two-class method by dividing the limited partner interest in net income by the weighted average number of limited partner units outstanding during the period. The limited partner interest in net income is determined by first allocating net income to the general partner based upon the general partner’s ownership interest of 2%. Any common units issued during the period are included on a weighted-average basis for the days in which they were outstanding.

12

Table of Contents

EQT Midstream Partners, LP

Notes to Consolidated Financial Statements (Unaudited)

Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or other agreements to issue common units, such as awards under the long-term incentive plan, were exercised, settled or converted into common units.  When it is determined that potential common units resulting from an award subject to performance or market conditions should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method. The weighted-average number of units used to calculate diluted net income per limited partner unit for the three months ended June 30, 2013 includes the effect of 8,706 phantom units and 97,034 performance awards. The weighted-average number of units used to calculate diluted net income per limited partner unit for the six months ended June 30, 2013 includes the effect of 7,597 phantom units and 103,362 performance awards.

The following table presents the Company’s calculation of net income per unit for common and subordinated limited partner units:

The partnership agreement requires that, within 45 days after the end of each quarter, beginning with the quarter ended September 30, 2012, the Company distribute all of its available cash (described below) to unitholders of record on the applicable record date.  As further discussed in Note I, a quarterly cash distribution was declared effective July 15, 2013, payable August 14, 2013 to unitholders of record on August 5, 2013.

Available cash

Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter:

13

Table of Contents

EQT Midstream Partners, LP

Notes to Consolidated Financial Statements (Unaudited)

·                  less, the amount of cash reserves established by the Company’s general partner to:

–     provide for the proper conduct of the Company’s business (including reserves for future capital expenditures, anticipated future debt service requirements and refunds of collected rates reasonably likely to be refunded as a result of a settlement or hearing related to FERC rate proceedings or rate proceedings under applicable law subsequent to that quarter);

–     comply with applicable law, any of the Company’s debt instruments or other agreements; or

–     provide funds for distributions to the Company’s unitholders and to the Company’s general partner for any one or more of the next four quarters (provided that the Company’s general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent the Company from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter);

·                  plus, if the Company’s general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.

Subordinated Units

All subordinated units are held by EQT. The partnership agreement provides that, during the period of time referred to as the “subordination period,” the common units will have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to $0.35 per common unit, which amount is defined in the partnership agreement as the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. The practical effect of the subordinated units is to increase the likelihood that during the subordination period there will be available cash to distribute the minimum quarterly distribution to the common units. The subordination period will end, and the subordinated units will convert to common units, on a one-for-one basis, when certain distribution requirements, as defined in the partnership agreement, have been met.

Incentive Distribution Rights

All incentive distribution rights are held by the Company’s general partner. Incentive distribution rights represent the right to receive an increasing percentage (13.0%, 23.0% and 48.0%) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels described below have been achieved. The Company’s general partner may transfer the incentive distribution rights separately from its general partner interest, subject to restrictions in the partnership agreement.

The following discussion assumes that the Company’s general partner continues to own both its 2.0% general partner interest and the incentive distribution rights.

If for any quarter:

·                  the Company has distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and

·                  the Company has distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;

then, the Company will distribute any additional available cash from operating surplus for that quarter among the unitholders and the Company’s general partner in the following manner:

·                  first, 98.0% to all unitholders, pro rata, and 2.0% to the Company’s general partner, until each unitholder receives a total of $0.4025 per unit for that quarter (the first target distribution);

·                  second, 85.0% to all unitholders, pro rata, and 15.0% to the Company’s general partner, until each unitholder receives a total of $0.4375 per unit for that quarter (the second target distribution);

·                  third, 75.0% to all unitholders, pro rata, and 25.0% to the Company’s general partner, until each unitholder receives a total of $0.5250 per unit for that quarter (the third target distribution); and

·                  thereafter, 50.0% to all unitholders, pro rata, and 50.0% to the Company’s general partner.

14

Table of Contents

EQT Midstream Partners, LP

Notes to Consolidated Financial Statements (Unaudited)

H.        Subsidiary Guarantors

The Company filed a registration statement on Form S-3 with the SEC on July 1, 2013 to register, among other securities, debt securities. The subsidiaries of the Company (Subsidiaries) are co-registrants with the Company, and the registration statement registered guarantees of debt securities by one or more of the Subsidiaries (other than EQT Midstream Finance Corporation, a 100% owned subsidiary of the Company whose sole purpose is to act as co-issuer of debt securities). The Subsidiaries are 100% owned by the Company and any guarantees by the Subsidiaries will be full and unconditional. The Company has no assets or operations independent of the Subsidiaries, and there are no significant restrictions upon the ability of the Subsidiaries to distribute funds to the Company by dividend or loan. In the event that more than one of the Subsidiaries provide guarantees of any debt securities issued by the Company, such guarantees will constitute joint and several obligations. None of the assets of the Company or the Subsidiaries represent restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended.

I.         Subsequent Events

On July 15, 2013, the Company announced that the Board of Directors of its general partner declared a cash distribution to the Company’s unitholders of $0.40 per unit for the second quarter of 2013.  The cash distribution is payable on August 14, 2013 to unitholders of record at the close of business on August 5, 2013.

On July 15, 2013, the Company and Equitrans entered into an Agreement and Plan of Merger (Merger Agreement) with EQT and Sunrise, a wholly owned subsidiary of EQT and the owner of the Sunrise Pipeline. Effective July 22, 2013, Sunrise merged with and into Equitrans, with Equitrans continuing as the surviving company.  The Company paid EQT total consideration of $540 million consisting of a $507.5 million cash payment, 479,184 Company common units and 267,942 Company general partner units. Prior to the merger, Sunrise entered into a precedent agreement with a third party for firm transportation service over a twenty-year term. If a transportation agreement pursuant to this precedent agreement becomes effective on its current terms by December 31, 2014, the Company will make an additional payment of $110 million to EQT. The transportation agreement is subject to review by regulatory authorities, which is expected to be completed by year-end 2013. The Company will also pay EQT additional consideration in the event certain other transportation agreements on the Sunrise system become effective prior to December 31, 2014.

The transfer of ownership of the Sunrise assets from EQT to the Company represented a reorganization of entities under common control and will be recorded at EQT’s historical cost. Accordingly, the Company’s historical results of operations will be recast to reflect the results attributable to the Sunrise assets beginning with the Company’s quarterly report for the quarter ending September 30, 2013.

On July 22, 2013, the Company completed an underwritten public offering of 12,650,000 common units, which included the full exercise of the underwriters’ over-allotment option, representing limited partner interests in the Company.  Net proceeds from the offering were used to finance the cash consideration paid to EQT in connection with the Sunrise merger. Following the offering and Sunrise merger, EQT retained a 44.6% equity interest in the Company, which includes 3,443,902 common units, 17,339,718 subordinated units, and a 2% general partner interest. The Company received net proceeds of approximately $529 million from the offering, after deducting the underwriters’ discount and estimated offering expenses of approximately $21 million.

15

Table of Contents

EQT Midstream Partners, LP

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

EQT Midstream Partners, LP (the Partnership, EQT Midstream Partners or the Company), which closed its initial public offering (IPO) on July 2, 2012, is a growth-oriented Delaware limited partnership formed by EQT Corporation in January 2012.  Equitrans, L.P. (Equitrans) is a Pennsylvania limited partnership and the predecessor for accounting purposes (the Predecessor) of EQT Midstream Partners (the Successor).  References in the following discussion to the “Company,” when used for periods prior to the IPO, refer to Equitrans.  References in the following discussion to the “Company,” when used for periods beginning at or following the IPO, refer collectively to the Partnership and its consolidated subsidiaries. Immediately prior to the closing of the IPO, EQT Corporation contributed all of the partnership interests in Equitrans to the Partnership. Therefore, the historical financial statements contained in this report reflect the assets, liabilities and operations of Equitrans for periods ending before July 2, 2012 and EQT Midstream Partners for periods beginning at or following July 2, 2012.

The following discussion analyzes, among other things, the financial condition and results of operations of the Predecessor and Successor. You should read the following discussion and analysis of financial condition and results of operations in conjunction with the consolidated financial statements, and the notes thereto, included elsewhere in this report. References in the following discussion and analysis to ‘‘EQT’’ refer collectively to EQT Corporation and its consolidated subsidiaries.

CAUTIONARY STATEMENTS

Disclosures in this Quarterly Report on Form 10-Q contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.  Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other words of similar meaning in connection with any discussion of future operating or financial matters.  Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the matters discussed in the section captioned “Outlook” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of the Company and its subsidiaries, including guidance regarding transmission and storage and gathering revenue growth and volume growth; infrastructure programs (including the timing, cost, capacity and sources of funding with respect to such programs); natural gas production growth in the Company’s operating areas for EQT and third parties; the amount and timing of distributions; the effect of the termination of the Sunrise Pipeline lease on adjusted EBITDA and distributable cash flow; projected operating and capital expenditures, including the amount and timing of capital expenditures reimbursable by EQT; liquidity and financing requirements, including funding sources and availability; asset acquisitions, including the Company’s ability to complete any asset purchases from EQT and third parties; the effects of government regulation, litigation, and tax position. The forward-looking statements in this Quarterly Report on Form 10-Q involve risks and uncertainties that could cause actual results to differ materially from projected results.  Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results.  The Company has based these forward-looking statements on current expectations and assumptions about future events.  While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control.  The risks and uncertainties that may affect the operations, performance and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company does not intend to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

In reviewing any agreements incorporated by reference in or filed with this Quarterly Report on Form 10-Q, please remember that such agreements are included to provide information regarding the terms of such agreements and are not intended to provide any other factual or disclosure information about the Company. The agreements may contain representations and warranties by the Company, which should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties of such agreements should those statements prove to be inaccurate. The representations and warranties were made only as of the date of the relevant agreement or such other date or dates as may be specified in such agreement and are subject to more recent developments.

16

Table of Contents

EQT Midstream Partners, LP

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Accordingly, these representations and warranties alone may not describe the actual state of affairs of the Company or its affiliates as of the date they were made or at any other time.

Executive Overview

On July 15, 2013, the Company and Equitrans entered into an Agreement and Plan of Merger (Merger Agreement) with EQT and Sunrise Pipeline, LLC (Sunrise), a wholly owned subsidiary of EQT and the owner of the Sunrise Pipeline. Effective July 22, 2013, Sunrise merged with and into Equitrans, with Equitrans continuing as the surviving company.  The Company paid EQT total consideration of $540 million consisting of a $507.5 million cash payment, 479,184 Company common units and 267,942 Company general partner units. Prior to the merger, Sunrise entered into a precedent agreement with a third party for firm transportation service over a twenty-year term. If a transportation agreement pursuant to this precedent agreement becomes effective on its current terms by December 31, 2014, the Company will make an additional payment of $110 million to EQT. The transportation agreement is subject to review by regulatory authorities, which is expected to be completed by year-end 2013. The Company will also pay EQT additional consideration in the event certain other transportation agreements on the Sunrise system become effective prior to December 31, 2014.

Prior to this merger, the Company operated the Sunrise Pipeline as part of its transmission and storage system under a lease agreement with EQT. The lease was accounted for as a capital lease for GAAP purposes and, as a result, revenues and expenses associated with Sunrise were included in the Company’s financial statements; however, the monthly lease payment to EQT offset the impact on the Company’s distributable cash flow.  Effective as of the closing of the merger on July 22, 2013, the lease agreement terminated; therefore, adjusted EBITDA and distributable cash flow are expected to increase in future periods because no further lease payments will be made.

On July 22, 2013, the Company completed an underwritten public offering of 12,650,000 common units, which included the full exercise of the underwriters’ over-allotment option, representing limited partner interests in the Company.  Net proceeds from the offering were used to finance the cash consideration paid to EQT in connection with the Sunrise merger. Following the offering and Sunrise merger, EQT retained a 44.6% equity interest in the Company, which includes 3,443,902 common units, 17,339,718 subordinated units, and a 2% general partner interest. The Company received net proceeds of approximately $529 million from the offering, after deducting the underwriters’ discount and estimated offering expenses of approximately $21 million.

Highlights for the second quarter of 2013 include:

·                  Increased the cash distribution to unitholders to $0.40 per unit, which represents an 8% increase over the previous distribution paid on May 15, 2013 of $0.37 per unit.

·                  Increased transmission and storage volumes by 123% and transmission and storage revenues by 65% for the three months ended June 30, 2013 as compared to the same period in 2012, driven by production development in the Marcellus play.

·                  Adjusted EBITDA of $23.4 million.

·                  Completed the Morris III interconnect expansion project, which added 300 BBtu of incremental daily capacity.

Adjusted EBITDA is a supplemental non-GAAP financial measure. For an explanation of this measure, please read the discussion below under “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Measures.”

17

Table of Contents

EQT Midstream Partners, LP

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Results of Operations

Business Segment Results

Operating segments are evaluated on their contribution to the Company’s consolidated results based on operating income. Interest and other income are managed on a consolidated basis. The Company has presented each segment’s operating income and various operational measures in the sections below. Management believes that presentation of this information provides useful information to management and investors regarding the financial condition, results of operations and trends of segments. In addition, management uses these measures for budget planning purposes. The Company has reconciled each segment’s operating income to the Company’s consolidated operating income and net income in Note B to the Consolidated Financial Statements.

18

Table of Contents

EQT Midstream Partners, LP

Management’s Discussion and Analysis of Financial Condition and Results of Operations