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EQM Midstream Partners LP  (NYSE:EQM)
Q1 2019 Earnings Call
April 30, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Sharon and I will be your conference operator today. At this time, I would like to welcome everyone to the ETRN and EQM Q1 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

Mr. Nate Tetlow, Vice President, Investor Relations, you may begin your conference.

Nathan Tetlow -- Vice President of Corporate Development and Investor Relations

Thank you. Good morning and welcome to the first quarter 2019 earnings call for Equitrans Midstream and EQM Midstream Partners. 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 6365419.

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 filed with the SEC and as updated by any subsequent Form 10-Qs.

Today's call may also contain certain non-GAAP financial measures. Please refer to this morning's news release and our investor 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 Janice Brener (ph) , Treasurer. Kirk Oliver, our Senior Vice President and Chief Financial Officer is traveling and will not be able to join us today. After our prepared remarks, we will open the call to questions.

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

Thomas F. Karam -- President and Chief Executive Officer

Thanks, Nate. Good morning, everyone. This morning, EQM and E-Train reported strong first quarter results, which were ahead of our guidance. EQM reported adjusted EBITDA of $332 million and net income attributable to EQM of $252 million. Janice Brener, who is ably standing in for Kirk Oliver who is traveling today, will provide more detail behind those numbers shortly.

During the first quarter we took quick action on our commitment to simplify our structure and enhanced our asset base through a strategic bolt-on acquisition. In late February, we closed the simplification transaction. This included exchanging the IDRs and economic GP interest for 80 million newly issued EQM common units and 7 million newly issued EQM Class B units and a non-economic GP interest.

In March, we announced the strategic acquisition of a 60% interest in Eureka Midstream and a 100% interest in Hornet Midstream. And in early April, we closed both the acquisition and the associated $1.2 billion convertible preferred issuance associated with the deal. We had the opportunity to further discuss the strategic rationale for this deal with many of you previously.

As mentioned, the assets are a perfect fit with the existing EQM footprint. The systems extend our reach into core wet Marcellus and dry Utica acreage. And most important, our teams know the assets, the customers and the resource. The assets are backed by minimum volume commitments which represent approximately 50% of the current throughput. This mix is consistent with the current gathering profile of our assets.

Since closing the transaction, we've been working to integrate the acquired assets. The strategic combination of the acquired assets in our existing EQM systems will provide significant long-term commercial opportunities across our water, gathering and transmission businesses. We remain committed to leveraging our assets to become the low cost Midstream provider in the A Basin.

And with that, I will turn the call over to Janice who will discuss the financial results and then Diana will give an operations update and I'll come back for some concluding remarks and to answer questions. Janice?

Janice Brenner -- Equitrans Midstream Corporation -- Analyst

Thanks, Tom, and good morning, everyone. Before discussing the financial results, I want to remind you of one accounting item. EQM's first quarter 2018 results have been recast to include the results of Rice Midstream Partners, the Olympus gathering system and 75% of the Strike Force gathering system, each of which came under common control late in 2017.

Now on to the results. EQM reported first quarter 2019 adjusted EBITDA of $332 million, distributable cash flow of $267 million and net income attributable to EQM of $252 million. E-Train reported net income attributable to ETRN of $56 million. For the first quarter of 2019, EQM operating revenues were $390 million, an increase of $19 million versus the prior year quarter. The increase is primarily related to higher contracted firm transmission and gathering capacities, and was partially offset by lower water services revenue. For the quarter, EQM generated approximately 90% of transmission operating revenue and 49% of gathering operating revenue from firm reservation fees.

EQM's first quarter operating expenses were $122 million, an increase of $17 million from the prior year quarter. Separation and other transaction costs accounted for $4 million of the increase. The remaining increase is primarily related to higher system throughput and additional assets placed in service, which is consistent with the growth of the business.

For the first quarter of 2019, water EBITDA was approximately $8 million. It is important to note that the pace of our water EBITDA is dependent on the pace of well completion activity. Based on the timing of customer well schedules, we expect that the majority of 2019 projected water EBITDA will be realized in the second half of the year. For the first quarter of 2019, EQM will pay a quarterly cash distribution of $1.145 per common unit, which will be paid on May 14th to unit holders of record at the close of business on May 3rd. We continue to target a 6% annual distribution growth rate at EQM.

Now moving to ETRN. During the quarter ETRN directly incurred $5 million of expenses, which were related to the separation from EQT and other transaction. We expect this to be the last quarter that EQM and ETRN will report non-recurring expenses related to the separation from EQT. For the first quarter of 2019, ETRN will receive $134 million in cash from its ownership in EQM. ETRN declared a dividend of $0.45 per share for the first quarter, which will be paid on May 23rd to shareholders of record at the close of business on May 14th. During 2019, ETRN will pay a quarterly dividend of $0.45 per share, resulting in an annual dividend of $1.80 per share. We continue to target an annual dividend growth rate of 8% at ETRN.

In terms of liquidity, EQM had about $1 billion drawn on its $3 billion credit facility at the end of the first quarter. So we remain in a good liquidity position to fund our organic growth projects. Lastly, we updated our guidance this morning to include our projections for the Eureka Midstream and Hornet Midstream acquisitions. For the second quarter of 2019, we are forecasting EQM adjusted EBITDA of $305 million to $325 million and net income attributable to EQM of $200 million to $220 million.

Our forecast is consistent with the expected quarterly production cadence announced last week by our largest customer, which includes a sequential production decline in the second quarter, followed by production increases in Q3 and Q4. Additionally, our transmission and storage business provides seasonal services to utility customers which have peak revenue during the first quarter. We expect revenue from these seasonal contracts to be lower in the second quarter by approximately $25 million versus the first quarter.

I will now turn the call over to Diana for the operations update.

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

Thanks, Janice, and good morning everyone. The beginning of 2019 has proven to be an exciting and busy time for us. Let's start with the acquisition of the Eureka and Hornet midstream systems. Although the timeframe from the announcement of the acquisition to closing was faster than most deals, our team did a great job managing the due diligence and integration preparation, while also continuing to operate our existing EQM assets safely and efficiently.

We are currently integrating the acquired assets with our existing EQM systems and we see significant value creation from the combined asset footprint. There are two upsides that I want to highlight. First, the assets will provide producers with the ability to wilgas (ph) around the system and reach high liquidity areas such as Canton, Ohio; Mobley, West Virginia; and eventually MVP and MVP Southgate. Second, we intend to leverage our water business to service the producers behind the system for water delivery and eventually provide produced water solutions.

Moving on to the execution of our large growth projects, let's start with MVP. During the first quarter, we maintained a scaled back pipeline construction effort which was consistent with our plan for the winter months. Currently, total project work is about 80% complete, which includes the three compressor stations and related facilities. At this point, while the completion of our project by year-end may appear unlikely, a narrow path continues to exist and the MVP JV is targeting a full in-service date during the fourth quarter. We are working closely with various agencies to adjust the outstanding issues in the timeframes we have outlined previously, which would allow us to attain a fourth quarter 2019 in-service date. We expect to have more definitive information regarding permit resolutions in the next few months.

Moving on to MVP Southgate, on March 22nd, FERC issued a notice of schedule for the project, which includes the expected delivery of the Final Environmental Impact Statement in December of 2019. As a reminder, the project is a 70-mile extension from MVP that will transport gas to points in North Carolina and is backed by a 300 million a day commitment from PSNC Energy. Subject to FERC approval, the project has a targeted in-service date during the fourth quarter of 2020.

Moving on to our plan to integrate and optimize our Pennsylvania gathering system. We finished the hydraulic study and the project design is now complete. We have been working with our largest customer to construct the gathering and water agreement that upgrades the midstream services, creates per unit cost reductions for our customers and unlocks latent system capacity. As a reminder, the system integration is expected to result in capital avoidance of approximately $300 million to $500 million over three to five-year period.

In terms of our water business, we continue to expand our fresh water services in Pennsylvania and Ohio. Additionally, we are committed to developing a produced water system for our customers. The basin needs a scalable solutions since the majority of produced water is trucked (ph) . We are conducting comprehensive Planning and Analysis for a pipeline solution for produced water. We view produced water similar to a gas gathering business as produced water has a predictable cash flow stream that can facilitate long-term fixed fee contracts. We are excited about this potential produced water solution and expect to roll out a detailed plan later this year.

I will now turn the call back to Tom.

Thomas F. Karam -- President and Chief Executive Officer

Thanks, Diana. So, you can see we're off to an encouraging start in 2019. As we turn our own path for consistent growth, we are doing so in an environment of moderated production growth and a focus on cash flow by A Basin producers. Over the long term, this new paradigm is good for the industry. We expect that the long-term value creators will be the midstream companies that can consistently be the low cost service provider. This is what we strive to do everyday. First quarter results are a good example of our focus on cost controls, albeit over a short period of time.

As expected, gathering volumes decreased from the fourth quarter of 2018, consistent with the production cadence of our producer customers. However, we were able to manage the variations in volumes and still deliver strong results by keeping a close eye on our operations and maintenance expenses and our SG&A expenses as we progressed through the quarter.

Beyond cost controls, our concentrated footprint allows us to operate efficiently. Our contract structure mitigates variability to our cash flows and the rock under our assets is among the most prolific in the world. We are confident that the team we have in place is very capable of operating and executing in this new cycle.

So in closing, we've been very transparent regarding our strategy and we will continue to be. We completed a bolt-on acquisition which strengthens our growth profile and provides additional commercial opportunities. We are constantly working to be a solutions partner for our customers and we are confident that our leading asset footprint and key growth projects will allow us to generate long-term shareholder value.

With that, we'll be happy to take your questions.

Questions and Answers:

Operator

(Operator Instructions) And your first question comes from Jeremy Tonet with JP Morgan. Your line is open.

Jeremy Tonet -- J.P. Morgan -- Analyst

Good morning. Just want to start off with the changing guidance here. I was just wondering if this only reflects the acquisition in the drop-down that you announced there or are there other kind of factors in play that we should be thinking about?

Thomas F. Karam -- President and Chief Executive Officer

Good morning, Jeremy. No, I think it's exactly what you said. It's just reflecting the folding in of the acquisition into our guidance numbers.

Jeremy Tonet -- J.P. Morgan -- Analyst

Okay, great. And with Eureka, how should we think about the NCI in the future there, if that's consolidated in the EBITDA number? How big is that or what's the trajectory when we're modeling there?

Nathan Tetlow -- Vice President of Corporate Development and Investor Relations

Yeah, Jeremy. This is Nate. You're correct. We will for GAAP purposes be consolidating. We will have the 60% ownership. So, we'll just be backing out 45% of net income of the JV.

Jeremy Tonet -- J.P. Morgan -- Analyst

Okay, thanks. And with the water there, just want to -- wonder if you can elaborate a bit more on how if you guys kind of hitting your guidance there, you know, flowing in over the balance of the year? The first quarter was a very small percentage. Appreciate the lumpy there, but it seems like there is a lot of ground to cover. How do you think about that?

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

We planned first quarter to be low. We're really weighted toward the third and fourth quarters with our number of completion. But it is lumpy based on the completions of the well.

Jeremy Tonet -- J.P. Morgan -- Analyst

Okay. And then just a last one, if I could. With MVP, just wondering if you could update us on the options that you are talking about with a bit more detail. Any resolution between the Department of Interior, Department of Agriculture, the different departments there as far as the right away through the National Park Service land?

Thomas F. Karam -- President and Chief Executive Officer

So, Jeremy, there is no resolution at this point. We continue to interact with the agencies in a very productive manner on a regular basis to continue to explore the avenues that we've talked about before. There is no real change in our guidance. I think what we're acknowledging is the passage of time here where we've said before that the next inflection point is the issuance of the West Virginia 401 permit and the Nationwide 12, which last week, I think on April 24th, West Virginia submitted the responses to the comments on the new rigs to the EPA, which now has to consent to the new rigs and then forward that consent to the Army Corp. for the issuance of the 401 and the Nationwide 12 permit, which we've all along said is sometime in this summer window, because again just to reiterate, we predicated the 4Q '19 a three windows of issuance, the 401 Nationwide 12, which I just talked about, the reissuance of a permit from the Forest Service as it relates to the erosion and sedimentation control in the Jefferson National Forest and we are aware that they continue to work on that and then the resolution around the Appalachian trail. So, we really have no further update other than we would guide you toward the next inflection point being the issuance of that 401 permit.

Jeremy Tonet -- J.P. Morgan -- Analyst

That's all from me. Thanks for taking my question.

Operator

Your next question comes from Spiro Dounis with Credit Suisse. Your line is open.

Spiro Dounis -- Credit Suisse -- Analyst

Hey, good morning everyone. So, I'll start off, I think EQT mentioned last week renegotiating some of the midstream costs lower and potentially providing some additional business to EQM as an offset. Just curious from an EQM perspective, how should we think about the impact here and will the goal more or less be keep guidance stable, while extending contracts, just how to think about that?

Thomas F. Karam -- President and Chief Executive Officer

Yes, Spiro, I didn't have a chance to listen to the EQT call. We've been pretty consistent with the way we've described our discussions with them. And that the goal here is to figure out a global solution, which would create lower per unit cost on their standpoint, some certainty and broader business on our standpoint, particularly as it relates to the water. The foundation of all of the conversations have been that from a gas standpoint that the starting point is a revenue-neutral output for us. So, we think that there is a lot of opportunity for us to reach one agreement or multiple agreements with EQT that would provide mutually beneficial outcomes.

Spiro Dounis -- Credit Suisse -- Analyst

Okay, that's clear. It sounds like more of a comprehensive plan in place. Appreciate the color there. And then on MVP, hate to harp on it, I know you guys are probably sick of talking about it. But I believe one of the options is a reroute of the pipeline. And I guess I'm just wondering at what point do you think you have enough information either rule that out or move forward with it? And I guess, the other way of asking it is, is there any merit to just starting with the reroute today? Does it give you any more certainty just to do that today and sort of waiting for the current process to play out, which does carry some uncertainty I suppose?

Thomas F. Karam -- President and Chief Executive Officer

So let me start with the assumption that we're not tired of talking about MVP because MVP is going to be the largest driver of our growth in both the transmission business and ability to service our Appalachian customers to move their gas to better pricing markets in the South. So, once you get past the headlines, we remain exceedingly confident and bullish around MVP. A reroute, as I've said repeatedly and we've been pretty consistent on this, that's the path of last resort because it would require the greatest time delay and cost increase and as long as we continue to have traction and some positive movement on the other pads, we're going to continue down those paths.

And I would also point you to that, as we come out of winter, we are starting the spring season at roughly 80% complete and now we are ramping up our construction again for the construction season and to the extent that we get the West Virginia 401 issued sometime in the summer, by the time we get to leaving the third quarter into the fourth quarter, we are going to be north of 90% complete with this pipeline. So that -- I appreciate the focus and we are focused on those three up -- keep calling them inflection points, that we need to resolve on the pipeline. But I don't want to lose sight of the fact that this is a 50 to 80-year asset that's going to be incredibly valuable for this Company and that with each month that we constructed, we take more budget risk and timing risk off the table.

Spiro Dounis -- Credit Suisse -- Analyst

Yeah, fair. I appreciate those comments. Thanks, Tom.

Operator

Your next question comes from Derek Walker with Bank of America. Your line is open.

Derek Walker -- Bank of America -- Analyst

Hi, good morning guys. Maybe just talking about the produced water solution that you mentioned, I know you indicated there are potential for more details later this year. But maybe just give a little more color as far as how that process is going, what are some of the kind of the key markets to kind of get that moving and as far as how you see it now, is, it still consistent with the plans when you first kind of talked about the acquisition kind of a few weeks ago?

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

So, it's consistent with what we were thinking and we actually are getting a lot of interest from multiple producers. We are just about ready to put pricing to it, more firm pricing and get something out in the next couple of months.

Derek Walker -- Bank of America -- Analyst

Got it, OK. And then, I think you mentioned in the call, the 300 to 500 of capital plan over three to five years. I guess, can you just elaborate a little bit more on that?

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

Yes. So, as we start integrating the RMP and EQM systems, there are places where we can save on build-out. There is also, as we integrate those two systems and create a high pressure system and a low pressure system for our customers, we can also utilize excess compression on either side and we don't have to build compressor stations for every pod. So, that's where those savings come in.

Derek Walker -- Bank of America -- Analyst

Got it. All right. Thank you.

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

Thanks, Derek.

Thomas F. Karam -- President and Chief Executive Officer

Derek, let me add one thing. Excuse me, operator. Derek, let me add one point to that question because I think we don't talk about it enough as it relates to produced water and piping produced water. The more producers that we attract into the mix as we start to design the system, the more efficient it will be. And one of the beneficial outcomes is that we have an opportunity to dramatically reduce the trucking of disposed water, so that if we can recycle and move the reuse of the water around, we'll be able to generate substantial reduction in truck traffic on the roads as it relates to disposed water, but also substantial savings, direct savings to the producers who will no longer have to pay for that disposal. That's not necessarily a revenue to us, but it is an ancillary benefit that will be very meaningful to the producers here that previously hasn't been available.

So with that operator, we'll take the next question.

Operator

And your next question comes from Dan Lambo (ph) with Bank of America. Your line is open.

Dan Lambo -- Bank of America -- Analyst

Hey, guys. I'm just wondering with the recent commentary of both S&P and Fitch putting you guys on negative outlook, if there were to be further delay to MVP, pass really is May-June timeframe is when S&P put the timeframe as, what would you do to try and defend the investment grade ratings?

Janice Brenner -- Equitrans Midstream Corporation -- Analyst

There are several alternatives that we would consider to defend the investment grade ratings. Clearly, there is advantages to maintaining it and that's certainly our preference. And we have considered several alternatives, looking at whether it's distribution growth rates, whether it's spending, cost reductions, we're basically exploring all options in order to make sure that we are able to continue to execute on our growth strategy as expected. So we have good line of sight once we get that 20 year fully contracted, $300 million of annual EBITDA from MVP online and at that point we believe that we will be in line with those investment grade target. So it's more in the near term and we expect that leverage will creep up as MVP is coming online and even it from the inception of EQM we made sure that we funded our drop-down in a debt-friendly manner using equity over advertising those and then you saw on our most recent acquisition, we financed that in a way it was mindful of our ratings.

Thomas F. Karam -- President and Chief Executive Officer

And Dan, this is Tom, let me just put a finer point on that. I was totally confused by the reaction of the agencies around the issuance of our convertible preferred. We did an acquisition, we funded it a 110% with the convertible preferred. The agencies were all over the lot as it related to how they viewed giving us equity credit for that. So we actually took action that we thought was the most ultra conservative to maintain that investment grade rating and the mixed messages we got didn't help. But you should know that we are very much mindful of how we fund our operations moving forward and we'll continue to be of a very conservative balance sheet posture in this Company. Thank you.

Dan Lambo -- Bank of America -- Analyst

Okay. And just as a follow-up, discussions on Moody's, are they still just waiting on MVP before they can actually give you an IG rating?

Janice Brenner -- Equitrans Midstream Corporation -- Analyst

Yes, that's our understanding.

Dan Lambo -- Bank of America -- Analyst

All right, perfect. Thank you.

Operator

Next question comes from David Amoss with Heikkinen Energy. Your line is open.

David Amoss -- Heikkinen Energy -- Analyst

Good morning. Tom, I'm just trying to think a little bit more about the critical path for MVP and I apologize for asking a similar question for the third time, but just related specifically to the Jefferson Forest and the issues that you've had there, can you at least give us kind of what you think the fence posts are to resolve that issue and what you have to do to achieve that resolution specific to the forest?

Thomas F. Karam -- President and Chief Executive Officer

So David, before the Cowpasture decision coming out of the Fourth Circuit, there was a singular issue with the Jefferson National Forest that related to the reissuance of the E&S permit allowing us to work in the forest. I think we've been pretty clear in saying that when we were first issued the permit, we used hypothetical data that supported the issuance of the permit -- the permit was issued. When the permit was vacated as a result of the Fourth Circuit -- original Fourth Circuit decision, we then had the benefit of actual data and the actual data is even more supportive of the issue -- the reissuance of the permit than the hypothetical data. So from a factual and technical basis, we're in really good shape as it relates to the forest service.

However, since December when the Cowpasture decision came out of the Fourth Circuit, for all practical purposes those two decisions are tied together. I can't imagine that the forest service would issue a permit without resolution to the Appalachian trail. So the goal posts are figuring out a solution to cross the trail either through public lands or private lands that will allow us to get back to work.

We still think that there are pads that we're working, either with the DOI and the DOA and the National Park Service that could get us there toward the end of the year, but I really don't have anything more definitive to say today.

David Amoss -- Heikkinen Energy -- Analyst

Okay, thank you for that. That's really helpful. And then Diana, just thinking about the produced water business specifically, can you talk about what's involved in treating produced water for reuse and just generally like I know you guys aren't ready to rollout the specific plan yet, but generally how you're looking at having to treat that water for reuse.

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

So as far as water quality, our customers are not requiring a treatment for the produced water. So they're comfortable recycling really and putting that water back down the hole (ph) without treatment.

David Amoss -- Heikkinen Energy -- Analyst

Okay, thanks. And then one last one, just again, and Diana, you've talked about the increase in activity driving the higher water business margin or EBITDA going forward, but it looks like your average margin on a per gallon basis is much lower than it was when RMP had that business. Can you talk about the discrepancy there?

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

I'm not sure exactly what your -- RMP wasn't really --

Thomas F. Karam -- President and Chief Executive Officer

(multiple speakers) volatility and timing issues. you see it not only on the revenue side, but also on the expense side.

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

From the original deal.

Thomas F. Karam -- President and Chief Executive Officer

(inaudible) multiple quarters.

David Amoss -- Heikkinen Energy -- Analyst

Okay, thanks.

Operator

Your next question comes from Chris Tillett with Barclays. Your line is open.

Chris Tillett -- Barclays -- Analyst

Hi, good morning. Just a quick one from me, it looks like on the updated capital guidance, the gathering spend went up by about $50 million. You had said previously that you expected 2019 CapEx from the acquisition to be about $90 million. So just wondering if the little bit of that delta there was maybe related to some of the capital avoidance that you guys had previously discussed in relation to the acquisition or if maybe it's reflective of some reduced spending on some of the legacy gathering assets.

Thomas F. Karam -- President and Chief Executive Officer

Yeah, I think, Chris, it's we did incorporate the Eureka numbers. There is no change in what we expect with capital with regard to Eureka. I think what you're seeing is simply just timing updates around our forecast, a little bit of capital moving into 2020.

Chris Tillett -- Barclays -- Analyst

Okay , got it. That was all from me. Thanks guys.

Operator

Your next question comes from TJ Schultz with RBC Capital Markets. Your line is open.

TJ Schultz -- RBC Capital Markets -- Analyst

Just on the workforce you have out for MVP right now how quickly can you scale up if you get some positive feedback on the inflection points or any concerns there and then alternatively just how insulated are you from significant cost increases as this timing is pushed out?

Thomas F. Karam -- President and Chief Executive Officer

So we're back to work now, we are scaling up as we speak, so there really wouldn't be any step change as it related to the issuance of the 401 to allow us to do that. As it relates -- the second part of your question was cost related, look, we're already 80% complete and every day we complete more and more of the pipe. So the best insulation from a a step change in cost is to complete the pipe.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay, I understand. Just last one, the $49.7 million asset sales from E-Train to EQM, is that used for E-Train level debt paydown, just any color there? Thanks.

Janice Brenner -- Equitrans Midstream Corporation -- Analyst

Yes, it is. Right now we used it to pay down the revolver.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay, great, thanks.

Operator

Next question comes from Vikram Bagri with Jefferies. Your line is open.

Vikram Bagri -- Jefferies -- Analyst

Hi, good morning, everyone. I had a question on OpEx. As we -- lot of moving parts, as we move from 1Q to 2Q and the OpEx and SG&A in 1Q, it seems like it was dropped off quite a bit. I was wondering if it's a temporary shift or it's permanent. If I look at the full year guidance, it seems like it was a temporary shift and OpEx and SG&A will sort of catch up or will be higher in next few quarters. If you can share more color on what were the drivers of lower OpEx in 1Q and how much OpEx and SG&A you expect in 2Q?

Janice Brenner -- Equitrans Midstream Corporation -- Analyst

So, we're very careful to be thoughtful about our OpEx and adding people. The first quarter is low because out of the gate we were really paying attention -- we were planning during the separation what our new structure was going to look like and as we continue to get our feet under us, we are able to do it a little cheaper than what we thought.

Vikram Bagri -- Jefferies -- Analyst

Understood. And is that the expectation that you will be able to maintain these efficiencies going forward or the OpEx will step up in 2Q, even though --

Thomas F. Karam -- President and Chief Executive Officer

Sorry, I was going to tell, on the G&A side, we've provided guidance of about $30 million to $35 million a quarter. I think we'll probably be trending toward the low end there, which is what Diana was referring to. On the O&M side, there is some seasonality with regard to work in the winter. So, we do see Q1 tend to be a little bit lower than the other quarters. So, it's probably be a little bit of step up in O&M in Q2.

Vikram Bagri -- Jefferies -- Analyst

Okay, understood. And then on MVP, you didn't change the timeline or CapEx guidance for MVP and fully recognizing that, it's understandable that timeline cannot be changed or CapEx cannot be changed given the lack of clarity on the regulatory front. But is there any way you can frame the expected increase in CapEx due to these delays? What will be the -- probably a week of delay, what will be the increase in CapEx? I've seen those numbers for some of your peer pipelines. It's about $10 million to $15 million per week of delay. Is that something you can frame up given that you've largely renegotiated contracts, the pipeline is 80% complete. Is that something you can clarify?

Thomas F. Karam -- President and Chief Executive Officer

I don't think we can, Vikram, because it depends on exactly when and where we may face a delay. So, I'm going to ask, for your patience to demure because I don't want to give you misleading information. Right now we're still working really hard to see if we can slip in through these windows while they are still open. But when we have an event or an inflection point, we will be in a much better position to accurately reflect what we think the current state of players. But for now, we are not officially changing anything other than simply acknowledging the passage of time.

Vikram Bagri -- Jefferies -- Analyst

Understood. And then, just lastly, the comment period on Nationwide 12 permit ended last month. Is there anything you saw in those public comments that maybe of concern or may delay the permit beyond summer? And how do you feel about the response to those comments and what should we expect on that front?

Thomas F. Karam -- President and Chief Executive Officer

So, the comments came in as expected. There was nothing that we saw that we were not expecting to see. The comments reflected points of view that we've heard before and continue to hear. We are quite pleased with the very efficient and professional way the West Virginia DEP responded to them and as I mentioned in an earlier response to a question, they were submitted to the EPA on April 24th. And from what we can see now, we don't expect anything out of the ordinary as it relates to the process inside the EPA and the Army Corp.

Vikram Bagri -- Jefferies -- Analyst

Great. That's all I had. Thank you very much.

Operator

Your next question comes from Alex Kania with Wolfe Research. Your line is open.

Alex Kania -- Wolfe Research -- Analyst

Thanks. Just a quick follow-up on the asset, I guess the drop in the shared services assets. Just what's the interplay between what you're paying in terms of SG&A up to E-Train versus the depreciation would be? Just kind of curious if there is a difference of cost in their net?

Thomas F. Karam -- President and Chief Executive Officer

I think it will be $15 million to $20 million a year and it's simply now an EQM, it'll be depreciation versus SG&A, but for the same amount.

Alex Kania -- Wolfe Research -- Analyst

Okay, got it. That's really helpful. Okay, great, thanks.

Operator

(Operator Instructions) And we have a question from Timm Schneider with Citi. Your line is open.

Timm Schneider -- Citi -- Analyst

Hey, good morning guys. First question from me is, on the contract renegotiations, in terms of timing, I guess, using a baseball analogy, what kind of inning are you guys with that -- batting practice or a little further out?

Thomas F. Karam -- President and Chief Executive Officer

No, I don't think we're in batting practice. I think we are a few innings in. It's -- to be fair, Tim, it's pretty complex from the EQT side as it relates to all of the moving parts and the logistics around it. And from our standpoint, it's pretty complex as it relates to the interplay between the water and the gas and high pressure and low pressure systems that we're trying to create. So, it's not so much that we're at a standstill. If they were each during the process the complexities so that we can get to the right answer acknowledging what the current cost structure is at EQT and how quickly we can evidence a long-term contract to show them some pretty significant unit cost savings. So, the conversations are going quite well and we're just going to continue along that path.

Timm Schneider -- Citi -- Analyst

Got it. And I'll have to get one on MVP as well. So, just assuming worst case scenario and you guys can't cross the trail, obviously there is a tremendous amount of pipe or steel that's already in the ground. Are there any alternative off takes that you guys could potentially get to outside of that?

Thomas F. Karam -- President and Chief Executive Officer

I think that we've been pretty clear that there is an option to cross the path -- to cross the trail through private lands and that would be under the reroute scenario that we've talked about before.

Timm Schneider -- Citi -- Analyst

Okay, got it. I was just curious if there was any other pods (ph) along the line that you could potentially get to outside of that, but it sounds like the private land one is the most likely scenario.

Thomas F. Karam -- President and Chief Executive Officer

That would be for the ultimate completion of the pipe. But as you know the route of MVP interconnects with the WB line at mile marker 77 and then the KA line at mile marker 180.5. So, there are two interconnects we'll call them, two opportunities for independent utility status at each one of those along the way. So, there are multiple points of opportunity here, Tim. And again, let me just step back a little bit. We understand the headlines and we live with it every day and we are trying to acknowledge reality here with our partners in MVP, but we don't want anybody to go away from this call questioning our confidence that we're going to get this pipeline built in in-service.

Timm Schneider -- Citi -- Analyst

Got it. Thank you. That's it from me.

Operator

(Operator Instructions) And we do not have any telephone questions at this time. I will turn the call over to the presenters.

Thomas F. Karam -- President and Chief Executive Officer

Thank you, operator, and thanks everybody for joining us today. We will continue to work hard every day to create shareholder value and look forward to speaking to you all again. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 45 minutes

Call participants:

Nathan Tetlow -- Vice President of Corporate Development and Investor Relations

Thomas F. Karam -- President and Chief Executive Officer

Janice Brenner -- Equitrans Midstream Corporation -- Analyst

Diana M. Charletta -- Executive Vice President and Chief Operating Officer

Jeremy Tonet -- J.P. Morgan -- Analyst

Spiro Dounis -- Credit Suisse -- Analyst

Derek Walker -- Bank of America -- Analyst

Dan Lambo -- Bank of America -- Analyst

David Amoss -- Heikkinen Energy -- Analyst

Chris Tillett -- Barclays -- Analyst

TJ Schultz -- RBC Capital Markets -- Analyst

Vikram Bagri -- Jefferies -- Analyst

Alex Kania -- Wolfe Research -- Analyst

Timm Schneider -- Citi -- Analyst

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