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EQM Midstream Partners LP (NYSE:EQM)
Q3 2019 Earnings Call
Nov 5, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the ETRN and EQM Q3 2019 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Nate Tetlow, Vice President of Corporate Development and Investor Relations. Please go ahead.

Nate Tetlow -- Investor Relations

Good morning, and welcome to the third 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 1924428. 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's and EQM's Form 10-Ks 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, Chairman and CEO; Diana Charletta, 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.

Thomas F. Karam -- President and Chief Executive Officer

Thanks, Nate. Good morning, everyone. Before we discuss our third quarter results, I want to take a minute to discuss the critical role that natural gas plays in mitigating the impact of climate change. As an industry, we need to be more vocal about the benefits of natural gas and how we continue to mitigate the effects of greenhouse gas emissions. We benefited from the tremendous success in developing domestic natural gas reserves from our abundant shale formations through job creation, tax revenues, a growing economy, and very importantly, financial security to so many families where this development occurs. Yet, there are common misperceptions regarding the industries practices surrounding methane in the environment. As you know, methane is the most significant component of natural gas. Therefore, we as an industry and E-Train as a company must be accountable and responsible for understanding and improving our methane management practices from cradle to grave. And while there is always room for improvement, we do have a successful story to tell on each of these fronts.

Our industry has made great strides during the past several decades with the US EPA's April 2019 inventory report joined total methane emissions are down more than 15% since 1990. In addition, every conversion of traditional coal-fired electric generation facilities to clean burning natural gas brings an exponential benefit of overall greenhouse gas reduction. The midstream industry in particular is continuing to push forward in a meaningful way to effectuate real mitigation of climate change impacts. Our E-Train and EQM, we believe it is not enough to achieve regulatory compliance on methane emissions. We must and will do better by proactively pursuing the implementation of best practices, reducing our overall carbon footprint over time.

E-Train has recently joined the environmental partnership, a voluntary reduction program offered through the American Petroleum Institute and the ONE Future fund coalition, which is a group of natural gas companies working together to voluntarily reduce methane emissions across the natural gas supply chain. And as a member of the Interstate Natural Gas Association of America, E-Train and other companies work with regulators to ensure that natural gas pipelines, compressor stations and storage facilities are designed and built safely and operate in ways that minimize methane emissions. Banning fossil fuels is not the answer. In fact, continuing to develop and utilize our domestic energy resources in a responsible manner, natural gas should be viewed as the gateway to the future possibilities offered by the world of renewables. Protecting the environment and future generations is a shared responsibility and the natural gas industry has been doing and will continue to do its part. At E-Train, we do not believe that energy development and environmental stewardship are mutually exclusive.

Now let's move on to our earnings information. This morning EQM and E-Train reported third quarter results with adjusted EBITDA coming in at the high end of our guidance. Kirk will provide more details behind those financials shortly. As we've discussed in past quarters, we're operating within a new paradigm of lower for longer natural gas prices, resulting in a slowdown in A-Basin production growth. In 2018, the average rig count in the Marcellus and Utica was 77 rigs, and as of last week, there were approximately 51 rigs operating. This 35% reduction is a positive sign. Over the long term, more moderate production growth will make E&P customers stronger, it will reduce our gathering capital needs, and will provide more stable and consistent long-term earnings growth. Not only can we survive in this new paradigm, but we can also thrive in it.

With that, I'll turn the call over to Kirk for the finance update, and Diana will provide an operations update and I'll come back for some closing remarks. Kirk?

Kirk R. Oliver -- Senior Vice President and Chief Financial Officer

Thanks, Tom. Good morning, everyone. Before discussing the financial results, I want to remind you of two accounting items. First, EQM's third quarter 2018 results have been recast to include the pre-acquisition results of RMP, which came under common control in 2017. And second, the Eureka joint venture is consolidated in EQM's and E-Train's financial statements for accounting purposes.

Now the results; EQM reported third quarter 2019 adjusted EBITDA of $335 million, distributable cash flow of $234 million and net loss attributable to EQM of $11 million. We're also reporting a net loss attributable to E-Train of $66 million. E-Train and EQM third quarter net loss was impacted by a $299 million impairment charge to goodwill and intangible assets. The impairment was primarily driven by lower forecasted natural gas production growth behind the RMP, Eureka and Hornet gathering systems.

For the third quarter of 2019, EQM operating revenue was $408 million, an increase of $44 million versus the same quarter last year. The increase was primarily related to higher contracted firm gathering capacity and the addition of the Eureka and Hornet assets. Stable cash flow profile of the business remains a core highlight as EQM generated approximately 94% transmission operating revenue, and approximately 52% of gathering operating revenue from firm reservation fees during the third quarter.

EQM's third quarter operating expenses were $440 million, an increase of $308 million from the prior year quarter. The impairment expense accounted for $299 million of the increase. The remaining increase was primarily related to the addition of the Eureka and Hornet systems, as well as higher gathering system throughput and additional assets placed in service.

For the third quarter of 2019, EQM will pay a quarterly cash distribution of $1.16 per common unit, which will be paid on November 13 to the common unit holders of record at the close of business on November 1. Additionally E-Train will pay a quarterly cash distribution of $0.45 per share, which will be paid on November 22nd to shareholders of record at the close of business on November 13. We intend to hold the EQM distributions and the E-Train dividends constant at least through the in-service date of MVP. Once MVP is in service, we will reevaluate the distribution and dividend growth rates. In August, EQM entered into a three-year term loan for $1.4 billion with the proceeds primarily being used to pay down our revolver borrowings. At the end of the quarter, we had about $300 million drawn on EQM's $3 billion revolver. So we have ample liquidity to fund our growth projects. We are currently in the middle of our annual planning process and we expect to provide guidance in mid-December after finalizing and receiving Board approval of the 2020 plan.

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

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

Thanks, Kirk, and good morning, everyone. The third quarter 2019 was another successful operating quarter for our team. Our systems gathered a record of 8.2 Bcf per day. We continued to make progress on our large growth projects and we remain focused on operating efficiently and safely. We recognize the need to be disciplined with our cost in this new operating environment and our expenses highlight our commitment to managing costs. Our year-to-date gathering O&M expense unit rate of just over $0.03 reflects our ongoing focus on operating as efficiently as possible without compromising our commitment to safety. In addition to O&M expenses, we have been very focused on overall corporate costs. It has been almost a full year since standing up a new independent company and I'm pleased that our SG&A expenses have averaged lower than our guidance of $30 million to $35 million per quarter.

In terms of our large growth projects, I'll start with MVP. The total project work will be approximately 90% complete by the end of the year. We continue to work through the remaining permitting and regulatory items. First, we are very pleased that the Supreme Court agreed to hear the Atlantic Coast Pipeline case related to its Appalachian Trail crossing authorization, and we are hopeful that the lower-court decision will be overturned. Second, with regard to MVP's biological opinion, the Fish and Wildlife Service recently begin the necessary reconsultation process and we expect the permit will be reissued early in 2020. Lastly, the US Army Corps of Engineers is currently doing the review on the Nationwide 12 permit and we expect to have that permit issued in the next couple of months. We are currently winding down construction for the winter and plan to ramp construction back up next April. We recently adjusted the project schedule and budget to reflect our current expectations regarding regulatory milestones and construction strategy. We are now targeting a late 2020 in-service date and then overall project cost a $5.3 billion to $5.5 billion.

Additionally, Con Edison recently expressed that it intends to exercise an option to cap its investment in MVP. This decision would increase EQM's ownership interest in the MVP JV to approximately 47% and EQM would be expected to fund approximately $2.7 billion. To-date, EQM has funded about $1.7 billion. The two main supply future projects for MVP the Equitrans Expansion Project and the Hammerhead Pipeline will both be completed ahead of MVP. A portion of the Equitrans Expansion project is currently operational and a portion of Hammerhead is expected to be operational by year-end. Those projects can provide partial interruptible service capacity until MVP is online. Upon MVP in service, the two projects have long-term firm capacity commitments that will commence.

Moving on to MVP Southgate, as a reminder, the project is a 70-mile pipeline that is expected to receive gas at MVP and transport gas to new delivery points in North Carolina. The project is backed by a $300 million per day commitment from PSNC Energy. Southgate is currently in the regulatory review process with the FERC and numerous state and federal agencies. The project is expected to be placed in service in 2021 at an overall project cost of $450 million to $500 million.

As it relates to EQT, we are having productive discussions with the new team regarding their updated development plans and simplifying the midstream agreements. We continue to believe that a mutually beneficial outcome can be achieved. As a starting point, we don't expect any deal to take effect prior to MVP in service. Our focus is attaining the best outcome for our shareholders and unit holders.

Executing on our main growth projects remains our top priority. Once these projects are in service, they will provide the backbone for valuable expansion and extension opportunities. This new infrastructure will be critical to serving future demand growth in the Mid-Atlantic and Southeast regions of the United States. I will now turn the call back to Tom.

Thomas F. Karam -- President and Chief Executive Officer

Thanks, Diana. We'll spend just about a year since the spin-off of E-Train from EQT. To say, it has been an active year with many unexpected events would be an understatement. Yet, there has been one constant and that is the strength of our business and the commitment of our management team. Team will remain focused on executing on its projects and creating shareholder value at every time. With that, we'll be happy to take your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Jeremy Tonet with JPMorgan. Your line is open.

Rahul -- JPMorgan -- Analyst

Good morning, guys. This is Rahul on for Jeremy. Thanks for taking my questions here. First one, can you provide us an update on the progress of EQT negotiations and how they are shaping up so far?

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

They are shaping up well. We are having very constructive conversations with the new team and continue to make progress. I think there is enough in the deal for both sides that we come out with a positive income -- positive outcomes or income.

Rahul -- JPMorgan -- Analyst

Got it. Are there any other partners on the MVP project with similar provisions on the investment GAAP that could follow on its lead at this point and if so, would EQM bear like most of the increases for this part is to stop distributions to MVP?

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

There is no other contractual ability from any of the other partners.

Rahul -- JPMorgan -- Analyst

Understood. And then one last thing on the leverage trajectory here, is there any changes to your long-term outlook at this point from the 3.5 to 4 times, which you had in your previous slide?

Kirk R. Oliver -- Senior Vice President and Chief Financial Officer

Well, we're working -- this is Kirk. We're working on our forecast and planning, which we will have some time in December and we'll have a better handle on what those numbers look like at that point in time. It will take us longer. I think to get to those targets now with just what's happening within the basin with production.

Rahul -- JPMorgan -- Analyst

Understood, thanks. Thanks for taking my questions, guys. That's it from me.

Operator

Your next question comes from the line of Shneur Gershuni with UBS. Your line is open.

Shneur Gershuni -- UBS -- Analyst

Hi, good morning everyone. If I can just sort of revisit the discussion about the renegotiations with really interesting comment [Technical Issues] that no change would happen until MVP comes into service. So is this negotiation is going on right now, is something that you'll agree to potentially in the next few quarters or so, but would be signed before MVP comes in service, but nothing would happen until it actually comes the service that kind of [Technical Issues]?

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

Yes, I think, with those come to the agreement that nothing will change until after MVP comes in service as far as rates. So, my thought is that we'll have it signed and negotiated before then, but nothing will come into effect until after in service.

Shneur Gershuni -- UBS -- Analyst

Okay. And in your response to the last question about a positive outcome income and so forth, can we talk about it on an NPV basis. I mean, are we looking for something that's going to be close to NPV neutral. Is that kind of way to be thinking about it where give and take somewhere else, but it ends up on an NPV neutral basis?

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

We're in the middle of negotiations right now. So we would prefer to let that to a later date.

Shneur Gershuni -- UBS -- Analyst

Okay, fair enough. And just a couple of follow-ups on guidance, EQT's [Technical Issues] plans for 2020; you've taken down some capex on the gathering side. I mean, do you have enough bread crumbs [Phonetic] for -- do you've a few bread crumbs for us, how are you thinking about 2020 at this stage right now? Was that gathering capex being deferred into 2020 or is it going to be 2021? How do we think about the fact that talking about flat volume here, if you can sort of give out thinking about [Technical Issues].

Thomas F. Karam -- President and Chief Executive Officer

You might want to reask that question because you're breaking up.

Shneur Gershuni -- UBS -- Analyst

My apologies there. So just wanted to better understand if you have any thoughts or early views on a 2020 guidance? I mean, just given in the context that EQT's already given some volumetric guidance. I mean, obviously, you want to tighten it up when you give your proper guidance from the Board. But as to, at least how you're thinking about it for 2022 stage in the context of what EQT said last week.

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

We're still working through that. So as far as volumes 2020 and what EQT has ready for us, we can kind of start working through that but from a capital perspective, we really need to understand their 2021 locations, and that's still, we don't have that all pinned down yet. So as we work through it, we should be in a better position mid-December to be able to give that guidance.

Shneur Gershuni -- UBS -- Analyst

All right, perfect. Thank you very much. Appreciate the color today.

Operator

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

Spiro Dounis -- Credit Suisse -- Analyst

Hey, good morning, everyone. Just following up on negotiations with EQT, probably respect that obviously are in the middle negotiations, but maybe just want to try and marry two comments that I guess both parties really talked about in the past, I think more recently, EQTs seem to offer up increased acreage dedications in exchange for a lower rate. I guess I'm just wondering is that consistent with your understanding of what's going on right now and maybe how does that tie to your goal, which I think at one point was to be revenue neutral, at a minimum?

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

So I think there are a couple of things that we're working through. One is an increase acreage dedication, but there is also an increase of MVC, which is very important to us, an extension of those contracts for a longer term. So there is a couple of things on both sides that we're working through.

Spiro Dounis -- Credit Suisse -- Analyst

Okay, fair enough. And is that goal of revenue neutral still part of it, or is that sort of still evolving?

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

It's still evolving.

Spiro Dounis -- Credit Suisse -- Analyst

Understood. Second question, just with respect to the Supreme Court decision, certainly, positive in your direction. Just curious now with respect to the land swap, is that or is that become kind of an option at this point where you sort of pick that up maybe midway through next year after a decision to the extent you need to or is there a parallel process you can run simultaneously here?

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

Our goal would be to run that parallel.

Spiro Dounis -- Credit Suisse -- Analyst

Okay. And so by the time you would get a Supreme Court decision in, let's call it, June, any sense for how much longer after that a land swap could sort of occur?

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

No, there is -- our goal would be that we have it tied up and ready to go.

Spiro Dounis -- Credit Suisse -- Analyst

Okay, very helpful. Thanks everyone.

Operator

Your next question comes from the line of Ross Payne with Wells Fargo. Your line is open.

Ross Payne -- Wells Fargo. -- Analyst

How are you doing guys? First question is, what kind of permitting is needed to get through Virginia to Transco? And second of all, what kind of hurdles do you see getting through North Carolina?

Thomas F. Karam -- President and Chief Executive Officer

On the Transco question, we've already completed those interconnects with Transco. So I think we're good there. With regard to North Carolina, it's the standard water permit we would need from them. We believe it's the 404 [Phonetic]. So we've made that application and that process is ongoing.

Ross Payne -- Wells Fargo. -- Analyst

Okay. Given the increased cost and your increased ownership in MVP, it sounds like you're not going to cut your distribution until -- or you're not going to address your distribution until after MVP. Is cutting your distribution something we can think about to shore up cost on that front and to potentially protect your IG rating?

Thomas F. Karam -- President and Chief Executive Officer

So I wouldn't think about -- I wouldn't look for a distribution cut. That's not something that we would consider.

Ross Payne -- Wells Fargo. -- Analyst

Okay. How are your conversations going with the rating agencies related to your investment grade ratings and how important is it for you to keep those?

Thomas F. Karam -- President and Chief Executive Officer

Well, it's very important for us to keep the investment grade rating, and as you know, we're on outlook by two of the agencies. We keep a very consistent dialog with all three of the rating agencies. We try to keep them updated when there is something that seems worth updating; we will make sure they don't have any questions after this call. And we will be meeting with all of them once we have our plan put together in December. So we keep a good dialog with them. But as you know, we don't have any clear [Indecipherable] but what they might do in the future. We do believe that we'll have plenty of time to react anything that they might raise with us.

Ross Payne -- Wells Fargo. -- Analyst

Do you have any idea what they need to see happen from their standpoint in terms of staying in IG given the hurdles you have with increasing costs and changes in your rate structure with EQT?

Thomas F. Karam -- President and Chief Executive Officer

I don't really want to speak for them on that. I mean, they obviously want to see our leverage metrics improve, and as I mentioned earlier, given the -- what's happening with production in the basin and the delays with MVP, that improvement will happen a little bit more slowly than what we previously thought. So that's going to be something obviously they'll be looking at and we'll be talking to them about, but I can't really speak for them in terms of where their cut off is.

Ross Payne -- Wells Fargo. -- Analyst

Okay. And finally, a number of fixed income investors including ourselves on the sell side about a hard time getting through to IR, so can they be more responsive to returning our phone calls?

Thomas F. Karam -- President and Chief Executive Officer

Yeah, absolutely,

Ross Payne -- Wells Fargo. -- Analyst

That would be appreciated. Thank you. That's it for me.

Thomas F. Karam -- President and Chief Executive Officer

Okay.

Operator

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

Derek Walker -- Bank of America -- Analyst

Thanks. Good morning, guys. First one from me, I think EQT in their call I mentioned that there is some asset sales outside of the core Marcellus [Indecipherable] divest. Is any of that acreage behind EQM systems and if so the contract associated with that acreage transfer over to the new potential customer there?

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

So I don't think we can speak to what that acreage really is. They didn't disclose what that was. So it would be out of turn for us to speak to what that is.

Derek Walker -- Bank of America -- Analyst

Okay. No. Fair enough. And I think they also mentioned that sort of after the gathering recontracting that sort of a natural follow up would be around the water. So there was indicating a produced water solution. So if that's the case, should we kind of think about the produced water solution as 2021 and maybe in '22 sort of event?

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

So we continue to work through freshwater with them even that I think will change a bit with the way that they want to use water. And then on the produce side, we continue to work with them for what they need. I don't think it's going to be a huge capital build, but there are certain aspects on the produce side that they need and we can help with. We're certainly working through that. So we are in active conversations with both of those things so that we can meet what they need on the water side.

Derek Walker -- Bank of America -- Analyst

Okay, great. And then maybe just a quick one on a process. I think on the Nationwide side of things, you mentioned in the next couple of months, you expect to get that. Is that something that you would expect after the Fish and Wildlife piece?

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

I don't think it necessarily has to be, but I think they're close to the same timing. So I'd say early next year for both of them and then our current schedule really doesn't have us hitting it hard until April.

Derek Walker -- Bank of America -- Analyst

Got it. Okay, that's it for me. Thank you.

Operator

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

Chris Tillett -- Barclays -- Analyst

Hi guys, good morning. Just I guess the follow-up on a couple of items in the release. Are you able to provide any further breakdown of the writedowns that you took in the quarter just in terms of how much was it attributable to RMP versus the Eureka and Hornet systems?.

Kirk R. Oliver -- Senior Vice President and Chief Financial Officer

Sure. RMP was about just under $170 million and Eureka Hornet was about $99 million of a goodwill impairment and then there was a deferred tax component to both of those of about $7 million and then we had intangible assets in Hornet Midstream related to contracts with producers of about $36 million.

Chris Tillett -- Barclays -- Analyst

Okay. Thank you. That's helpful. And then to follow up on Diana comments from a little earlier, how much capacity or how much volume flow are you guys able to provide on the interruptible service today on the Equitrans Expansion in the Hammerhead project?

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

So it really depends on -- I think the capacity is -- are you looking at 600 [Indecipherable], yes. But it really depends on market and what the differentials are as far as what we can gather with [Phonetic].

Chris Tillett -- Barclays -- Analyst

Okay. I mean, I guess, is any of that built into your current outlook or should we expect that is just being more opportunistic?

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

No, it's opportunistic.

Chris Tillett -- Barclays -- Analyst

That's it for me then. Thanks, guys.

Operator

Your next question comes from the line of Chris Sighinolfi with Jefferies. Your line is open.

Chris Sighinolfi -- Jefferies. -- Analyst

Hey, good morning, everyone. Thanks for the time.

Thomas F. Karam -- President and Chief Executive Officer

Good morning, Chris.

Chris Sighinolfi -- Jefferies. -- Analyst

I wanted to just to follow up -- a lot has been asked and answered and I appreciate it. I just have one follow-up, if I could, and that's to circle back on some of Ross's questions, just with regard to the dividend distribution reassessment process. I think we all understand the decision to hold payouts flat over the remaining MVP execution timeline just given the uncertainty inherent in it and the escalating cost of the project. But I guess presuming MVP and then Southgate comments on your current guidance, I'm wondering, Tom, what factors your way or how you plan to think about shareholder payouts after that point? At the Analyst Day, you guys obviously a year ago with when ETRN for spinning, it was articulated as a full payout C-Corps. I'm just -- it seems to be changed views at least in regards to the C Corp entities versus the MLPs in terms of how shareholders returns get allocated, whether that be through the dividend, through buyback or improvements in leverage. And so I'm just curious, your current thoughts on that.

Thomas F. Karam -- President and Chief Executive Officer

Yes, Chris, this is Tom. That's a really good question. We don't have an answer for you as we sit here today, because we're still -- the issue we're facing is we have so many balls up in the year with these different projects with MVP, with the reopening of the contracts with EQT, with some other things that the next 12 months would bring to bear. We're just trying to keep our powder dry and our options open, as it relates to the ultimate use of funds and use of proceeds from our cash flow. So let me defer answering that today, but the question is on point with something that as we get into early next year, we're going to be much more clear about.

Chris Sighinolfi -- Jefferies. -- Analyst

Okay. I guess...

Thomas F. Karam -- President and Chief Executive Officer

Clearly, we're very sensitive to our leverage.

Chris Sighinolfi -- Jefferies. -- Analyst

Yes.

Thomas F. Karam -- President and Chief Executive Officer

I think that is priority number one for us right now.

Chris Sighinolfi -- Jefferies. -- Analyst

Okay. I guess what I'm getting after and maybe it's just premature given the timetable is, if you were to, for example, resume growth in the pad at EQM, is it an option -- it's certainly an option, is it a view that you think is credible that maybe the growth doesn't follow at a commensurate pace at ETRN and net cash either builds or is used for accelerate term loan repayment or share repurchase or something other than commensurate level of dividend growth.

Thomas F. Karam -- President and Chief Executive Officer

Understood. And I like to answer the question this way and that is, that cash will be used to maximize shareholder return in some form or fashion.

Chris Sighinolfi -- Jefferies. -- Analyst

Okay. All right. Thanks for your time this morning, guys.

Operator

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

TJ Schultz -- RBC Capital Markets -- Analyst

Hey, good morning. Just one follow-up on the land exchange plan. I'm just trying to understand the next steps there understanding the goal to have it tied up and ready to go by next summer. If you can kind of just walk through what needs to happen to get there? Thanks.

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

We're still working with the agency on what those steps need to be. And as we continue to define, then we can continue to talk about them.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay, thank you.

Operator

Your next question comes from the line of Ross Payne with Wells Fargo. Your line is open

Ross Payne -- Wells Fargo. -- Analyst

Sorry, guys. One more question, I guess you know based on your comment to protect the balance sheet and deleverage, why does it not make sense to go ahead and cut the distribution now to help fund, to keep the balance sheet in shape, to fund the increased cost of MVP and ultimately to deal with any kind of decrease in rates with EQT? Why don't you go and do that now? Because we've made the determination not to Ross.

All right. That's all I got.

Thomas F. Karam -- President and Chief Executive Officer

Thanks.

Operator

There are no further telephone questions at this time. I turn the call back to our presenters.

Thomas F. Karam -- President and Chief Executive Officer

Thank you very much for joining the call today. We appreciate everybody's attention to us. Have a good day. Be careful out there go [Indecipherable].

Operator

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

Duration: 36 minutes

Call participants:

Nate Tetlow -- Investor Relations

Thomas F. Karam -- President and Chief Executive Officer

Kirk R. Oliver -- Senior Vice President and Chief Financial Officer

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

Rahul -- JPMorgan -- Analyst

Shneur Gershuni -- UBS -- Analyst

Spiro Dounis -- Credit Suisse -- Analyst

Ross Payne -- Wells Fargo. -- Analyst

Derek Walker -- Bank of America -- Analyst

Chris Tillett -- Barclays -- Analyst

Chris Sighinolfi -- Jefferies. -- Analyst

TJ Schultz -- RBC Capital Markets -- Analyst

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