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Will Bottlenecks Derail Mountain Valley’s Potential?

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After years of legal struggles, Mountain Valley Pipeline (MVP) finally entered service on June 14 and is currently available for interruptible or short-term firm transport contracts through June. The pipeline is fully subscribed under long-term capacity agreements with the anchor shippers which begin July 1. The pipeline has been flowing an average of 340 MMcf/d since its start-up, well below the full 2 Bcf/d of capacity.

MVP runs roughly 300 miles from the Marcellus (West Virginia) to an interconnect with Williams’ (WMB) Transcontinental Gas Pipe Line (Transco) in Pittsylvania, VA. East Daley expects MVP to be less than 50% utilized on average in 2024, due to downstream constraints at Transco Zone 5.

mvp tdn 6.26

Transco is the primary pipeline providing ~2 Bcf/d of egress out of the Zone 5 hub. The pipe is fully contracted and seasonally runs full creating bottlenecks for additional MVP flows into the area. In May, Transco’s southbound egress ran ~400 MMcf/d below capacity providing some room for MVP to offload volumes to more southern demand (see chart).

While some incremental projects are expanding Zone 5 capacity in 2H24 and 2025, downstream constraints will be fully alleviated in 2027 when Transco debottlenecks downstream through its Southeast Supply Enhancement expansion. Equitrans (ETRN) is developing the MVP Southgate project to extend service from MVP into North Carolina.

East Daley estimates that the Southgate expansion would add approximately $29MM in EBITDA assuming a 300 MMcf/d minimum volume commitment (MVC). The potential for an MVP mainline compression expansion of 500 MMcf/d could also provide a boost to MVP earnings. EDA estimates the expansion if fully subscribed would lift ETRN’s portion of MVP EBITDA by ~$65MM upon completion. Both projects have start-up dates expected post-2027.

In conjunction with the startup of MVP, multiple other projects are slated for contract startups including the 1.6 Bcf/d Hammerhead gathering header as well as the Equitrans Expansion Project (EEP). Hammerhead will connect Pennsylvania and West Virginia gas volumes to MVP while EEP, which has firm transport agreements of 550 MMcf/d, will provide north-to-south capacity on Equitrans Pipeline for delivery into MVP. East Daley estimates that Hammerhead and EEP will provide a $76MM and $20MM lift to ETRN EBITDA, respectively, going forward. Additionally, ETRN gains downside protection from a step up of EQT’s gathering MVC topping out at an incremental 1 Bcf/d over the next 3 years. MVPs in service also grants ETRN a $36MM uplift in 2024 based on the current HH forward strip. – Alex Gafford and James Taylor Tickers: ETRN, WMB

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