UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 22, 2017

RICE MIDSTREAM PARTNERS LP
(Exact name of registrant as specified in its charter)

 
					
Delaware	 	001-36789	 	47-1557755	
(State or Other Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(I.R.S. Employer
Identification No.)	
2200 Rice Drive
Canonsburg, Pennsylvania 15317    
(Address of Principal Executive Offices)
(Zip Code)    
(724) 271-7200    
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Item 2.02	Results of Operations and Financial Condition.	
On February 22, 2017, Rice Midstream Partners LP (the “Partnership”) announced its results for the quarter and year ended December 31, 2016. A copy of the Partnership’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
 
Item 9.01	Financial Statements and Exhibits.	
(d)    Exhibits.

Exhibit
No.	  	Description	
		
99.1	  	Press Release dated February 22, 2017.	
THE INFORMATION FURNISHED UNDER ITEM 2.02 OF THIS CURRENT REPORT, INCLUDING EXHIBIT 99.1 ATTACHED HERETO, SHALL NOT BE DEEMED “FILED” FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, NOR SHALL IT BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	 		 	RICE MIDSTREAM PARTNERS LP	
				
	 		 	By:	 	Rice Midstream Management LLC,	
	 		 		 	its general partner	

	 		 	By:	 	/s/ Daniel J. Rice IV	
	 		 		 	Daniel J. Rice IV	
	 		 		 	Director, Chief Executive Officer	
Dated: February 22, 2017
 
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EXHIBIT INDEX

Exhibit
No.	  	Description	
		
99.1	  	Press Release dated February 22, 2017.	
THE INFORMATION FURNISHED UNDER ITEM 2.02 OF THIS CURRENT REPORT, INCLUDING EXHIBIT 99.1 ATTACHED HERETO, SHALL NOT BE DEEMED “FILED” FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, NOR SHALL IT BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.
 
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Exhibit 99.1

FOR IMMEDIATE RELEASE
Rice Midstream Partners Reports Fourth Quarter and Full-Year 2016 Financial and Operating Results
CANONSBURG, Pa. - February 22, 2017 /PRNewswire/ - Rice Midstream Partners LP (NYSE: RMP) (“RMP” or the “Partnership”) today reported fourth quarter and full-year 2016 financial and operating results. Highlights to date include:
 
 	•	 	Fourth quarter average daily throughput of 1,203 MDth/d	
 
 	•	 	2016 average daily throughput of 983 MDth/d, 3% above guidance	
 
 	•	 	Net income of $34.3 million and $121.6 million for the fourth quarter and full year, respectively	
 
 	•	 	Fourth quarter Adjusted EBITDA (1) of $46.2 million driven by accelerated Rice Energy (NYSE: RICE) water volumes	
 
 	•	 	2016 Adjusted EBITDA (1) of $158.4 million, 6% above the high end of guidance	
 
 	•	 	Distributable cash flow (“DCF”) (1) of $41.9 million and $143.2 million for the fourth quarter and full year, respectively	
 
 	•	 	DCF coverage ratio (1) of 1.58x and 1.70x for the fourth quarter and full-year, respectively	
 
 	•	 	Raised fourth quarter distribution to $0.2505 per common unit, an increase of 27% over the prior year quarter and 6% relative to third quarter 2016	
 
 	•	 	2016 expansion capital of $104 million, 23% below guidance resulting from a combination of projects under budget and shifted into 2017	
 
 	•	 	Acquired Vantage Energy’s midstream assets for $600 million including an acreage dedication covering 85,000 core dry gas Marcellus acres in Greene County, Pennsylvania	
 
 	•	 	Exited the quarter with strong liquidity of $682 million and leverage of 1.1x net debt to 2016 Adjusted EBITDA (1)	
Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, “We delivered another outstanding quarter of meeting or exceeding expectations, as our sponsor’s reliable production growth has allowed Rice Midstream Partners to spend its capital effectively and grow distributions at top-tier rates while maintaining ample coverage. Additionally, the acquisition of Vantage Energy provides a longer, more visible runway for our talented team to execute and deliver top-tier distribution growth at healthy coverage levels.”
 
1.	Please see “Supplemental Non-GAAP Financial Measures” for a description of Adjusted EBITDA, distributable cash flow , DCF coverage ratio and related reconciliations to comparable GAAP financial measures.	
 
1

Fourth Quarter 2016 Financial Results
For the three months ended December 31, 2016, gathering volumes averaged 1,203 MDth/d, a 71% increase over the prior year quarter and a 26% increase relative to third quarter 2016, with 24% attributable to third-party volumes. Compression volumes averaged 825 MDth/d, a 778% increase over the prior year quarter and an 11% increase relative to third quarter 2016, with 36% attributable to third-party volumes. Fresh water delivery volumes were 321 MMgal, or an average of 3.5 MMgal/d, a 59% increase relative to the prior year quarter and a 138% increase relative to third quarter 2016.
Operating revenues were $59.5 million, comprised of $41.8 million in revenues from our gathering and compression segment and $17.7 million in revenues from our water services segment. Operation and maintenance expense totaled $7.3 million, including $2.9 million for gathering and compression and $4.4 million for water services. Net income was $34.3 million, or $0.33 per limited partner unit. Adjusted EBITDA (1) was $46.2 million and, after giving effect to $2.8 million of estimated maintenance capital expenditures and cash interest expense of $1.6 million, DCF (1) was $41.9 million, resulting in a DCF coverage ratio of 1.58x.
We invested approximately $22 million of net expansion capital, excluding acquisitions, including $17 million to develop gas gathering and compression assets and $5 million to develop our water services assets.
 
1.	Please see “Supplemental Non-GAAP Financial Measures” for a description of Adjusted EBITDA, distributable cash flow and related reconciliations to comparable GAAP financial measures.	
Full-Year 2016 Financial Results
For the year ended December 31, 2016, gathering volumes averaged 983 MDth/d, a 52% increase over the the prior year, with 27% attributable to third-party volumes. Compression volumes averaged 572 MDth/d, a 794% increase relative to the prior year, with 43% attributable to third-party volumes. Fresh water delivery volumes were 1,253 MMgal, or an average of 3.4 MMgal/d, with 11% attributable to third-party volumes.
Operating revenues were $201.6 million, comprised of $132.1 million in revenues from our gathering and compression segment and $69.5 million in revenues from our water services segment. Operation and maintenance expense totaled $24.6 million, including $8.0 million for gathering and compression and $16.6 million for water services. Net income was $121.6 million, or $1.46 per limited partner unit. Adjusted EBITDA (1) was $158.4 million and, after giving effect to $11.2 million of estimated maintenance capital expenditures and cash interest expense of $3.9 million, DCF (1) was $143.2 million, resulting in a DCF coverage ratio of 1.70x.
We invested approximately $104 million of net expansion capital, excluding acquisitions, including $99 million to develop gas gathering and compression assets and $5 million to develop our water services assets.
 
2

									
 	  	Average Daily Throughput (MDth/d)	 	
 	  	Three Months Ended	 	 	Year Ended	 	
 	  	December 31, 2016	 	 	December 31, 2016	 	
Gathering Assets	  				 				
Affiliate	  	 	910	 	 	 	714	 	
Third-party	  	 	293	 	 	 	269	 	
	  	 	 	 	 	 	 	 	
Total	  	 	1,203	 	 	 	983	 	
	  	 	 	 	 	 	 	 	
% Third-party	  	 	24	% 	 	 	27	% 	
		
 	  	Average Daily Compression Volumes (MDth/d)	 	
 	  	Three Months Ended	 	 	Year Ended	 	
 	  	December 31, 2016	 	 	December 31, 2016	 	
Compression Assets	  				 				
Affiliate	  	 	531	 	 	 	327	 	
Third-party	  	 	294	 	 	 	245	 	
	  	 	 	 	 	 	 	 	
Total	  	 	825	 	 	 	572	 	
	  	 	 	 	 	 	 	 	
% Third-party	  	 	36	% 	 	 	43	% 	
		
 	  	Average Water Volumes (MMGal)	 	
 	  	Three Months Ended	 	 	Year Ended	 	
 	  	December 31, 2016	 	 	December 31, 2016	 	
Water Services Assets	  				 				
Pennsylvania Water	  	 	149	 	 	 	521	 	
Ohio Water	  	 	172	 	 	 	732	 	
	  	 	 	 	 	 	 	 	
Total	  	 	321	 	 	 	1,253	 	
	  	 	 	 	 	 	 	 	
% Third-party	  	 	—  	% 	 	 	11	% 	
On October 19, 2016, concurrent with Rice Energy’s acquisition of Vantage Energy, we purchased entities owning the Vantage Energy midstream assets from Rice Energy for $600 million. The assets are located in Greene County, Pennsylvania and include 30 miles of dry gas gathering and compression assets. In connection with the acquisition, Rice Energy dedicated the acquired 85,000 net acres to RMP to provide gas gathering, compression and freshwater distribution services.
 
1.	Please see “Supplemental Non-GAAP Financial Measures” for a description of Adjusted EBITDA, distributable cash flow and related reconciliations to comparable GAAP financial measures.	
Financial Position and Liquidity
As of December 31, 2016, we had $660 million of availability on our revolving credit facility and $22 million of cash on hand, resulting in $682 million of total liquidity to fund our 2017 capital budget. We exited the year with a low leverage of 1.1x net debt to 2016 Adjusted EBITDA (1) .
 
1.	Please see “Supplemental Non-GAAP Financial Measures” for a description of Adjusted EBITDA and related reconciliations to comparable GAAP financial measures.	
 
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Quarterly Cash Distribution
On January 20, 2017, we declared a quarterly distribution of $0.2505 per unit for the fourth quarter 2016, an increase of $0.0135 per unit relative to third quarter 2016. The distribution was payable on February 16, 2017 to unitholders of record as of February 7, 2017.
Conference Call
RMP will host a conference call on February 23, 2017 at 11:00 a.m. Eastern time (10:00 a.m. Central time) to discuss fourth quarter and full-year 2016 financial and operating results. To listen to a live audio webcast of the conference call, please visit RMP’s website at www.ricemidstream.com . A replay of the conference call will be available following the call for two weeks and can be accessed from RMP’s homepage.
Rice Energy will host a conference call on February 23, 2017 at 10:00 a.m. Eastern time (9:00 a.m. Central time) to discuss fourth quarter and full-year quarter 2016 financial and operating results and we encourage RMP investors to listen-in. To listen to a live audio webcast of the conference call, please visit Rice Energy’s website at www.riceenergy.com . A replay of the conference call will be available for two weeks and can be accessed from Rice’s homepage.
About Rice Midstream Partners
Rice Midstream Partners LP is a fee-based, growth-oriented limited partnership formed by Rice Energy Inc. (NYSE: RICE) to own, operate, develop and acquire midstream assets in the Appalachian basin. RMP provides midstream services to Rice Energy and third-party companies through its natural gas gathering, compression and water assets in the rapidly developing dry gas cores of the Marcellus and Utica Shales.
For more information, please visit our website at www.ricemidstream.com .
Forward Looking Statements
This release includes forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than historical facts included in this release, that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as, forecasted gathering volumes, revenues, Adjusted EBITDA, distribution growth, and distributable cash flow, the timing of completion of midstream projects, future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, market conditions, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. All forward-looking statements speak only as of the date of this release. Although we believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.
We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to our gathering and compression and water services businesses. These risks include, but are not limited to: commodity
 
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price volatility; inflation; environmental risks; regulatory changes; the uncertainty inherent in projecting future throughput volumes, cash flow and access to capital; and the timing of development expenditures of Rice Energy or our other customers. Information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by us will be realized, or even if realized, that they will have the expected consequences to or effects on us, our business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
Contact:
Julie Danvers, Director of Investor Relations
(832) 708-3437
Julie.Danvers@RiceMidstream.com
 
5

Rice Midstream Partners LP
Statements of Operations
(Unaudited)

 	  	Three Months Ended	 	 	Year Ended	 	
 	  	December 31,	 	 	December 31,	 	
(in thousands, except per unit data)	  	2016	 	 	2015	 	 	2016	 	 	2015	 	
Operating revenues:	  				 				 				 				
Affiliate	  	$	46,993	 	 	$	21,379	 	 	$	152,260	 	 	$	93,668	 	
Third-party	  	 	12,473	 	 	 	7,935	 	 	 	49,363	 	 	 	20,791	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	  	 	59,466	 	 	 	29,314	 	 	 	201,623	 	 	 	114,459	 	
Operating expenses:	  				 				 				 				
Operation and maintenance expense	  	 	7,297	 	 	 	4,882	 	 	 	24,589	 	 	 	14,910	 	
General and administrative expense	  	 	6,022	 	 	 	3,072	 	 	 	18,759	 	 	 	13,394	 	
Incentive unit (income) expense (1)	  	 	—  	 	 	 	(4	) 	 	 	—  	 	 	 	1,044	 	
Equity compensation expense (1)	  	 	145	 	 	 	1,185	 	 	 	2,873	 	 	 	4,501	 	
Depreciation expense	  	 	7,456	 	 	 	5,944	 	 	 	25,170	 	 	 	16,399	 	
Acquisition costs	  	 	52	 	 	 	—  	 	 	 	125	 	 	 	—  	 	
Amortization of intangible assets	  	 	412	 	 	 	408	 	 	 	1,634	 	 	 	1,632	 	
Other expense	  	 	1,292	 	 	 	51	 	 	 	1,531	 	 	 	543	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	22,676	 	 	 	15,538	 	 	 	74,681	 	 	 	52,423	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss)	  	 	36,790	 	 	 	13,776	 	 	 	126,942	 	 	 	62,036	 	
Other (expense) income	  	 	78	 	 	 	—  	 	 	 	78	 	 	 	11	 	
Interest expense (1)	  	 	(1,562	) 	 	 	(1,094	) 	 	 	(3,931	) 	 	 	(3,164	) 	
Amortization of deferred finance costs	  	 	(1,046	) 	 	 	(144	) 	 	 	(1,479	) 	 	 	(576	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before income taxes	  	 	34,260	 	 	 	12,538	 	 	 	121,610	 	 	 	58,307	 	
Income tax expense	  	 	—  	 	 	 	(17	) 	 	 	—  	 	 	 	(5,812	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	$	34,260	 	 	$	12,521	 	 	$	121,610	 	 	$	52,495	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	$	34,260	 	 	$	12,521	 	 	$	121,610	 	 	$	52,495	 	
Less: Pre-acquisition net income (loss) allocated to general partner	  	 	—  	 	 	 	992	 	 	 	—  	 	 	 	7,296	 	
Less: General partner interest in net income attributable to incentive distribution rights	  	 	888	 	 	 	—  	 	 	 	1,428	 	 	 	—  	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to limited partners	  	$	33,372	 	 	$	11,529	 	 	$	120,182	 	 	$	45,199	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average limited partner units (in millions)	  				 				 				 				
Common units (basic)	  	 	72.0	 	 	 	36.5	 	 	 	52.8	 	 	 	30.7	 	
Common units (diluted)	  	 	72.2	 	 	 	36.7	 	 	 	53.1	 	 	 	30.8	 	
Subordinated units (basic and diluted)	  	 	28.8	 	 	 	28.8	 	 	 	28.8	 	 	 	28.8	 	
Net income attributable to RMP per limited partner unit (2)	  				 				 				 				
Common units (basic)	  	$	0.33	 	 	$	0.18	 	 	$	1.46	 	 	$	0.76	 	
Common units (diluted)	  	$	0.33	 	 	$	0.18	 	 	$	1.45	 	 	$	0.76	 	
Subordinated units (basic and diluted)	  	$	0.33	 	 	$	0.18	 	 	$	1.50	 	 	$	0.76	 	
 
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 	  	Three Months Ended	 	  	Year Ended	 	
 	  	December 31,	 	  	December 31,	 	
(in thousands, except per unit data)	  	2016	 	  	2015	 	  	2016	 	  	2015	 	
Adjusted EBITDA (3)	  	$	46,225	 	  	$	19,065	 	  	$	158,353	 	  	$	63,780	 	
Distributable cash flow (4)	  	$	41,863	 	  	$	16,997	 	  	$	143,222	 	  	$	56,944	 	
Quarterly distribution per unit	  	$	0.2505	 	  	$	0.1965	 	  	$	0.9210	 	  	$	0.7680	 	
Distribution declared:	  				  				  				  				
Limited partner units - Public	  	$	18,416	 	  	$	8,284	 	  	$	56,371	 	  	$	24,715	 	
Limited partner units - GP Holdings	  	 	7,204	 	  	 	5,651	 	  	 	26,485	 	  	 	22,086	 	
General Partner	  	 	888	 	  	 	—  	 	  	 	1,429	 	  	 	—  	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total distributions declared	  	$	26,508	 	  	$	13,935	 	  	$	84,285	 	  	$	46,801	 	
DCF coverage ratio (5)	  	 	1.58	 	  	 	1.22	 	  	 	1.70	 	  	 	1.22	 	
 
1.	Prior to their acquisition by us, our water assets were allocated incentive unit expense, equity compensation expense and interest expense initially recognized by Rice Energy. These non-cash charges are described in more detail in Note 9 to the consolidated financial statements in our Form 10-K.	
2.	Net income per limited partner unit does not include results attributable to the water assets prior to their acquisition as these results are not attributable to our limited partners.	
3.	We define Adjusted EBITDA as net income (loss) before interest expense, depreciation expense, amortization expense, non-cash equity compensation expense, amortization of deferred financing costs and other non-recurring items. Please read “Supplemental Non-GAAP Financial Measures.”	
4.	We define distributable cash flow as Adjusted EBITDA less interest expense, and estimated maintenance capital expenditures. Please read Supplemental “Non-GAAP Financial Measures.”	
5.	We define DCF coverage ratio as distributable cash flow divided by total distributions declared. Please read “Supplemental Non-GAAP Financial Measures.”	
 
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Rice Midstream Partners LP
Segment Results of Operations
(Unaudited)
Gathering and Compression Segment

 	  	Three Months Ended	 	  	Year Ended	 	
 	  	December 31, 2016	 	  	December 31, 2016	 	
(in thousands)	  	2016	 	  	2015	 	  	2016	 	  	2015	 	
Affiliate gathering volumes (MDth/d)	  	 	910	 	  	 	577	 	  	 	714	 	  	 	547	 	
Third-party gathering volumes (MDth/d)	  	 	293	 	  	 	126	 	  	 	269	 	  	 	100	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total gathering volumes (MDth/d)	  	 	1,203	 	  	 	703	 	  	 	983	 	  	 	647	 	
Affiliate compression volumes (MDth/d)	  	 	531	 	  	 	9	 	  	 	327	 	  	 	33	 	
Third-party compression volumes (MDth/d)	  	 	294	 	  	 	85	 	  	 	245	 	  	 	31	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total compression volumes (MDth/d)	  	 	825	 	  	 	94	 	  	 	572	 	  	 	64	 	
Operating revenues:	  				  				  				  				
Affiliate	  	$	29,286	 	  	$	16,434	 	  	$	86,347	 	  	$	61,180	 	
Third-party	  	 	12,473	 	  	 	4,739	 	  	 	45,752	 	  	 	16,031	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating revenues	  	 	41,759	 	  	 	21,173	 	  	 	132,099	 	  	 	77,211	 	
Operating expenses:	  				  				  				  				
Operation and maintenance expense	  	 	2,897	 	  	 	2,021	 	  	 	7,987	 	  	 	6,006	 	
General and administrative expense	  	 	4,731	 	  	 	2,617	 	  	 	15,044	 	  	 	9,961	 	
Equity compensation expense	  	 	128	 	  	 	965	 	  	 	2,270	 	  	 	3,925	 	
Depreciation expense	  	 	3,814	 	  	 	1,778	 	  	 	10,840	 	  	 	6,310	 	
Acquisition costs	  	 	52	 	  	 	—  	 	  	 	125	 	  	 	—  	 	
Amortization of intangible assets	  	 	412	 	  	 	408	 	  	 	1,634	 	  	 	1,632	 	
Other expense	  	 	902	 	  	 	—  	 	  	 	1,051	 	  	 	492	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total operating expenses	  	 	12,936	 	  	 	7,789	 	  	 	38,951	 	  	 	28,326	 	
Operating income	  	$	28,823	 	  	$	13,384	 	  	$	93,148	 	  	$	48,885	 	
 
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Water Services Segment

 	  	Three Months Ended	 	 	Year Ended	 	
 	  	December 31,	 	 	December 31,	 	
(in thousands)	  	2016	 	  	2015	 	 	2016	 	  	2015	 	
Water service volumes (MMgal)	  	 	321	 	  	 	202	 	 	 	1,253	 	  	 	777	 	
Operating revenues:	  				  				 				  				
Affiliate	  	$	17,707	 	  	$	4,945	 	 	$	65,913	 	  	$	32,488	 	
Third-party	  	 	—  	 	  	 	3,196	 	 	 	3,611	 	  	 	4,760	 	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Total operating revenues	  	 	17,707	 	  	 	8,141	 	 	 	69,524	 	  	 	37,248	 	
Operating expenses:	  				  				 				  				
Operation and maintenance expense	  	 	4,400	 	  	 	2,861	 	 	 	16,602	 	  	 	8,904	 	
General and administrative expense	  	 	1,291	 	  	 	455	 	 	 	3,714	 	  	 	3,433	 	
Incentive unit (income) expense	  	 	—  	 	  	 	(4	) 	 	 	—  	 	  	 	1,044	 	
Equity compensation expense	  	 	17	 	  	 	220	 	 	 	603	 	  	 	576	 	
Depreciation expense	  	 	3,642	 	  	 	4,166	 	 	 	14,330	 	  	 	10,089	 	
Other operating expense	  	 	390	 	  	 	51	 	 	 	480	 	  	 	51	 	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Total operating expenses	  	 	9,740	 	  	 	7,749	 	 	 	35,729	 	  	 	24,097	 	
Operating income	  	$	7,967	 	  	$	392	 	 	 	33,795	 	  	$	13,151	 	
 
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Rice Midstream Partners LP
Supplemental Non-GAAP Financial Measures
(Unaudited)
Adjusted EBITDA, distributable cash flow and DCF coverage ratio are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess the financial performance of our assets, without regard to financing methods, capital structure or historical cost basis; our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing or capital structure; our ability to incur and service debt and fund capital expenditures; the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We define Adjusted EBITDA as net income (loss) before interest expense, depreciation expense, amortization of intangible assets, non-cash equity compensation expense, amortization of deferred financing costs and other non-recurring items. Adjusted EBITDA is not a measure of net income as determined by GAAP. We define distributable cash flow as Adjusted EBITDA less cash interest expense, and estimated maintenance capital expenditures. We define DCF coverage ratio as distributable cash flow divided by total distributions declared. Distributable cash flow does not reflect changes in working capital balances and is not a presentation made in accordance with GAAP.
We believe that the presentation of Adjusted EBITDA, distributable cash flow and DCF coverage ratio will provide useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net income and net cash provided by operating activities, respectively. Our non-GAAP financial measures of Adjusted EBITDA and distributable cash flow should not be considered as alternatives to GAAP net income or net cash provided by operating activities. Each of Adjusted EBITDA and distributable cash flow has important limitations as an analytical tool because they exclude some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA, distributable cash flow or DCF coverage ratio in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA, distributable cash flow and DCF coverage ratio may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA, distributable cash flow and DCF coverage ratio may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
 
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 	  	Three Months Ended	 	 	Year Ended	 	
(in thousands)	  	December 31, 2016	 	 	December 31, 2016	 	
Adjusted EBITDA reconciliation to loss from continuing operations:	  				 				
Net income	  	$	34,260	 	 	$	121,610	 	
Interest expense	  	 	1,562	 	 	 	3,931	 	
Depreciation expense	  	 	7,456	 	 	 	25,170	 	
Amortization of intangible assets	  	 	412	 	 	 	1,634	 	
Acquisition costs	  	 	52	 	 	 	125	 	
Non-cash equity compensation expense	  	 	145	 	 	 	2,873	 	
Amortization of deferred financing costs	  	 	1,046	 	 	 	1,479	 	
Other expense	  	 	1,292	 	 	 	1,531	 	
	  	 	 	 	 	 	 	 	
Adjusted EBITDA	  	$	46,225	 	 	$	158,353	 	
	  	 	 	 	 	 	 	 	
Adjusted EBITDA	  	$	46,225	 	 	$	158,353	 	
Cash interest expense	  	 	(1,562	) 	 	 	(3,931	) 	
Estimated maintenance capital expenditures	  	 	(2,800	) 	 	 	(11,200	) 	
	  	 	 	 	 	 	 	 	
Distributable cash flow	  	$	41,863	 	 	$	143,222	 	
	  	 	 	 	 	 	 	 	
Total distributions declared	  	$	26,508	 	 	$	84,285	 	
DCF coverage ratio	  	 	1.58	 	 	 	1.70	 	
Reconciliation of Adjusted EBITDA to Cash:	  				 				
Adjusted EBITDA	  	$	46,225	 	 	$	158,353	 	
Interest expense	  	 	(1,562	) 	 	 	(3,931	) 	
Other income (expense)	  	 	(1,292	) 	 	 	(1,531	) 	
Acquisition costs	  	 	(52	) 	 	 	(125	) 	
Changes in operating assets and liabilities which used cash	  	 	1,295	 	 	 	1,350	 	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	$	44,614	 	 	$	154,116	 	
Net cash used in investing activities	  	 	(623,408	) 	 	 	(721,087	) 	
Net cash provided by financing activities	  	 	592,995	 	 	 	581,207	 	
	  	 	 	 	 	 	 	 	
Net (decrease) increase in cash	  	 	14,201	 	 	 	14,236	 	
Cash at the beginning of the period	  	 	7,634	 	 	 	7,597	 	
	  	 	 	 	 	 	 	 	
Cash at the end of the period	  	$	21,835	 	 	$	21,833	 	

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