Operating expenses for 2012 totaled $212.1 million, 11% higher than in 2011 and consistent with the growth in the EQT Midstream business, such as higher compressor O&M and depreciation expenses, property taxes, and labor on the expanded gathering and transmission infrastructure. On a per unit basis; however, year-over-year gathering and compression expenses were 20% lower in 2012. O&M in 2011 was reduced by $10.3 million resulting from a property tax reserve. SG&A was flat year-over-year as a result of a $2.8 million recovery from the Lehman Brothers bankruptcy, and a $2.5 million reduction of a regulatory reserve at Transmission, which together offset higher SG&A costs.
EQT Midstream had fourth quarter 2012 operating income of $70.4 million, a 33% increase over the same period in 2011. Net gathering revenues increased 27% to $83.8 million in the fourth quarter 2012, primarily due to a 43% increase in gathered volumes. Net transmission revenues totaled $33.5 million, a 59% increase over 2011, mainly due to the sale of capacity on the Sunrise and Marcellus expansion projects. Net storage, marketing and other revenues totaled $7.7 million, a 59% decrease over 2011, and included a $4.3 million non-cash unrealized loss on derivatives and inventory. Operating expenses for the quarter were $54.6 million, up $1.5 million from 2011, as an increase in DD&A was partly offset by a $2.5 million reduction of a regulatory reserve included in SG&A.
Distribution’s operating income totaled $68.6 million in 2012, 21% lower than reported in 2011. Net operating revenues for 2012 were $170.0 million, $17.5 million lower than last year, due to the warmest weather on record in the Company’s service territory. Operating expenses for 2012 were $101.4 million, compared to $100.7 million in 2011.Distribution’s fourth quarter 2012 operating income totaled $24.8 million, compared to $22.1 million for the same period in 2011. Total net operating revenues were $50.0 million, essentially unchanged compared with last year, while operating expenses were $2.4 million lower as a result of lower incentive compensation expense and a reduction in the estimate of asset retirement obligations.