PSXP - Earnings call transcript Q3 2017

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Operator

Welcome to the Third Quarter 2017 Phillips 66 Partners Earnings Conference Call. My name is Julie, and I’ll be your operator for today’s call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. the to turn President, Dietert, now Relations. Investor will call Jeff over Vice I begin. may you Jeff,

Jeff Dietert

two Good to will and CFO; call. President; afternoon, results welcome Mitchell, Tom contains Participants earnings as third reminder Kevin and differ on website, as will materially statements conference differ operating our that, Operating Liberti, to be session. quarter here to Vice Safe the during the of Harbor today’s events we forward-looking Chief call With President filings. we may during remarks. along actual in supplemental call SEC will and Taylor, be Statement. results from Partners included It what well call financial with turn Vice Officer. Q&A include President Slide The I the Taylor, Tim presentation is Phillips can the over making Tim information. the section Actual Phillips using that and XX Partners materials are be a could that on we XX the present and opening our presentation for Factors will cause today. found

Tim Taylor

We Jeff. with from EBITDA earnings and quarter Thank was Partnership’s assets Harvey. minimal Hurricane our were million $XXX $XX The you, disruptions third and impacts million. operated well adjusted financial

higher Directors Board X% per last than $X.XXX is of approved which quarter. Our the third of quarter unit, distribution

increased we growth coverage quarter. XX was rate IPO, our have quarters distribution XX%. distribution at Our X.XX this compound of times consecutive XXXX a annual Since

million base reliable cash Merey Phillips fee by integrated throughput from Sweeny in strategy current pipeline generation, assets. include Merey secured expand a our and to the on the agreement acquisition tolling XX% funded of and provides assets placement EBITDA XX common financing. XX, annual The five-year add we CAGAR attractive backed The completed recently units systems that and consideration was about common minimum deliver us the a assets a of equity commitment The source Partnership. billion expected to keeps includes and are track $XXX $X.X That Phillips through for adjusted issuance to Phillips volume of partner a acquired run a transaction The complements Bakken target. from preferred XX. Pipeline. four, to largest XX-year flow slide general Moving our rate a Sweeny the to-date XX% public with to of debt units, acquisition distribution our and proceeds issuance. and private for

end expect well-positioned than access to program. equity We ATM our the to run And XXXX. billion our by so achieve are without do we of selective EBITDA use market of $X.X further through goal other rate the to

XXXX. barrels fourth JV. second joint venture. this of year. this our XXX,XXX Let’s operator day expected day. to Lake now Hills XX has operations segment in per Lake the quarter we in is completed by is per loop complete joint operates expected interest A XX% have the to and and move Bridge own per end Charles growth in Terminal in by portfolio. the to plans the from second The pipeline project This from XXXX. new completion increasing Sand of interest barrels commercial project execution is to barrels play to organic Louisiana. currently The STACK further of STACK day half Charles, We five expected a the capacity St. is James, this the Bayou Beaumont Pipeline, in a interest, talk XX% capacity barrels complete with the into own about which a to Louisiana, to expand XXX,XXX Phillips begin XXXX. existing increases announced approximately and to further capacity We now DCP XXX,XXX the day slide from be of expected XXX,XXX half extension in to per one-third the is Pipeline The be venture to Midstream,

North Refinery. We long-term Phillips a first with processing Pipeline continue will development Charles the of volume will expected venture to gathering to expected constructing services include production interest project in The a XX.X% approval XXXX. in PSXP minimum new is XX,XXX owns The to investing is by a be for The in project $XX end agreement Final barrel is the link unit Mountrail Total Phillips pipeline processing Dakota. region. capital isomerization XX raw in per cost and venture a additional capacity million. Bakken system projects JV. of services gas XX-mile natural growth the McKenzie is of project Lake the joint expected XX about of in a develop this County. day including system County quarter is commitment. the The in Completion at Sacagawea in XXXX.

financial Now, for updates over I quarter. turn Kevin will the Mitchell, both, to the and provide to operational call

Kevin Mitchell

everyone. Tim. Good you, Thank afternoon,

Both second throughput terminal million XX X.X mainly which slide during up volumes turnarounds six. at the operations from system while on during pipeline equity quarter, utilization was X.X completed volumes to Looking the due million throughput were day, per affiliates volumes Overall terminal pipeline Total quarter. refineries increased barrels the quarter. was second at Phillips from across the barrels and crude higher excluding per day.

change seven $X.XX the from affiliates. revenue lower while shows in exclude the hurricane volumes at Pasadena slightly Average per the terminal. to products $X.XX declined quarter pipeline primarily pipeline revenue downtime $X.XX was quarter. during Connector, of EBITDA both related the previous average quarter, Sweeney Cross-Channel per adjusted terminal barrel, pipeline, due to Pasadena equity barrel and the increased the third NGL rates at in and Our terminal Slide to and these

down and throughput EBITDA was Third calculation. costs. planned higher quarter million by expense. our $X volumes lower $XXX maintenance $X decreased Slide primarily Hurricane-related million Operations This eight was the million, by the during second through EBITDA partially adjusted increased driven million maintenance DCF $X to offset higher from volumes, EBITDA the impacts quarter. quarter. by walks

revenue flow was of quarter expense we million net expenditures interest will distribution impact $XXX of times. million. impact capital These with million. result million, of the $X units The deferred $XX the During the will acquisition. had cash and the for distribution third total of million in quarter coverage X.XX was Distributable maintenance were $XX the quarter, $XXX common recent receive ratio a distributions. connection units coverage reflects ratio issued in cash The cash

the fourth until as year. of of cash over unit However, on achieved be assets that we have of will quarter earnings October the not third partner from highlights payable the the Slide XXst. approved The recently will per record to acquired distribution limited $X.XXX unitholders last be recognized XXth November quarter. growth nine

quarter our run approximately ended Slide by remarks. $X X.X a ratio a open times increased Prior cash the million the the distributable to adjusted finished of XX% Third $XXX the cash now revolving of $XXX acquisition, quarter. borrowing $XXX annualized be questions. with by basis. of of debt adjusted was and around Partnership the EBITDA million. of shows EBITDA times. the for EBITDA our EBITDA quarter million. at recent we rate XX% $XX million on end expect Post-acquisition, our the is XX X.X financial outstanding run flow the leverage adjusted completion increased We position rate Long year-over-year. prepared third revolver We’ll term, under line covenant with to credit concludes quarter and our million This for to facility. We

Operator

[Operator Raymond go you. Thank ahead. Jenkins Justin Instructions] from please James,

open. line is Your

Justin Jenkins

we’re capital Great, below It bit thanks. the again, today. Good things, the PSX here MLP guide guess, taken trending or at XXXX. bit spend I starting a maybe level as the of like budget looks shifted, is a at afternoon, Bridge maybe everybody. some on PSXP side I I’m Is Bayou at guess here full-year loaded into well. of spend thinking there backend down

Tom Liberti

Yes.

is this Tom. Justin,

You’re right. exactly

shifted ending some but that Bridge of the we Sand for still have our CapEx. on we plan that have with Pipeline, into the So, guidance increase the on Bayou Hills we on XXXX,

Justin Jenkins

And you years? you guess, it viewing continues to want outlook? know, I of the $X in PSXP at we’ve announcement to Is don’t grow how front-row here, I’ll CapEx that on budget but set just think that like the on $X that PSXP are to past December again is maybe billion. directionally to the seen then, share on reasonable billion maybe with I XXXX stick maybe

Tim Taylor

Yes.

it, Justin, those to think projects as think PSXP. it’s accretive at organic I we about

we’ve absolute level, And an coverage over as the So, that’s grown and size that. we we going on time, better get to are bigger trend. direction in to continue

line that we’ve continue So, with that this in to last this it opportunity will we directionally be and last we to go. year how the next on Tom? that’s more year, depending have set want had this capability year,

Tom Liberti

do CapEx I going guided have budget the have years to future. that and certainly we the increased every was expansion in to say, that in just plan year

Operator

ahead. go Mizuho from Zarahn Securities, Brian please

open. is line Your

Brian Zarahn

quarter? change from what’s first Bridge, service the half of Bayou On causing to the date in year second the

Tim Taylor

Well, is [ph] permitting project’s providing think diligence currently Corps in process. doing I thing. sound; we due the still good their that’s -- basically, and -- own the doing a we’re the think And

I longer their as cover And take sure basis than going permitting make that’s expect to thoroughly. so, forward. just That’s to what see going think they we they very

before just the proceed truly it the of we is So, the construction. permit, with can final matter permits from the Corps getting

Brian Zarahn

on -- third on the more Bridge, sticking bit then, performance a elaborate the And Bayou with in you quarter? can

Tom Liberti

I can, Brian. Yes.

line. and do actually, has of on quarter, coming higher much volumes that to lot DAPL Third were with

in of that that So, the facilities presentation, is Tim I connections other we that his bit talking think what we see are was about beginning to a synergy into own.

Charles, in DAPL And the terminal into and there Lake third into volumes connection then, Bayou is the we first that the quarter Beaumont, quarter. a there. into So, much than and saw higher Bridge in comes Beaumont second PSXP into volume in

Brian Zarahn

the traditional talk was bit of your shifting the of little financing inclusion it’s the to unit, obviously on the less than processing other addition recent midstream about can that dropdown, I asset? market. know I assets. you the contracted to by little guess, but more well-received a And

Tim Taylor

a at really set it’s this, look up as partnership. We

fit was operation. and it think fractionation. like processing So, way totally about that so separately, into nice I that out then, And a a it I portfolio. in as came already doing We’re it think about our much [Ph] carved was tolling

to And the in processing the fits with the fractionator the does so terms product piece business, what and of like out. get service much a it get you very in of really

are Those a unit A, of was terms that lend I we opportunity looking that B, units isom themselves unique and the processing at like as asset [ph] to that are building that structure. it well. in both refining So, think kind of

Brian Zarahn

the to [ph] for CapEx, changes And CapEx, for expectation you the any Beaumont your maintained expansion then outlook year, maintenance year? CapEx, sticking that to

Kevin Mitchell

be the close at EBITDA, look to it we falls million. assets put $XX have of guidance No, in for that’s as million kind some have number There of that of next kind talked EBITDA are and we when of the early have a And think will where toXX% more on down you X% be we mature in $XX year. just more and of the of little and we quarter. to X% then given that a kind around makeup with will things into we line about getting quarters bit timing

on we guidance. yearly that hit a So, basis, still we will think

Brian Zarahn

last impacted the Understanding dropdown, XXXX, growth higher much size, one but well needs have financing IDR sustainable the distribution you XXXX, more I the after as about by of distribution the target structure? sort of And coverage, by how achieving the now me. coming in Okay. But, given for financing as thinking cash balance distribution you hurricane on are was for little quarter fourth third quarter. the that coverage your so are flows visibility and larger your rate, guess

Tim Taylor

There questions in a lot were that. of

me… Let

Brian Zarahn

many with question parts. One

Tim Taylor

I like Yes, that.

as there. you the our at we look backlog, at look assets fundamentally, have we think, go inventory of forward, I we

We we post-XXXX. growth, ability talk value. have top to market say quartile I’d one are We distribution sensitive what the And distribution creates really those that is to growth. drive the of yet, maximum continued

about growth, and think optimal have value. the the structure to drive M&A, at the organic about that development best best distribution make I we are project So, thinking to sure the accretion we capital that IDR of structures looking deliver combination really

looking coverage are of it’s what we in capital, make cost sustaining, what that are expectations just like leave are we growth, good we and enduring we distribution to trend expectations we think be are by you I through sure I but the at also looking and and yet market ourselves that think at number So, are. it a options of position with good what tune and the to have flexible, pick -- would try saying is

Kevin Mitchell

that fourth Yes. this And the only thing there distribution right I very that is within the healthy the add coverage -- are it would drops will be quarter. as completely once you

completed you within that have are organic growth, into and being PSXP. got XXXX projects And so, the

still You -- is potential some deliver growth. distribution also coverage currently you help PSX another means that of have distribution then, level. for that other reside at to itself the that have assets And

And XXXX. we and so, into we that beyond, factor all XXXX look of and

Operator

go JP please Jeremy Tonet from Morgan, ahead.

Your line is open.

Jeremy Tonet

think is Clearly, glad more capital, issuance does evolve successful funding as internal been there XXXX market your finding in less you about do MLP wondering that hybrids common placing have that pockets the think guys the about and you there the starts on equity later and deep more nice you out self-funding. what just date, to beyond, I’m market recently? or dropdown. worked But, very very the alternate have strategy how you last given of seeing emphasis been in with I’m Partnership’s

Tim Taylor

maximum indicated we a ago, think cash I minute accretion. I structure, cost Well, think optimum -- capital of as

you’re market the at look you right. If today,

offering, creating end you much value actually common you go If can as equity you as a through not have up large that.

part look is make we really those growth, coverage about try all distribution we we market us growth our what be that get driver of organic telling about terms to think our and try in ratio, thoughtful So, to that. the I best the hit our the that’s factors sure as value to that

a have right inventory can of that creation. we that we think try drive of push, and value lot I levers lot So, optimal a to

Jeremy Tonet

midstream billion that’s than That’s time. Are there? assets any to processing find helpful. Are its that of type traditional different just the your about PSXP other as then, buckets refinery any could other there about way such notable of assets? thinking bit Thanks. there $X.X items unit And the little think into over EBITDA

Tim Taylor

part really on putting a to not some newer desire my we processing processing need as PSX that primarily refinery the I all to projects, There’s hat think So, units. convert into on deep that. think for we our go really way other it, -- about question, would on think I see and to structure

basis I think it an or a upon to opportunity. has depend by project project

set things out of to be though logistics the docks, MLP. the the of connections, most So, we’ve be had that’s to the associated always versus as that the to in type and we’re going in saying income primary the this likely there’s it’s existing up refining, with has to fee they could on the do things processing point. a we’ve lot not as of refining, And there Jeremy, assets. possibilities kinds that continues PSX that to of assets based other going assets focus of that storage, any projects in include those qualifying that are be backlog but included

Operator

Barclays, Theresa Chen go ahead. from please

open. is line Your

Theresa Chen

Hi. for your hat the follow of another I’m any you of midstream put in very going might with wanted for someone and returns to parent’s during and ask up in doing Rodeo? partnering entity up for call that be the on. general to ways Is needs with else. there frothy how made increase to of comments team assets the PSX I Permian up on about multiples back one to to volition

Tim Taylor

that all by We can we’re that Sand at the to that on it’s Hills. open I options, I that and that. think SCOOP/STACK we the you value. think about a there’s think if opportunities as something the case maximum at maximum basis case we expansion think, look you value, opportunities think I NGL portfolio, but as there; Theresa, the deliver think a the about across stack, about Look way all think

Theresa Chen

sponsor a C no similar very Okay. midstream yourself with as partner if is publicly you still to private MLP, And JVs well? secret assets. for willing and a a frothy another corp. very you you someone entity to traded with to seek midstream stranger go -- you’re would a or In are environment,

Tim Taylor

mean, most joint sense. done joint I and open to we’ve clearly, MLP with of whatever we’re think projects venture interest other kinds makes and large companies partners. the I

So, of I we to the the to that’s think best makes we what best things that to suite look project, solid bring say at look at the and that. table whole all the way

Kevin Mitchell

we that justify arrangement a saying a opportunity. just I to don’t frothy an multiples, those overpaying way for add by going into view as would JV

from, So, the with future away see to too it’s form not be of might going these but view of we JV come pay utilize much. somebody growth to potential where on to prospects else we just clear in how justify some some

Tom Liberti

to little makes bring it not demand do I best add, some portfolio enough and of things, our up Theresa, easier work line justify together, think and just CapEx bring maybe have the and JVs an have partners are you would can a where And some but if entire so I you to a volume, of at that and look bit finally automatically that volumes the the work. base volumes

Theresa Chen

sticking to possibly point, updated stake on addition Okay. to thoughts a That taking system, long-haul gathering up in an interesting any the in Corpus? with brings Permian, the a pipeline,

Tim Taylor

we exit consideration. project to growth, active, Well, I’d say, a [Ph] see the we so, and the think pipe, that just what’s volume I make under Rodeo lot the is And saw look and the would say sense. kind to that of intra-basin. Permian’s responding that things of we at and scenario the opportunity On there it

a it’s a we really that’s what leverage to to was Tom think about say there way of was talking need on in. possibility So, that. terms But, all I in do to

Operator

RBC from Markets, go Scotto Capital ahead. please Elvira

is line open. Your

Elvira Scotto

expect pipeline, The have newly I’m midstream capital the announced gas a contracts Sacagawea typical that Pipeline going this butcher raw does should on to JV, return theme. spend? that we and

Kevin Mitchell

a yes midstream is kind both. do that base-load We contract organic volume typical should and returns. the to of have on answer The expect

Elvira Scotto

opportunities more there And JV? then, around that expansion are

Tom Liberti

The gave us to the increases would where good things. were raw That gives than into pipeline. come the kind where volume an for there. of by different get is of as line, a crude opportunity product advantage move for trucking line synergy runs good And to offtake, opportunity parallel looking always the there things some as There an Sacagawea people Bakken. wasn’t truck. and We’re bit could the gas came places by of as think in XX take that miles we I Sacagawea have. gas of us -- answer rather infrastructure pipeline, the line we really to the

So, we’re always advantage in things there. we looking the kind just things. if for be further of will there know but are taking Don’t some

Tim Taylor

Yes. are. the Sacagawea where of kind the circles system operations The center of DAPL

connect transmission So, and as as think connections, I on the the got continue to grows to is there well. the intra-basin footprint our additional Bakken now DAPL and we’ve gathering pipeline with

Tom Liberti

one I some but a fields in Sacagawea just we the connection Sacagawea quick give small and made by now. the directional Yes. Newtown, would into example, actually on a in line we’ve the line you made crude. And from of connects that

DAPL Palermo into get that Rail going the into in going get and south that you So line over Dakota pipeline on the north Terminal.

Elvira Scotto

the when where export PSX, but opportunity is you around is there of a any would Permian, growth the that midstream it’s just lot the for you organic but it the SCOOP/STACK. like seems think expensive, then, It be discussion it Is that about helpful. its opportunity? opportunities PSXP, Beaumont see and around greatest growth And

Tim Taylor

theme from think of U.S. oil, exporter the be will and NGLs natural see to continue clean I products standpoint, gas. an a you of of crude

capacity think on the fog natural so, the there the for export around that side making And is sure needs is there. I midstream

that other market liquids because to would the different Beaumont production over and crude look production types us; supply I theme that’s to increase to you at that the North then, believe crude, So, looking within think run. of gas we about with will still America our that. different are sponsor continue that’s if opportunities and interest there system, grow And long -- centers, fits at

to looking or infrastructure then better how it’s those connections network the work which that XX options integrate of system. Phillips with provide market to pieces to is really at finding them can around our supply and we and So, needed market, sponsor get

Elvira Scotto

you And time the Do then, midstream the PSXP last all just entity? the one foresee Phillips of will where for me. a construct for

Tim Taylor

capital of projects and easier get you do. budget are the bigger get now bigger where of on bigger we the and to as that But as project. depends clearly, into It as -- you size gets

a -- at We hope PSX. getting of long-term would are. your the more primary so, sponsor we vision the for ago. much the And are midstream than we growth, I where think now of level vehicle were handling we is this are bigger size couple where capable just years projects that’s And we for to

Operator

from Ryan go Levine please Citi, ahead.

Your open. line is

Ryan Levine

Good afternoon.

you growth this the see And what Regarding an around for there Beaumont, expansion quarter? terms in of update outlook you what volumes could projects? provide did next and is timing

Tim Taylor

So, that’s a PSX all. asset, of first

more just you selections the to crude opportunities not give the across we for increased connects generally, exports, the the update. either we quick volumes that’s inbound kind But, build crude product I’ll don’t extended that’s so, that are continuing a borne and of course refining. specific electoral demand crudes outbound, of water some that seeing will as PSXP it’s there. talked James, St. because the out PSXP’s have asset. there, dock then, continue storage And Bridge And within to growth for to that Bayou just we see about, I

and So, it pipeline top the Coast storage the the seeing PSX just system demand good within that on for connectivity really on we Gulf what And opportunity is the level. and water borne connection. at are the really then of is

performing So that’s the very been opportunity a from asset strong standpoint.

Ryan Levine

any may level targeting be ultimate able of asset XX to Are million you capacity color or as of the when capacity? still to around that you barrels ramp

Tim Taylor

in recently we storage today range. think barrel XX I projects, to the XX some million million sanctioned with of are

capacity and opportunity that’s headed to we PSXP. if that that continue to PSX ultimately over asset develop the a think develops. We’re again, to bit the probably a XX or we’ll a not have refine little further, But,

Ryan Levine

dropdown… point, to may when color any a that where that then, become asset Q PSXP of around in that or sits the And potential

Tim Taylor

might inventories on -- as And we dropdown in that’s you that’s guidance appreciate, inventory specific those potential of we of give at assets, timing. our talk PSX, the one as when don’t in about dropdown is It there.

Operator

please go from Blum Wells Fargo, Michael ahead.

line Your open. is

Michael Blum

Thanks. My questions were addressed. Thank you.

Tim Taylor

Thank you.

Operator

ahead. Goldman please from Jefferies, go Corey

open. is line Your

Corey Goldman

Merey? you on DAPL DAPL, assets on think some there’s can would the you I any I and appreciate more the on that can both you Sweeny, give give but at color debt project Presumably those on helpful. guidance DCF so be there’s Merey and some color Brian guys guys. level still on provided maintenance Merey for Hey, color

Kevin Mitchell

EBITDA we’ve $XXX year EBITDA. the both of level given, is assets that adjusted on The asset those a million

interest be So, on it’s charge in Merey of DCF loan. pretty a -- PSX actually a to the major going obviously care some we’ve contracted Sweeny, to close of DAPL maintenance, have the There’s around ongoing the that level. actually turnaround. major charge on way we take to the with maintenance getting that would happen

fairly that would So, be steady income there.

Corey Goldman

We to on the any PSX difference Okay. taking they’re the side if on expect see shouldn’t cost? Merey,

Kevin Mitchell

on cost They’re side. the taking today Sweeney the Merey Yes.

Corey Goldman

And the then, second question.

IDRs, peers But, PSXP I the What a guys doing. discussed as have mean, are raise you doing call. the for of don’t you you IDRs premium, equity for are this to your to LP follow-up and at no there. were of corporate at terms potential any bit like you significant would options a little In been solutions. I structure assuming size units float PSXP. PSX a on pretty guys and of Even swapped some know just extent considering some good guys that the you have

is to this comfortable other options share B, willing and you there with; A, that will there guys be that something PSX that So perhaps are at point.

Tim Taylor

IDRs terms in conversion -- that pretty one. a restructuring, think is things total like of at I think the for we about to There open to I that it. way mean, lot look leave is No. of

structure really to capital come a I structure strong back an we want And accretive the to MLP. think for -- maintain so, and capital I

things need So, there host you to that are can whole should look address we at, of that.

Corey Goldman

pecking there is any or that say Are high you’d the willing on slower. be to order

Tim Taylor

this at not No, point.

Operator

now to Jeff. further back over turn no I questions call at We this will have time. the

Jeff Dietert

Julie. And XX Partners. you, for thank you your interest Phillips in Thank

additional have questions, or you C.W., If you. please me, Rosy, call thank

Operator

Thank gentlemen. today’s you, This and concludes conference. ladies

You disconnect. now may

Phillips 66 Partners (PSXP) 27 Oct 172017 Q3 Earnings call transcript