PSXP - Earnings call transcript Q4 2017

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Operator

Welcome to the Fourth 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

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

Kevin Mitchell

transaction deliver on to of billion quarter our Bakken run the pipeline Thank afternoon track well with the the partnership from our XX% in rate we Phillips latest CAGR. everyone. addition, XXXX and year-end $X.X remain interest target. XX% XX. are near the acquisition to-date largest five-year this we we With EBITDA distribution And operated our you, during the Merey Sweeny completed and very The Good Jeff. coker

is $X.XXX X% of quarter which Directors higher unit Our approved quarter. Board of fourth common distribution a than last per

annual have consecutive a IPO, Since quarters our coverage growth. XX%. highlights distribution this compound was of distributions XX Our rate four financial we Slide increased our at XXXX X.XXx growth quarter.

XX% IPO. XX% EBITDA we earnings over slide, from the DCF and from each and since by year adjusted earnings, by and growth see in achieved have XXXX, can you we In adjusted EBITDA substantial DCF As increased XXXX.

retrospectively modified adjusted to the rate joint $XXX adjusted basis on to Concurrent ventures run our EBITDA. actual reporting on disclosures with impacted is XXXX has EBITDA grown target. reports and through approximately run Distributable was by This a million. change we flow cash rate include when consistent look billion $X.X with Our this not made results our acquisition, quarter change. fourth basis our a

of EBITDA the were Moving was driven adjusted earnings the $XXX Bakken primarily on XX flow volumes. Slide and and million quarter acquisition had from cash quarter $XXX interest distributable Adjusted fourth Sweeney to EBITDA in which % fourth increased five, third million Merey was $XXX million; quarter the $XX the by million. strong pipeline,

position In financial terminal hurricane million under addition, of the cash during our borrowings higher due utilization and to the $XXX Slide end million at ended operations facility. no with credit of the refinery six and our had the revolving volumes and year. We shows improved higher pipeline after outstanding XX mainly Phillips XXXX quarter we $XXX

X.Xx. on to basis X.Xx. debt-to-EBITDA leverage Our Long-term around be was we revolver ratio a covenant expect

we are over program. our ATM and in on fund without With run plans XXXX use for from confident our growth through turn position markets than equity growth a the of that to Tom update the projects. strong ability continue We our I'll business our other financial an Liberti call selective our to accessing to

Tom Liberti

Thanks Kevin and good afternoon everyone.

ratio our positioned with well we distribution healthy coverage X.XXx, to sheet growth indicated strong at As and fund opportunities. XXXX our are Kevin a balance

$XX maintenance and is budget million includes for million, which projects million capital growth capital. for $XXX Our $XXX

in a The expected JV. by as is quarter. extend XX% The interest And began pipeline the venture. All joint this to XXX,XXX venture million by of operations existing expansion XXX,XXX completed, Charles of XX Lake will Bayou barrels per this Charles the per been in at Phillips DCP Further pipeline initial capacity in capacity Sand on Bridge project Charles approval. and we phase increase reminder, a Nederland step expansion gasoline increased anticipated expansion fourth from the barrels the half and Commercial last are in St. expected isomerization Lake received agreement of begin components. permits was from Refinery the higher volume begun a XX a is of has by Phillips During to loop will day XX% barrel the Startup pipeline completed this to XXXX. the of second the barrels the year. octane day blending Partners production quarter, end venture a the have joint The Hills STACK owner in and This Hills capacity Louisiana. interest remember for XXX,XXX expansion of into XXXX. owns we enter $XXX processing is When play extension Phillips to this of services the Midstream. And Sand XX has to day the second XX unit pipeline exceeded XX,XXX into XXX,XXX operations Lake on we line expect with barrels minimum joint to per half of own construction Phillips throughput with James, loop the per of Partners to further the per one-third received final long-term including commitment. XXXX. fourth end Texas the complete day the day. a quarter.

Mackenzie this processing mile venture. completion pipeline XX.X% half concludes This we linking Our constructing in owner capacity remarks. the County XX Dakota natural are Montréal in prepared County. is Sacagawea North gas our venture XXXX joint gathering and Project of second a in production system pipeline expected in is raw to and

will We the now line questions. open for

Operator

Thank you.

go the will from Justin question-and-answer begin please We Instructions] ahead. now session. Jenkins Raymond James, [Operator

is line open. Your

Justin Jenkins

of for should capital whole Great. growth I'd again PSXP? with of kind Looks the market? the start the couple midstream that all just over Thanks. or family. it near half of midstream that I Philips guess capital does in budget. is become the mix How to even Hi, about like think Does it of to grow maybe half a like everybody. stay X/Xth PSX evolving years? PSXP Does over gross next we

Kevin Mitchell

Justin, it's Kevin.

think look the the I it's MLP each PSXP of year-over-year in its capital capital the continue the the increased at and increase has to grown to as ability growth MLP. spend, year; with you spend really

of to ability always to the over we midstream look segment. as grow So larger I directly we're assume as MLP in grow overall on that unreasonable will always capital objective to with the a that. to it's don't the our the Midstream think MLP that was the continues its time that share that conducting And funding be it back, majority of CapEx was the take

Justin Jenkins

as helpful or think That's ATM X.Xx a on up. debt-to-EBITDA, reference comes Perfect. should the limiting to selective of is market follow another capital factor maybe then, just Right. side Is we maybe there? issuance project conservatism the up in the Kevin. And bolt-on case

Kevin Mitchell

No.

that just a organic at fair then, capacity there of underway run our we're let think a amount I organic saying back. things, me will over target XXXX. EBITDA projects come what Tom of and EBITDA not look couple are lot you course We're most those, on too step is, today. the described so that billion the $X.X a of anyway. Well, off have rate is of And of we far

be we've that. extent So of there look needs that are We've healthy coverage, potential you already to at reasonable if at funded on at -- XXXX won't end some capital increase got that capacity we're cash the by, that X.Xx to balance MLP. the sitting got the

ATM there's program feel done we easily that extent of activity needs, the a the lot ATM. we've to and equity never can we So within little that a the of bit on accommodate

somewhere $XXX period. I in over million think months, XX the about that had So done we've around the I in time program total we've think

would really So fact just the we at referencing the may and don't equity program. need that we do anticipate through all what just much needs we

Justin Jenkins

Appreciate And that XQ, it's modeling one think proportional I in distributions particularly between JVs last and high is about that question quick thinking the it Perfect. is the presentation or color from EBITDA $XX rate difference Kevin. that million for and reported cash a I run XQ? change the in was that think

Tom Liberti

probably about just Justin. typical That's

Justin Jenkins

good there. it Have Leave Perfect. a weekend guys.

Kevin Mitchell

Thanks.

Tom Liberti

Thanks.

Operator

Securities, ahead. MUFJ please go from [Indiscernible]

open. Your is line

Unidentified Analyst

guys. Hey

question a kind Just a thinking here. of little long-term more quick

to measure you to it look block start keep a want kind right GP operating rise IDR under of assumption through now of want and little level protective IDRs quickly Do of splits the coverage all lifespan. guys didn't and to higher the that big units ever the blow eliminate and say to As coming you GPs soften the a at the this -- we just you up? searches really watch that and as eventually a a have is if you to

Kevin Mitchell

Yes.

could do that. certainly You

we at this structure. As look

But we sitting around have distributions of are of percent we time, at the the a we same by right so back So that. way that IDR, yield GP reasonable have coming to see X%. a

overall equity So as in the is terms, cost back we that. look and still at step competitive of and

say time be as point However, addressed. over this needs get to you you a where to

end probably would get probably need also that work also how it? X, come we know about of we it about we the become works to and than to going have we partner structure relative How it in holders so there there. X sure not terms. unit think just way it's ago, thoughtful how doesn't sooner go doesn't from to we'll dilutive up that I'm And overall anticipated, we in this quite that's the I a we're such standpoint but years previously yet. -- What general we that? the this thought LP to be about the LPs,

Tom Liberti

program aggressive point had it a also would fairly program. we've coverage and always overall But just that I growth pretty fairly MLP. [indiscernible], growth strong an in had a organic young We've And ratio. high out and we've had too a

the keep be balance beginning strong. those would So plan pretty balance to sheet strong we've kept always and from -- kept we've the sheet the that

Unidentified Analyst

be growth it distribution to We guess be mind the more balance into want anybody are else do sheet end lower well, elimination. corner guess I suddenly growth. it rate can need to a and and to have we seem a that's to going comes we just high investors and don't healthier when you to I you an a distribution a then, because concern. my a where pin themselves mix. willing an dilutive see very see a they with down go, of too. of distribution in cut environment always we coverage in up And if healthier were And do Right.

know lines. like along So that just people those to are I'd thinking

Kevin Mitchell

Yes. No, we certainly understand that.

Tom Liberti

I we going end back the that on of cycle to make adjustment, about, were do the you to that want rather we obviously that. are life something than some be along would and end if talking think front

Kevin Mitchell

Right.

Unidentified Analyst

guys. Okay. Thanks

Operator

Zarahn Brian please with go ahead. Mizuho Securities,

open. Your is line

Brian Zarahn

afternoon. Good

Kevin Mitchell

Good Brian. morning,

Brian Zarahn

increase in but most million earnings, In little the quarter, the breakdown from $XX I it's a bit Bakken bit assuming equity maybe Hills? pipeline and you could from elaborate Bakken a the the on of Sand about

Tom Liberti

Brian Bakken volumes. from in projection. the the because Sand initial the Southern even Yes. had quarter. Southern NGL -- first Sand healthy And increased, acquisition. line our the Actually The ramped was were volumes quarter. that every from increased there Hills quarter, volumes to also both Hills and this actually quarter has had meet Obviously capacity And Hills the is fourth just Hills that volume capacity as volume has increased

Brian Zarahn

the million Southern from it? to increase way is Bakken, Hills, most quarter from right of was about the $XX from the Sand and the Hills that think it So third

Tom Liberti

it's acquisition the mean I the most Yes. obviously of in Bakken.

Brian Zarahn

Okay.

be great crude pipeline term at the some about deal is forward do be a Permian partner project, of obviously forward it parent's Could proposed of outset participation how a moves competition, something form moves or or PSXP but is think you participating. the other longer could it dropdown? a this On

Tom Liberti

any could we We the said with the of We've look be that We time look it a participate of project settle at. the both right along kind what just in a PSXP at split. in at the at be PSXP we'd looking were future -- is could and on always situation project. that would dropdown, PSX. PSX

Brian Zarahn

expected is me compared the last unit. one the given returns does the How then, the for contract isomerization And with dropdown? your historical project on

Tom Liberti

the talked the midstream returns. I in good We being think typical from attractive. it those typical about project of of on organic it's end midstream returns. It's kind be going And midstream to

Brian Zarahn

Thanks Tom.

Operator

Jeremy from please ahead. JPMorgan, Tonet go

is open. line Your

Jeremy Tonet

on midstream question been that on to just the really that regards Maybe kind target hit there. is afternoon. out appears. given Good to competition of able the growth There's side turned with up last how concerns entities being returns to it be organic they picking

mid project kind Anything do the So seeing rates you you teens out out of can competitive have major hitting landscape are if here. with look you any share across portfolio else see kind you of us there. kind on there? pressure your those suite I or of of mean you returns

Kevin Mitchell

it's Jeremy, Kevin. Yes.

we're wanted fee-based why don't returns with -- the will and we be at And kind I it the different. we've about it, from out be specifics projects typical think return have of But a know volume into And see look hitting the seeing we from outset. given with project those minimum projects. as and -- of expectations our we returns. way will I level not They're went reason we we any other sort It's kind commitments. than look had expected on that saying at done across midstream unit externally the whole of as internally PSXP. that we've so talked isomerization any lot those as we've of structured would I the a laid

as expect it where line deliver as as to. capital expect comes So spend exactly it we long with should we the in

Tom Liberti

growth Yes. with And with have the come again, grown it's It spend hit projects. pretty projects Jeremy, minimal grown selectively of that for the the [boarding] question I being selective fee-based I sake. of in organic commitments, those pretty it. being we've and question We've of been [ph] think hasn't a with think with the kind been that and Kevin had. a We've selective nicely. projects And and profitably. we've been growing

Jeremy Tonet

out and But competitor those a Thanks think then, risk is one projects and proposed it's to and project returns you for thinking how seeing just in of there how projects, seeing for there wondering like you Gray type for shapes that. about about are projects. that, [ph] And and to upstairs. just turning a dedication different looking Oak project out a think opposed wondering with risk and those important income I minimal through be there [MBCs] look as that? How commitments at could of guys just acreage you you or make returns for dedications how if us could acreage was would help if type

Kevin Mitchell

Well, that projects projects all that's being we level consider sponsor standpoint really because all at look projects as perspective when a the ultimately from and MLP a from at that we midstream looking that stream MLP fee-based that you it destined flow such minimum expectation the the for We're a MLP. for make around portfolio. the revenues derisk very commitments and fit at much cash

But of much with that you of start more you talking way model I minimum acreage looks which about is type that the commitments. G&P start kind or structured at different -- a -- -- a a processing volume terminals pipeline, point when know so look also you you fee-based dedication bit at that like assets. in very And when commitments looking some they're terms little volume PSXP business

risk So projects. less err we midstream side of we these at not kind look more of on as the

Jeremy Tonet

that. That's very housekeeping for And Thanks good a then hear. here. to item just

there? you basis keeping let track is With an it for basis the where on could sits that covenant agency ratio on leverage us at just X:X the know

Kevin Mitchell

basis the basis. -- a touch on rate basically bit just on on more a X:X X:X, for covenant on is like run lower just it's a a standpoint, But than little The run a the rate it's agency.

Jeremy Tonet

that. me. Okay. That's Thanks for for all

Kevin Mitchell

Jeremy. Thanks

Operator

Kristina Kazarian from Suisse, ahead. please Credit go

Your line is open.

Kristina Kazarian

is and Can most guys. Hey for specifically as projects maybe a you set there what longer that the term like about attractive and bit you strategy some talk looks or the more really thinking organic for is can NGL little of you're well? PSXP regions what growth the talk Great. about opportunity get it working,

Tom Liberti

I'll little and Kevin comment that bit start a probably then more. Yes. can

has expansion XXXX. XXX the to completed. possibly of further Lake and XXX,XXX by Sand we've now this to done by The about a completed moving XXX,XXX right for barrels year. end And be Charles will pipeline, XXX that. process talked for -- going barrels this in of another will project year that into looking we're expansion the Then DCP we're that talked the next about be year looking day at on the will day quarter end Hills the As into with a of be

that got have Bridge projects the currently a the again those in a smaller current up. little done We've will we add assets of lot year. will on we've but number the second the be So expansion got Bayou there. half of of

a and We're the are kind things of that that's have of this more year large to that come those at rather fruition things So of looking extensions in next current couple we a through and project. assets could year. both

Kevin Mitchell

perspective I from a level. Yes. supplement And sort of with would that a just sponsor

not but what's the at look already, MLP. there out You in

So Beaumont you've in. which Bridge invest the Bayou got integrates course with the the and of PSX And pipeline. Pipeline is terminal Bakken also to continuing

additional the expansion the than as standpoint some transportation expansion refinery standpoint. some MLP Sweeny at tie be potentially NGL sit level a capacity about sort destined at frac from that as could hub from got the Tom both logistics of assets sponsor You've at into again point. some which a well assets talked still that PSX the for could future

you're our that. provide opportunities the double-whammy I'd that where good midstream say around enhance existing and provide assets say sort with that along that's and looking those opportunities infrastructure assets refining at assets if underlying in we're of also and connected benefit to Beyond leverage the

Kristina Kazarian

this is, process? that Great. in to know year the of thought market a about And impact we've selected transaction not yesterday, context that and only talked follow-on peers does how one I issuance in for guys did the your do maybe my of equity you a needing but drop your

Kevin Mitchell

I taken just and that where reinforces think we've we it position sit. Well, the

targets. very in good are We stead XXXX our for

look year. get But to be and will the underway have would required come that hand, will on when will low debt when in investment balance metrics. XXXX cash strong to we really our got at it's at end at generation, or ongoing the cash our the online pretty you haven't a range look we've nominal this specific anything the the sheet. a Some billion $X.X needs the target, fact that we about you We're whether balance said externally good organic projects on not of drop that

can take to little extent do care the so of we need easily we that the equity program. a And bit of on ATM

with referring see transaction like shouldn't us you're coming you the So to. out anything

Tom Liberti

last Yes. transaction last through that our really for quarter shape the XXXX see to good did put all of in financing that we We targets. us said quarter

Kristina Kazarian

Perfect. good guys. you to That's very Thank hear.

Kevin Mitchell

Thanks.

Tom Liberti

Thanks.

Operator

go Akyol Selman from please Stifel, ahead.

open. is line Your

Unidentified Analyst

taking on for Tim is her Thanks Selman. this Hi, for question.

one Just impact XQ? PSXP will how quick one, in teardowns

Tom Liberti

our PSXP issue. that's remember Well, on issue don't on all we assets. always But we volumes direct We and really maintenance a our about any refinery numbers talk that. have anything, of minimum

And so out those refining the really basically from turnaround minimum volume there system. activity, smooth activity commitments are to maintenance

So really those. we big effect a you see have don't when

Unidentified Analyst

Got it. Thanks.

Operator

Tom Abrams please ahead. from go Stanley, Morgan

open. line Your is

Tom Abrams

offered wanted not follow a Jeremy's and first couple as perhaps distant Thanks. -- on and you're and to Ford, -- contract regard If question future gathering processing. that Would processing DJ, of likely future I just if be you assets. to in things Eagle interest up structure? of of the kind gathering SCOOP/STACK Permian someday to on categorically

Kevin Mitchell

be so DCP, G&P step are those business and how put would all in that with midstream I'll traditional that you that terms assets our with then, anything. want we of kind we exposure we terminaling really think And to-date the PSX path midstream been all we've look that never my got intentions. you've more that's it want of the -- back G&P I through at the in then, is of terminals never assets. this, transportation infrastructure transportation and say we've infrastructure pipelines, from on, and as deviation got PSXP about of again as PSXP is of is PSXP. So hat and kind a at never to But down certainly significant on state all of DCP

Tom Abrams

I to to Just going other the ask ahead type -- wanted a to thing confirm year seems the guidance about was it wanted you're like model.

XX will triangulating So debt. you want a corridors sounds be we model as around little where other on there it, you more your future? should any XX like your it that and about put It sounds we it. if we coverage and is bit to about could think about Are thinking like parameters try

Tom Liberti

anything safe that think there's assets I first quarter there's No. from where some think I I in that synergy mean a the we where don't we have assets standpoint. to current operate say be preference now. it's would

us will look we think are something obviously. short that extremely So would But have be will it someplace accretive would attractive attractive to at I if or be where to and that for out MLP, would of stepping we very the not. asset for be we

Tom Abrams

Sorry, corridors over be you what absent I X.X or instance acquisitions, of or X.X kind to misspoke. of X.X would comfortable, the like between or X.X that the is to the or parameters balance you'd where kinds financial comfortable are coverage be those future? where The for you'd operate sheet like in and parameters

Kevin Mitchell

Yes.

Okay, through above acquisitions okay. be depending and them both and that leverage I that acknowledge couple about mean gone we X.X those timing and can around how a that say of on that so the transactions you've it are funded. of and below

X.Xx is So guidance a We than growth have higher up said going leverage respond on a on XXXX is that. still say any distribution kind given other strong of coverage. accordingly we specific that have expectations pushing we beyond and are we X.Xx haven't growth would And pipeline. on market historically the the basis

sort tier we top growth. of top to be or So on expect quartile distribution

Tom Abrams

lot. a Thanks

Operator

from go Corey Jefferies, Goldman please ahead.

is open. Your line

Corey Goldman

about Justin's EBITDA on the new a Just methodology. follow-up question earlier

$X.X Sorry, prepared now target the is if the beginning it are that now? heard I the billion remarks you in And considering apples. of miss to apples

Kevin Mitchell

That's correct.

Corey Goldman

Okay.

of out change? motivation what for purely Just the was curiosity that

Kevin Mitchell

really terms through the basis. of the We in EBITDA value, the and asset the quarter we to when talk we to multiple. needed in we through that on about with look pipeline transaction that a make basis overall the talk to metrics So to the that transaction make showed MSLP sense drop value, a that the look on all Bakken needed did the fourth

look would to reports It's way parent you be the EBITDA way and the straightforward total the decided methodology part within through We segment -- and at the we're EBITDA. to company using significant are also joint level. And so is through consistent we with know by PSX internally there easiest MLP. as with the when most looking that a carry the in typically forward we thing because thing report the so the to probably ventures we're level that overall at do, parent

Corey Goldman

you. Got

can balance if how PSXP, then, that there much us, And sorry Bakken? just off is sheet apple remind Okay. you or is on just it

Tom Liberti

carbon explore outside is, Explore has debt.

Corey Goldman

you. Got

Okay. All right.

And you look spoke so stream have little again given we the this, run but what XQ. you we maybe growth billion do I if at apologize now to on just in XXXX. rate if a so over just coming and It $X or is projects in about

You don't do a you? year, necessarily need dropdown this

Tom Liberti

have. We closer some take target. any drops that and to on on the our projects of look current run getting at billion But and the of obviously, anything we $X.X you guidance don't closer the on organic that rate you when we're give EBITDA

Corey Goldman

that year-end full I And for year it full for also XX we a the think $X.X for slate. or Okay. number the that is like bunch billion? Is of PSX's the -- think, target a PSXP target should

Kevin Mitchell

a year-end rate. It's run

Corey Goldman

you. Got

Okay. Perfect. help the guys. I Thanks. appreciate

Operator

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

Jeff Dietert

you, call need any you Rosy Philips or Thank Thank interest you. Partners. Please Appreciate your up. me if XX in follow Julie.

Operator

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

disconnect. now may You

Phillips 66 Partners (PSXP) 2 Feb 182017 Q4 Earnings call transcript