PSXP - Earnings call transcript Q2 2020

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Operator

Welcome to the Second Quarter 2020 Phillips 66 Partners Earnings Conference Call. My name is David and I will 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

X Good to will and Vice call. Vice afternoon welcome and President, Participants earnings second President Zuklic, on conference Operations; quarter of Harbor financial Officer. Partners website, XX and Today’s Operating today’s Vice Tim be and Chief call Phillips CFO; include information. materials can Safe found with the supplemental Rosy contains on Mitchell, and Phillips Kevin presentation the Roberts, statement. XX operating Slide President Events our section along Partners

well making Kevin during actual in Actual cause today’s Mitchell. With filings. We to forward-looking will will our Q&A materially Factors our comments. presentation results session. to be the SEC may from as differ call I statements over as that, the differ could and turn are that results here included

Kevin Mitchell

and Thank you, everyone. Jeff good afternoon

and on which Oak Board distribution During operated oil approved with disciplined focused XXXX Partners We its unit, the balance capital investment achieved Directors reliably first increase Terminal, liquidity. a strong the South environment $X.XXX excellence, of cents per grade and common full The into cargo from loading. strong Gray over and second credit first quarter operating and remain the Phillips Partners our and allocation. saw of X% quarter, a projects. the crude the milestones maintaining of is business navigate sheet current quarter Texas Phillips XX second Pipeline unchanged second and supplied rating XXXX. quarter first on our growth Gateway well-positioned safely to recently key service began The XX its

million quarter volumes and from the Partnership $XXX distributable and on to were first quarter results, Adjusted Pipeline. both Slide cash production, financial by million with prior Texas the of of earnings $XXX assets growth to year reduced Gateway Partnership liquidity. This during includes, X our $XX of available decreases driven domestic well and The cash reflect related highlights product recognition The quarter million the We refinery Slide investments about credit discuss joint Gray includes to lower $X $XX as under Pipeline. Pipeline Partnership’s in venture capital utilization the spend South Sweeny the as to the the million. $XXX Gray interest ended reported CXG the This and and Terminal million quarter. on X on flow wholly an second funded facility. and of and Oak Oak flexibility EBITDA of sale the Pasadena an demand. Moving our revolving gain million. Pipeline financial in second oil down owned

continues The EBITDA the deferred on basis leverage targeted fund revolver to ratio long-term of to covenant X.X, was for Partnership a In Pipeline debt its of addition, commitments the project. remains Liberty share which ratio our X.X. below

merits has Circuit a Court. continues ruling founded. are governments, consumers Access beyond ratio chain. Our has history matter throughout process. Access believe distribution state well We owners and shutdown through this of the the we value believe operations and be recognized Dakota Court appeal X.XX. energy of allowed Access workers operate Dakota the DC implications pipeline to coverage to it local Dakota temporary to the a uncertainty with of safe should and Pipeline litigation. judicial Pipeline the The associated the extend the economic customers, while We the appealed was Pipeline the District

for negatively Dakota coverage year, could XX an by the Partners For impacted distribution Pipeline. Access adverse the ruling Phillips be on

necessary and remains coverage balance actions to a priority. long-term target we Maintaining as excess this. However, sheet top a X.X in take achieve will continue of to strong

projects. provide Now, update will our growth an on Rosy

Rosy Zuklic

hello and Kevin Thanks, everyone.

our growth barrels, about pipeline Moving capacity and will on supports barrels the which to XX.X at ahead recently and million Caverns the projects. Slide completed was project done X. XX budget. X to schedule the on expansion of Phillips million from storage We fracs and talk X The CXG Clemens I X, Sweeny

in Gray contribute We West to Eagle expect operation South to Terminal. the facilities project. XX.XX% has Partnership Pipeline. in the and third area, multiple export the Ford the caverns a the Gray quarter new the commenced results. Oak Oak of Pipeline Oak Corpus marking The interest refineries Texas Coast, ownership Gateway Gulf the to Texas to The connects and Christi Texas full Gray from completion including

have July. totaling Marine capacity are been X.X as of commissioned year the operations, million of The this of oil barrels terminal tanks phases finished. export up first by expected the additional crude ramp second construction the including to and are and storage began end dock X in operations dock,

Sweeny capacity. completion Pasadena project This Philips expansion reached interest in XX% terminal. the completed from X.X pipeline terminal of of our XX a barrels supported capacity with the owns expect project to July We to the and commitments export million of quarter. first Partners volume XX. remarks. be day up by prepared quarter storage Phillips mechanical in total this to XXX,XXX per operations began XXXX barrels concludes long-term in and is capacity The This and

for line We questions. now will open the

Operator

[Operator go Instructions] Moreen Please ahead. you. Gabe Thank Mizuho. from

is open. Your line

Gabe Moreen

a give am start see there rating, your prepared, you are in and you current much guess discussions wondered if investment how just I grade I thoughts the everyone. stay DAPL is distribution while out your in the to they radiation the not through? season, credit what afternoon have of if and process any as just EIS time could well achieved, might wondering with as I the maintaining your the is outlook DAPL good Hi, terms

Kevin Mitchell

but ourselves make event means think are And of to we available the hold the I that There same obviously, at the when that have level a we two of is terms look said spend, the in of as have and that spend more look around much a complete, us will the we pipeline a to to these lot but levers Gabe, you the flexibility pipeline to there having distribution evaluate, still decision got the next at – the that point projects main will would where lot that’s in don’t of in that the would in capital Yes, we time. we as distribution Kevin. the level will be at year, consider it’s something that into to and flexibility. has is and shutdown, we distribution reason this shutdown, that year capital you for the not event needs be.

Gabe Moreen

to a Bakken, Understood. Thank you. And a terminal as question I you have other there. is then I also real in had the think guess there I assets

event this in. you the benefit there volumes have get interest partial I asset we be year a that customers’ think any shutdown? in the some Would to DAPL to of over that

Rosy Zuklic

that. this from Palermo yes, you like is an Gabe. event about Rail no, benefit Rosy, are it at thinking the would Terminal Yes, right, And we there see

Gabe Moreen

And Rosy, can just volume how you currently you there much talk are doing capacity? about versus

Rosy Zuklic

don’t. rate XX% It’s I now. a right at probably

Gabe Moreen

Okay, understood. Thank you.

Operator

from go ahead. Dounis Suisse, please Spiro Credit

Your open. is line

Spiro Dounis

afternoon Hey, guys.

mobilize understand, I Liberty in back and project just an trying that of to more curious around and so a for realistic a you? how event guess question last First get in follow-up briefly, DAPL shutdown, or know could stand on sort But covered would just of just is the I where scenario, that it’s to calls. alternative the lot extended you few quickly in permanent been that

Timothy Roberts

Roberts. Tim is this Hi,

long would get the question. our is say dependent on So, we going deferred thanks really term now depending with still for to be are be right to ability it. – that It’s to I Liberty really Liberty we going commitments.

timing going going happens that producers the say shippers if I you. So those two, achieving for are say to that long could now hard there willing honest it’s to us. get anybody happen with to too think or to It would else I wants uncertainty to investment liberty. would is that wouldn’t on very the it’s to that line grade that well, on with I that help commitments is and impact between be are right term Bakken people obviously, returns. but on Obviously, interesting make acceptable are much what what

liberty with we forth. up the meant be parts Rockies, Liberty plus, some so and was and DJ place, so, Powder also in coupled barrels And with of in put coupled Bakken River Basin, to really the

wasn't it Bakken really a. plays much. So

complemented was not it specific but think it play. that I that

at point, merits, own still its think too have project. interest on They we call Liberty at I look early makes So this still sense to do that and advance enough that we it. possibly to

Spiro Dounis

that forward basis Got it. gears revenue of as makes that accounting believe realize will MVCs, up. used Switching means we the here some see those I credits in a And are on Thanks. MVCs the to sense.

how through for and many this both see for what the total JV that EBITDA? you and in going maybe assets, to over have I realize sense we do quarter forward, that owned start wholly guess could So any quarters was deficiency

Rosy Zuklic

hard earnings a From perspective forward, just them as the have like quarter May a actual it’s pay and quarter the move about to benefits should MVC different go for perspective. volumes a and number thinking levels, so we April we actually it don’t to some of it we and cash have – actually right, in out cases, start next month I when as comes say actually the opposed ways mean, out closer but to, from JV’s are paying of but simply the But many distributions, their seeing the seeing next that, as some you, there month. flow March, and and you MVC are to because I

Operator

Scotto go please RBC Capital Markets, Elvira from ahead.

open. Your line is

Elvira Scotto

good everyone. Hey, afternoon,

levers and distribution. that of you be about would two So could itself the shutdown DAPL in which pull event CapEx talked the PSXP

CapEx still with or year being most a run So with said reasonable but growth of finished close for minute CapEx some spend you growth in let’s what projects that, just rate This your have complete. start XXXX beyond? to be a you and the would CapEx essentially

Kevin Mitchell

Hey, Elvira, That’s it. Kevin. it’s

is look that of just projects only major If have a amount the at the has rest decent you top will small of spend then one XXXX the that. pipeline. projects the going, it on that got And in be CXG we

XXXX the capital bit a than point, a point am it be we But year. but we So highlighting I is later not quite it’s at something were lower I think are potential in where to guidance to year. this in there’s position for do this the a we give that for

aggregate this to million. something year in So $XXX close

reasonable a in not magnitude could order it position number specific by so down from come a this a point. but that, to at of give And

Elvira Scotto

said, just what we thanks. lever the the around shutdown am should is distribution you just just to if is if at that if going a in I or, the ratings down? trying Or distribution the understand my what is going okay distribution Okay, as about question that think you or terms with automatically And about forecasts? DAPL then or it you so would happens a look like second of, DAPL leverage are was either leverage your the see should distribution say, think at agency as timeline look we to

Kevin Mitchell

Yes, we things. financial looking across give the of entire profile be the will those MLP to holistically as consideration so we

from But we impacted broader what’s looking And that’s at the what position distribution. so, if of metrics, of so in can sort economic depends elements. outlook, economic And of pipeline well happens, it the get of distribution if certain metrics are that the make at loss are shutdown because we all help on element that the that time. as cash on so the our also loss offset point then decision the that those on EBITDA, also, triangulating of the a different they the around leverage being can we flow a impacts

we an of So, any reduction a the make until – that do, to around are that we at won’t whatever be a percent. say mean we easy doesn’t automatically shutdown are there. distribution to definitive go That’s is that point that where but something means ready that we one won’t to

Elvira Scotto

Thank you.

Operator

please Barclays, go Chen from Theresa ahead.

Your line is open.

Theresa Chen

expectations around the expecting terms what the the you timeline are clarify process, process? of to appeal of itself DAPL just Hi, in

Kevin Mitchell

stands From can days Court Appeals – be right sort weeks. anytime of we hours, are from response the day process, now And of or the anytime. it expecting some

submitted, been are so through do we been now done. think They that process. all that’s the have So, briefings going

hear with. back will come we they what So,

you Now to is maybe, probably depending which appeal, take which that would would send regardless Supreme to outcome on party to are of would of decision suspect another side whatever the there still the then on course. Court, going that you – which is either the avenue process up appeal I

believe before and that you there that. get itself if that went process turns look – that’s can So, that recently the into response up you weeks an through I they emergency with X that around was permit, an nationwide process, on just took at came through for not emergency again, example, back

that but data point could what So potentially that’s like? not a another us on look gives given, just it

Theresa Chen

Okay.

for landed a rendered, landed on that desk the time Court’s X the the appeal permit the Supreme decision that the or from was was So weeks? time to permit it

Kevin Mitchell

Yes.

get I the same process with I started appeal by you the Court saying it thing, we but – time the for look think yes, at maybe weeks, can so X was you the getting Appeals, at I Supreme are process. weeks Court from yes, of Theresa, answer we another point this from time looking District on answer you the X through if know, goes it that an from that mean,

Theresa Chen

for over. around contract year. the believe once Do recognition when and any will earnings in please we the that the and makeup of terms at on within in year on? assuming you me shipper MVCs you I the makeup throughput, and I believe recognized affiliate And that to is and correct so were between When timing the wrong, is – lumpiness Got made period the started in of you gap relation go of look it. in be the DCF if period which as but your earnings whole am each coverage, I see a

Rosy Zuklic

are There agreements I I could but right, mean, their pipeline different slightly shippers. the everyday think you be, has with

are it’s too, So, way earlier was to I also it – to bit cash about little bit you same. all And so but little off, like a in be the a lumpiness of but right. some thinking going that describing the Spiro causes their the of that distributions is cases not

Operator

Jeremy Tonet please go from JPMorgan, ahead.

open. line is Your

Jeremy Tonet

Hi, good afternoon.

the your Just wanted with volumes, guess oil refined of to base year. over and crude you will, touch for product system your expectations I the volumes if for balance

over across of and us could those seeing what a live progress balance recovery give how and volumes now your helpful. think of will of you how areas you That kind the the recover If you would like just snapshot year? are be

Kevin Mitchell

utilization on call, the XX% in averaged the we the about in we And second quarter. during July. Jeremy, range averaging XX% Yes, talked of the PSX low month

the rapidly refined and recovers increase the expect depend utilization and really what evolves continues into economy the how forward the back it’s on of half back third year, demand that to look half going demand we recover. of rest for the and in recovers as to to As of the the products quarter the year, how we demand

Jeremy Tonet

kind more could And color you Thanks. JV EBITDA, helpful. consolidated very there. if That’s just of wondering on your provide a is everything bit

bigger if year-over-year assets so on could us And wondering give is you flavor one to a which the individual others? than have look by going changes the

Rosy Zuklic

from Oak happened the comes just and is first pleasantly the just DAPL this that doing a Bakken from surprise contributions to quarter. quarter Southern the well Hills. we to think came received I pipes pipeline again that of I saw those and order. it is when way and this of the pipes increased pipeline. the saw what been from lower area. wells surprised that that’s simply, just mean, no shutting in at expected in, up Sand the well Gray result least And quarter we the the have so we the and NGL that’s first were from in from be additional I ramp that as in Hills was

Operator

from ahead, go is Jefferies Sighinolfi open. your please Christopher line

Christopher Sighinolfi

Hey, good afternoon, everyone.

Kevin Mitchell

Chris. Hi,

Christopher Sighinolfi

that appreciate There parts. questions mean moving to want Elvira’s I Gabe on just lot I of this DAPL I regarding a is uncertain. is and Kevin, follow-up process

co-ventures the and contribution lots the Access Your provided But in association in equity require have Midwest have made depending response a outcomes determined and And things will of put contingent by debt. be contribution filings it, the of equity shaped you I XX agreement the with what event. as portion as understand Dakota your on to by trigger would reference different legal are. regulatory which an guess you your securities Access, Dakota note country I would offering. Connector Spring up maybe other

Supreme is do. trigger in trigger like more, with the Is fails that a so a the My And Circuit issue? just understand better help Court, courts that it the you the component is stay event? that, DC question timing-related at Is if well? and what Can questions around I event? that mean, regard the to us it what constitutes obviously, as

Kevin Mitchell

Yes.

is the to temporary whole the the something that notion ability event. of revoked the But that it’s and way around event, a would trigger event, continue availability really all the permit, permanently, a permit the to trigger of not think So shutdown a about would triggering be pipeline permit, of the the all it’s operations. be therefore the

So the triggering the That’s about not permanent how would an But of a Tim, think permit but would be work core a it. completes of interim I revoke period be not its event, shutdown would. while

Timothy Roberts

that’s exactly. No right. That’s

Kevin Mitchell

Okay.

Timothy Roberts

to was X. did about comment. one clarify the weeks verified, nationwide I it's want not eight I XX permit just

but Supreme still of hands So the in Court. that’s

that may not it be So or than can longer. less take could be

was they that just ruling last a that’s So guideline from did that make.

Christopher Sighinolfi

variance that cannot it around And time be period. significant

Timothy Roberts

Absolutely.

a that’s necessarily point, make a So – wouldn’t just I shutdown. a not data

Christopher Sighinolfi

Okay.

back think it that regard, what the at through on event determination of to point then would the service partners process, stay we is a carrying that DAPL If fine. efforts then, EIS might a challenge, just If if you sale with So and then outcome say around EIS or an issue. the is that trigger to the take, is in year and your let’s made. and to go effectively formal longer, is that’s a and there service the that depending goes that debt it’s have a everything way about

Kevin Mitchell

Correct.

have to the that or fund a the service, interest XX debt being down put period the months expense. pipeline to shut of cash the co-venturers in probably of period that there in is so is So whatever and would event

Christopher Sighinolfi

Thank your had. I much all clarifications. you very That’s perfect. for Okay,

Kevin Mitchell

Chris. Thanks,

Operator

go Theresa Chen from Barclays, please ahead.

open. is line Your

Theresa Chen

hear you Can hello. me? Hi,

Kevin Mitchell

Yes.

Timothy Roberts

Yes.

Theresa Chen

nationwide on so you Proper? process or would expect do Tim, it your Justice the permit, just will follow-up full sorry. to Supreme Court adjudicated need the be that by this that Sorry,

Timothy Roberts

out a that’s I think my don’t Theresa to get I back but would a probably league. have you but Yes, of to it’s that that now and is just Court, are Supreme you on full refer guess. what

So I am pull to let going check. say me back and

Theresa Chen

you then while out? Okay. running long Xx how from plays could an And investor, squeeze more comfortable just would coverage, sub one DAPL I if offline be

Timothy Roberts

Well, an on basis. annual we coverage think about really

given expect a certainly a multiple situation you so have X, it And over that continue to but and you wouldn’t below so quarters. that can you got in you quarter-by-quarter, have where drop fluctuate could quarter

And is a an extended that to we sub a that period extended to X% if to need so consider coverage. wouldn’t for it’s go cause shutdown be us event needs action scenario that, an whether but would on we distribution take

Theresa Chen

Thank very much. you

Operator

We today’s over now reached the Jeff. have will turn I call. the to of end call back

Jeff Dietert

David in you Phillips all you, your and XX for Thank Partners. interest thank of

you please you. If call have additional or Thank Brent me. questions,

Operator

Thank you. gentlemen, this Ladies conference. today’s and concludes

disconnect. now may You

Phillips 66 Partners (PSXP) 31 Jul 202020 Q2 Earnings call transcript