SHLX - Earnings call transcript Q1 2018 | Shell Midstream Partners, L.P.

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Operator

Good morning. My name is Victor and I will be your conference operator for today. At this time I would like to welcome everyone to the First Quarter 2018 Shell Midstream Partners’ Earnings Call. All participants are in a listen-only mode. Latter we will conduct a question-and-answer session, and instructions will be given at that time. now turn will to call I Ms. Instructions] like the to over [Operator Relations Selinidis, Officer. Courtney Investor

begin conference. may You your

Courtney Selinidis

Thank you. are Welcome contains Call and for to Carsten, our the first Midstream Shawn With quarter Safe Partners. Harbor me Slide today CFO. Kevin statement. CEO; Shell Nichols, X Earnings Conference

to and for our events financial Today's measures. cause risk statements session. release disclosures including measures different will may Actual important this be We X future differ press making the actual and with non-GAAP the call to as refer during materially the Appendix the earnings in statements regarding forward-looking comparable such under SEC. expectations measures. be such factors factors results could to GAAP that in financial Please presentation results to from here as release included related and reconciliations certain presentation also most and are this contains Q&A well at filings of press morning's

end will turn Nichols. questions We take to of at call the over the that, Kevin I'll With presentation. the

Kevin Nichols

for of milestone the and ensure customers, to on schedule joining the with you, for And long-term EBITDA guidance. we integrity our net business We Zydeco a a and which $XX of Good Shell Midstream reliability XXXX morning. completion the step pipeline webcast. thank significant proactive generated and million you quarter Zydeco in The This of million the Courtney. adjusted successful $XX test income the earning communities within was Partners operate. quarter quarter. of Thank one achieved in the one

quarter. Partners in million XX% market. I’m achieved income adjusted proud backdrop positive say certain was against as test, approximately and about prior the respectively $XXX integrity to up a And offsetting million Zydeco as net the of of generated impact items, EBITDA, XX% the Midstream difficult Shell have the from this onetime would and of $XXX Excluding well

mid-March in policy Shell press confirming not the allowances FERC release Partners. aware FERC’s addressing for issued that tax a after revision sure on MLPs. a statement you the policy all are issued I’m impact Shortly Midstream would changes material the As revised to we a have announcement,

visited be there on I questions the the this clear to continues as with last investors that some it’s topic. month, However, over

time me take Shell what we the a announcement let material So not bit impact Midstream of to means business. expect discussing and to the it a do why Partners

seen environment. As class, type, in point portfolio, starting product in the important geography, terms This nature a it’s customer keep of asset to regulatory mind in of the is also base. diversified diversity our

approximately fact, not for owned FERC, of rate run directly already thirds the Seacorp. available our In two cash distribution regulated either by or is by

FERC Looking two announcement, statements. at policy really the made they

tax service First, not of pipelines We a income any they for service MLPs policy the have issued allowance of do cost model. model. revision the cost a in in eliminating

this is The of can negative Zydeco second the on But on explicitly may that example is to related difficult of a Zydeco FERC’s our determine methodology. the go XXXX. what indexation. in not is note is in state from indexation. create will of The bases time pipelines indexation very index that like statement out to it’s to look contracts At the important what this to impact the pipeline. negative change protection case An contracts tariffs

the Zydeco headroom future. creating of addition, our under all for In not indexation, has increases allowable the taken in tariffs

FERC So regulated, Seacorp. FERC remaining already the is FERC is majority regulated a by to portfolio from of by runway a is revision. see to of diversification not expected owned regulated. our our at looking material portfolio, this we or is And that expect further not the policy portfolio two forward, our not impact going is thirds as remaining directly third our summarize, The of

onshore portfolio, largely our the to transition project driven on So Zydeco the now integrity by let me results quarter. completed mainline. results were In operating the the for

was February X. line of the on taken planned, service As out

results the to onshore portfolio offshore, of of restored in quarter line integrity the eastern on and our volumes communicated. quarter continue the slightly expected with The in to successful than completion one the the quarter the total test, to and normal In guidance pipeline increased remaining the volumes was prior operations. deliver Following the XXXX. previously steady fourth were timeline pipelines the due was completed terminals higher corridor. The largely within activity

the Auger expected are on continue Looking corridor forward, eastern to to the Pipeline increase. volumes and

to to production turn expected the bring expected less production in in over deepwater the to quarter, XXX,XXX Peak Shawn XXth to pipeline. barrels flow announcement host is breakeven will walk for XXXX. week, begin decision Vito, scheduled forward-looking the attention for the results by Mexico. I sponsor Mars per be will a call to Shell. of estimated deepwater before the barrel. is investment a $XX and made reach Mexico Gulf a Shell day our development have Now currently is project which Last price Shell’s to This be recent your financial to wanted took I in to than of This you approximately our Gulf into through the final

is pipeline required This some years in no results Organic offshore our Over the for call first expected great cash discuss is with over production, Shawn? quarter. the XX%. the action. the hand now of available that I’ll by capital to five Shawn by financial increase Vito company. for to a Mars growth to strategy example of corridor our the distribution With

Shawn Carsten

Kevin. Thanks

million storage XX-day outage quarter, the integrity down was revenue looking test. from Income primarily Now how our performance was translates due by about Zydeco million, at to $XX.X for investments $XX.X this largely into which equity financial million, prior the at than at driven was activity revenue quarter, $XX the during the lower from quarter, Mars. the prior

variance the will the beginning recorded does as results, investments some in not be lines income our this income show other in certain from In addition, to equity quarter, will which individual impact but P&L.

quarter. $XX fourth largely by about the $XX.X corporate onetime was driven income tax million This dividend dividend Our a reform. increase increase following was million from up

quarter. million, partnership the cash This adjusted So results about income a total, in adjusted our full December total capital attributable offset dividend of to million insurance higher and EBITDA partially by prior a the drop in quarter test was impact $XX.X down $XX $XX million integrity quarter. interest EBITDA total in was to on from first maintenance expense, After Zydeco distribution approximately other $XX recovery. adjustments million. available had impact about The for and was the

XXXX. ratio increase the for underlying distribution XX% quarter impact a quarter fourth removing the resulting Our a of Zydeco partnership over $XX.X increase LP The X.Xx. declared coverage impact the quarter unit from the now around X.Xx, and first ratio have X.X% been and of dividend of was representing recovery, the a per positive well integrity the one insurance would coverage onetime time the test, as over the

routine upstream available that years higher than average plant the a to to distribution. at for quarter, have is producer income net are and we turnaround significant our in within As we impact $X expecting expect second to cash Mars previous most about maintenance the which occur an of million

project were addition, completed In maintenance the in programs now will be routine delayed quarter. work, given ongoing which second several

the quote partnership’s finally, let me balance and So liquidity. sheet

cash total equivalents million As $XXX partnership and total had of of of and outstanding March the debt about cash XX, $XXX.

in hand our between acquisition. assets time from capacity acquire we billion As facilities future debt We previously at billion any the under on to cash XXXX. of $X of $X.X Shell to guided, to plan use our and intend

So XXXX. in let me not reiterate raise intend we to do that additional equity

take that will questions. now with your So Operator? all

Operator

comes question the our from Tonet first And [Operator Morgan. Instructions] of line from JP Jeremy

may You begin.

Your line may be on mute.

Unidentified Analyst

for Jeremy. on this Good Bill morning is

on going growth Just your pass Thanks. plans as curious later you know will day XXXX-XXXX? be

Kevin Nichols

the This Kevin. you at cut Sorry very Bill could end you repeat there? question, is the

Unidentified Analyst

Sorry about that.

dated past XXXX, XXXX grow about think go we plans latter as and how on curious you that? Just

Kevin Nichols

thank look beyond. take not we’ll at guidance and reiterate that peers XX% But through date. at continue you. We've for XXXX look is guidance Yes look guidance later we’ll to at in then right at we’ll XXXX mid the refresh marketplace, giving take time XXXX teens. the We'll our a this guidance guidance to now the a and always given at we're for a

Unidentified Analyst

Okay is of of the the great thanks. – for then how rest curious outlook year Gulf project And Thanks. with just Vito progressing? Mexico nice the

Kevin Nichols

always Bill the on Yes again. been bullish Gulf of Mexico. We've thanks

Mars. year some Amberjack connecting in into is like into and flows fields additional we eastern and and and we’ll XXXX. XXXX continued year Gulf Stampede from Anchor like in a coming activity be projects Gulf have maturing Crown have Coulomb. see that this And corridor in of have the reach is the new to to projects are are both Mexico estimated there we Mexico. of projects We XXXX & later are that to come on to additional late in the that connected and And volume peak last slated which

business see new So to of XXXX, coming the and new continue Gulf we beyond. Mexico to and prospects XXXX

Unidentified Analyst

my taking for you questions. thank Great

Operator

question of next from comes our line from Barclays. And Theresa the Chen

You may begin.

Theresa Chen

Good pipelines? onshore cap? any market follow-up Bengal percent proportion can I that your morning. based, about additional you FERC, your indexation on color to Kevin the understand comments low is you of of to talk in explorer related have hundred and some on Colonial contracts but

Kevin Nichols

you of public. the Thank have Yes that that good we much. all We don't to morning give very out Theresa. information

the those Shell. of to defer lines Colonial by answering of this, what to and those would Some are one they're companies I you operated them. not And related being

of combination lines based and out the of as the market index these but domain. public well that true is in rates, rates, of it not have a most as lines that is all So

Theresa Chen

the representing specifically, consolidated XX% guess I update been it. any for this that doing of contracts Got off re-contracting maybe rolling on the are on your year work revenue? Zydeco you’ve two

Shawn Carsten

thanks Theresa. Yes,

any customers. as years area Bakken, out in So as flexible talking Permian, team that creating crude offshore destinations our connecting met the job of allows and team the and new customers of existing has over with customer last excellent busy connecting be system to customers done The many most unfolds. several the an its negotiating is demands sources of that scenario many in connecting crude, our to

process when little We’ll the regards process. terms, a conditions, of So to volumes. we’re little a that it's the specific to information further have with in early update

Theresa Chen

Okay.

receive In pieces remaining more bit terms moving your insurance expect year? proceeds the the the to precisely press million, little with the during that a for Auger of do when release you $X.X quantifying

Shawn Carsten

and go we now negotiation QX. receive with right But through the of these have it gestures Theresa So that’s course a process. to we’ll in hope

guidance the so can at this provide And best that’s point. we

Theresa Chen

And $XX.X that for exactly What's current reimbursement? run it. tax dividend, how million – good a the current due reform the the to Colonial bump much was in Got rate?

Shawn Carsten

beyond Approximately $XX above normal and the portion incremental the distribution. reform, from the million tax was

Theresa Chen

thoughts the that? around thank you. your Okay lastly, topic And any restructuring, just of updates IDR timeline and on on

Kevin Nichols

IDRs, been the it the to to this we knew of be Yes, investors. that come We're Theresa. to the have out. we on time recognize when we thoughtful have going that we as it's question thanks We deals and at but market talk we’ll subject. would I’m date But done this no how surprised on guidance. take get prudent additional have this I accretive. the We not appropriate, by question the action impact approach time at

Theresa Chen

comment date an MLP you peers accretive, has to Okay, But acceptable the where they've the transaction on dilutive is look your you I many when at about deals that – one are LP, that been your to announcements to when the of guess you? day outcome the done of

Kevin Nichols

about I'm forward our not to deals. talk going looking

we on and can again the history how watch doing, be others we've that what in to and the us been peers we'll going based we thoughtful are and the prudent approach market. in on think the we've we you look date judge and and deals what's since on IPOed. our consider we that done And marketplace, I

Theresa Chen

you much. Thank very

Operator

from from Zarahn Thank Brian you. the And line question comes our Mizuho. next of

You may begin.

Brian Zarahn

Good morning.

Kevin Nichols

Good Brian. morning

Brian Zarahn

on is XX%. On contribution seeing the impact you Vito you’re you could reiterate Mars expect that that the positive

Kevin Nichols

distribution years pipeline the cash see Mars system XX%. of for We think incremental about over you'll an first the available five from

Brian Zarahn

And Mattox your contribution That’s base? on helpful. the asset that then flow to from how the project Appomattox, Mattox from Thanks. pipeline, we volumes think that onshore about on but on understanding will should

Kevin Nichols

Proteus acquired an Well not know as we in maybe the anymore, We and thanks. interest Brian Endymion recent system. it's recently, you but

pipeline the the from commissioned. and there coming So then into system from as Proteus about corridor. is an that be think will platform, the I Mattox that Endymion flow will as volumes molecules impact pipeline that Those and you think Appomattox contract

product, some and tariff available onshore, as shippers there. the see where a some and then some footprint, to the the you it hits to benefits be that's want on there'll of customers that depending take could cash as So existing on well. assets And from onshore additional

Brian Zarahn

longer the what’s dropdowns, completed. wait Guess That's complete helpful. to on your much And why then financing shifting thought the is process down? to drop

Kevin Nichols

what Yes to good that drop firmly and reiterate to that land that to year very they're will guidance is that giving know the going asset is X.X, drop comfortable the team when that’s it of of question. not the be. been X.X will guidance it I separate that asset, a just bring this down for acquisition in the We our down on have we're time. range. us regards a And The out that we're market investors waiting process specific is busy and working With at timing, the we'll it's when the prepared, and this ready. achieve getting

Brian Zarahn

more flow? then XXXX consideration growth prior given growth, question cash potentially a XXXX just on the retain is since following-up any to the you’ve growth there issued distribution And market in on moderating to change distribution distribution guidance,

Kevin Nichols

minds lot investors on Brian. Yes, thank that that's we the and know question. get a of our No you of I

about First to of have from and IPO we start this say do going business. and we on foremost, the been of we're the delivering very what the all launch

continue we'll so stick with And that to guidance.

I did think very we we it not mid for give XXXX. said We specific number was were teens. the in a –

But bit a the of with gives go. to of and market where that to within range. we that us we want think play little sense range with, play I will regards a to

Brian Zarahn

for final LIBOR. rate us on you just revolvers, on change question your update interest me current the given And can the in your

Shawn Carsten

this Brian Yes Shawn. is

the for thanks So question.

still So around range the running we’re in X%.

just a picked down you had our better in prior equity base with price revolver up one. slightly we a if actually February lower new December remember that offering So than the because position the to we're

we're still good So relatively in shape.

Brian Zarahn

Shawn. Thank you

Operator

Our Thank next Instructions] Gabe [Operator lines Bank. from you. question of Deutsche comes Moreen

You may begin.

Gabe Moreen

Just me. a from couple quick questions

larger and credit or any actually larger getting longer drops in further with and conjunction debt potentially issuing seeking is a to partnership the term thought financings? With maybe some rating

Shawn Carsten

Hi Shawn. Gabe is this

But has always our can always looking now our that that sponsor than what the better sponsor to rate clear with facilities a in that we is it been honestly at willing supportive have So the we’re conversation. they're – to our market. if market, have we right interest get

further won’t is at than until our advantageous with that rating. such covenants so to our And public holders, simply time on just unit And I public facilities for credit easier those to go a not market. sponsors a do think for we us it’s with the business

Gabe Moreen

I’m of out was MLP should appetite at financings then for the what wondering and that that guess conversation in sponsor? the sponsor, And read raised there sponsor of might level with be it. the future terms appetite Got to place participate in your into with in we future how difficult of capital any in the equity equity just markets issuance. portion the went that equity I to terms

Shawn Carsten

one to sponsor. they And it's kind pleased I pleased do are always think out. also the are the able long-term. buy look doesn’t also what at sponsor in the be to our and [ph] they it has we I’ll of investment would, hit the at Gabe the the time time. with everybody where long-term looking this where to quick this sponsor our they're sold So that markets that unit bought market not they they a the for of at we’re price or own. And are remind for And the

the this. sponsor so our we now MLP and fully to about And committed think that’s is

Gabe Moreen

dropdowns the having guess you organic spending future additional is the them? any to next Thanks. bigger, about Gulf the profile and CapEx me thoughts out terms thinking way of in much growth But just And in terms last capital. then might for a organic in one growth of I acquire the coming of really assets spend hear I of without

Shawn Carsten

assets. given as guidance to the specific haven't We any really

said, and what the assets to we're our to portfolio, stability. think versus the more and to how we’ve in are business. of balance affiliate going in favor and look We'll terms we’ll – look portfolio of what overall diversify grow that do see the growth I compliments with

look those to organic on in will or gas to growth affiliate of Nautilus Marcellus, of example out expand needs. our There all continues a the is gathering it’s that. Permian, to opportunities grow the and in shore types the affiliate Utica we'll Crestwood Permian, their whether growing drill system more I And was think the for great meet is as continue Crest on operations where offshore.

see we another the businesses. that's affiliate some So growth area where to would linked

Gabe Moreen

Thank very it. much. you Got

Operator

Thank you. And I'm showing no I to Courtney further Ms. like to Selinidis. back questions. turn call

You may begin.

Courtney Selinidis

you much Shell in very Partners. Thank for your interest Midstream

My website. Thank a feel me contact directly. can any as follow-up you If free our please on found have information be call as you presentation question, additional on give material, again. the well to

Operator

conclude in and today's does participating This program. conference. Ladies thank for you the gentlemen

have You may a Everyone disconnect. great day. now

Shell Midstream Partners (SHLX) 3 May 182018 Q1 Earnings call transcript