SHLX - Earnings call transcript Q3 2018 | Shell Midstream Partners, L.P.

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Operator

Good morning. My name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2018 Shell Midstream Partners' Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. now Investor turn Relations will to call I Parker, Jamie Officer. Instructions] like the to over [Operator

You may begin your conference.

Jamie Parker

are Partners. Thank third you, X me contains Midstream Harbor CFO. quarter the CEO; today With earnings conference our Shawn Nicole. call for Slide Welcome Carsten, Kevin Nichols, to statement. and Safe Shell

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

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

Kevin Nichols

and Jamie. you morning everyone earnings Shell thank third you, Thank for for joining webcast. Midstream Partners' Good me quarter

increased performance, systems. saw If a offshore look take net diversified we I through at onshore some with of trends generating We strong results. our $XXX quarter. activities be start very adjusted $XXX second growing key driving to adjusted continue the and our had EBITDA very million a me Let this EBITDA. operating from XX% our Evidence, And quarter-over-quarter of the income and million quarter our volume our with positive, Zydeco growth were cash volume quarter-over-quarter volumes to strategy strong continue with to continues demand. we're we significant deliver sustainable to quarter. system, largely increased see assets seeing our with in terminals driven line is remaining onshore portfolio pipelines to flows. portfolio, as the our prior growth our delivering results offshore Shifting and partnership. to and continue robust deliver where offshore, The quarter by our of onto Starting major

third million our offshore time the are third to a organic day, in strong X quarter combined key fact, up transported normal some These two operating portfolio and by year. themes, per results In offshore last quarter return levels. growth driven XX% from this the barrels

let Focusing and define And look remind from with pipelines capital. of Mountain of tiebacks first comes are prior continues XX% recent existing one of the from first volumes quarter organic our share systems growth individual second organic with on to new I you from the last to little let start quarter you excited this fields year. Amberjack, systems that into I'm the our volume connect me call as me than growth most that at in Amberjack more earnings coming quarter with growth to we for saw the into XXXX expect acquisition our no online. as one deliver fourth Corridor, Delta Corridor, corridor growth as continued growing to as Crown into over we saw Gulf that evidence new production the the Anchor growth oil two all take our tiebacks, came our and Mexico. new robust June and we new in we Eastern Horn Shifting see the other our and and in and in organic to

to rates. platform rate theme in the run system pipelines and platforms systems over in good returned second up And normal now the connected project May mid run to XX% July this year. to Now came normal turnaround planned we from time returning these some operations Auger Odyssey last bringing the historical the and of Mars to back coming to a back operation, on the a

from on continued we an give from re-contracting So this our portfolios quarter update Mexico look ahead, to in as and Gulf shift system. and growth at expect performance offshore our you strong I benefit of operations our the me I'm to on summarize, Now, efforts our extremely of proud Zydeco let portfolio the

walk As end this second contract in We another season, that season the did me you at expiring expected quarter to specific and forward terms outcome the and through the we see not from you of next the of of have contracts In that which process interest in expires two levels September, plan and we conditions at move that year offered. an that of know how are we year. closed the so conducted here. let open open the we

Coast in market dynamics by will fundamentals barrels. the continue strong Permian light Houston demand in to our growing driven that see for continue key play grow exist the to continue in to as constraints fundamentals, and for Texas demand Gulf production will such continues an Louisiana role Zydeco to capacity Houston, Louisiana that on important view for is demands robust today land in capacity we However, be are will and and and Market in of system. and out Houston refining that evacuation evolving

and the that connected a say the Gulf of export in origins me the many we remind systems crude Let and facility. very Zydeco one competitive sources best as also and of system system to refining see an you and Coast, is centers tying

with this monitor include potential our for maximum further unit next believe guide customers and continue the we evolving of prudent have market We which to the approach open with shippers and to ensure holders and another decided discussions be will this backdrop our value market. most season. existing So ahead to continue steps looking against the to could an

These XXXX, sponsor the which IDR growth cap would at the essentially Throughout of levels. touch the support this anticipated demonstrates our be are future sponsor to grow $XX for strong IDR's the investment. distributions We commitment to IDR's further and me cap to for footprint. quarter four partnership waive the believe be portion XXXX expected and million approximately reflects expect we let to a Finally, funds midstream IDR's. waive and Shell's are the on used

our mid-teens distribution saying our growth results, sponsor now operating by growth our all Shawn and it year. strong and me XXXX guidance distribution our diversified I'll us me XX% through solid over for wrap lets next hand of for Shawn? support, the financials. walk With that to to portfolio reiterate So let up

Shawn Carsten

Kevin. Thanks,

As a Shell quarter good the quarter shown third in press was for yesterday's Midstream. release,

Our to business and perform. We're continues corridors the well our by growth supported in performance. organic onshore offshore asset strong solid

cover me let of metrics now, financial for quarter. So a our key few the

prior XXX was normal returning in quarter, operations. roughly revenue from the to about to was Eastern offshore Our XX fields which coming fields million, new million due primarily corridor and the up online

on quarter. million, up about also investments million was the XX by Income The Our incremental oil of revenue from Amberjack from allowance Explorer. the about equity prior impacted quarter, previously the largely during was due Mars from income and prior Amberjack plus is quarter. a XX by by up, [ph]. from quarterly the quarter inclusion discussed for increased colonial Dividend to as Jamie was and about driven primarily sales the increase full X million growth dividends some XX

income the primarily our X from about quarter. other was in due This decrease down quarter. proceeds million about that's received is insurance X second Now, million to prior the

total available After to up about interest the on adjusted adjustments, million, cash million. distribution partnership quarter. from for and about XXX some other XX% was prior the expense, So EBITDA maintenance XXX capital was total attributable

those representing X.X% ratio the over partnership times. quarter in All prior a increase and third over Our XX% of the a a the quarter declared LP per XXXX. healthy distribution quarter X.X for unit resulted of $XX.XX coverage

the So let partnerships liquidity. now and turn to sheet me balance

to a X.X EBITDA. As debt which of XX outstanding EBITDA ratio on partnership based adjusted times about the of equates billion, annualized September had to debt of X.X total QX

very be business. in affords grow combined from flexibility our comfortable to with anticipated IDR significant we continue as levels which growth XXXX our with the continue We our debt waiver to sponsor us

close make filing like statement we will you I later I today. before to Finally, that shelf registration aware be

We the are will our as in this future. statements registration expire current doing near

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

Operator

Our comes Jeremy Instructions] the from of question [Operator you. Thank line JP Xst Morgan. of Tonet

Your is open. line now

Unidentified Analyst

this Jeremy. for Hi, Joe is on

So there has strong. mentioned really Zydeco, you been demand is my first question around

of there that? are to would what and opportunities the expansion that expand [indiscernible] could you So there system do type things

Kevin Nichols

for question. is this Kevin. Thanks Joe Yea, the

came you into strength in mentioned QX. been going see system that nominated we has full demand and run As been up QX since The and QX demand back has over we strong. and on

as expansion optimize the crude as at we significantly at of this a time We're expansion new increasing of forward. we for connections. speak new or twining system. continue far sources different Again, looking the major is to but the not go continue As so look connections we'll there to and to line mainline, the destinations,

Unidentified Analyst

ramp contributed And helpful. then earnings. Anchor and them mentioned That's Are expecting also contribute fields again? to in Q thanks. you Crown QX and that new you Okay, X to also

Kevin Nichols

of Gulf that in individual on call. continued for the in Yeah, see fields, Mexico of the growth earnings but it's speculate we strength we in hard and corridors me this highlighted both to

timing not tiebacks time. new volumes we online coming that to the we'll big will the they come growth those that continue production well. to at The the late exactly there as corridor corridor Eastern I'm and the as and this see its - are there in looking what see expect like, several platform when fourth with we're So Amberjack forecast on continued at other quarter we and do in able look to

Unidentified Analyst

That's Okay, thank you. all had. I

Kevin Nichols

Joe. Thanks,

Operator

you. Thank

Barclays. question comes Our the of Chen Theresa of next line from

now Your line is open.

Theresa Chen

in strong volumes if Zydeco, another up two questions, understand so that? see but of Follow the how year capacity wrap for by you you're the with think still spot should the go turn doesn't availability, the my I'd I on discussion that into could contracts season, thank that about open Hi, that taking great to that to speed question through. up end just

Kevin Nichols

Theresa thanks. Yeah.

everybody that Now, make glad to that. that wanted I because brought understands I'm up you sure

on opportunity extent the customers Our happen from contracts to - get exactly our the ship the not [ph]. have even for potentially because what a to the customers to space will existing the line may the ability that ship lot customers and existing had when that's that and

we historical shippers will leave existing to line, open go If go the shippers but the on season on and volumes. will choose the new right on for volumes. that to volumes for such have to historical everybody out another to to the time will contracting not time until move they nominate room of on their that look it's slot go at Our decided ability

Theresa Chen

are you to for in you that XXXX? you relation have announcement, IDR every XXXX, already, distribution there looking looking this in to but year stop more reassess guidance and the look or waiver beyond something given is growth XXXX it maybe use a that the beyond solution out measure permanent will it Got

Shawn Carsten

sizes Theresa million sheet. balance We equity this back us that won't around to is always the the markets market the drops provide as so that. we we partnership comments value guidance XXXX. and of do XXXX Shawn. as give any to and we we'll unfolds. debt We're $XX can back not where through or about conservative The go course beyond take go. contributed waiver It we'll will providing related and are any the run we see sponsor We evaluate year or the - a will

So we beyond not any guidance will we've provide done what today.

Kevin Nichols

beyond specifically goes let We sponsors me the to Theresa IDR's to XXXX maybe regards may And speculate IDR's. what not from and as with what the the do sponsor or - also won't to may perspective.

the they're solution Although that space. at looking they - I've always said, in long-term

should and I a offered Our the sponsor have what's long-term committed think this the unit considering the something with that market in growing to say to They has to solution. and pleased date. they're what that it interim. the to and taking performance evaluate this sponsor has the the view, holders solutions into thing to long-term continues up right view looking can midstream support entered while issue how the shows is be, And heard MLP they business. to strong the They're that really market business do. they're IDR's long-term delivered MLP they're what a the they've long-term or to I around listen so

Theresa Chen

previous very you. debt looking within are like lastly helpful, achieve a guidance, of It's mid-teens and XXXX that in years? to with thank you equity mix And fund growth to growth the

Shawn Carsten

as maintain have unfolds, said available but lot that conservative to approach And XXXX the a sure have just see sheet we fairly options to think reiterate we X.X cash plenty facilities, what between for - of to I of balance we'll XXXX. a liquidity have that - available allows I about us Theresa earlier, and us we they how because billion

Theresa Chen

Thank much you very

Kevin Nichols

Thanks Theresa.

Operator

next question [Operator Spiro line the of Dounis Our Credit you. Instructions] of comes Suisse. Thank from

now is line Your open.

Spiro Dounis

Hey, good afternoon.

for you on Amberjack, set one if in quarter, look can XX had a the markers quick distribution us? as of Just kind we reiterated any was you here I fourth guys there's the kind mile if wondering forward out million other of here

Kevin Nichols

I will So only barrels out the next where we that the runs that the will we day that is did of this Amberjack that that at said think by running and the only one be mile mentioned when time give it we that of from is marker year a end today. XXX,XXX drop

or we a year, give guidance as barrels day. didn't distribution to it for say but we grow to the any did next the continue earnings So growth the of system XXX,XXX that the would

Spiro Dounis

words little it towards back should and into primarily flat of that necessarily think growth the Got it you're the be will is or still and respect million going into just just we business. could is with pivoting dropdown reinvested or a that dropdown other XX about primarily I in to a more clarify, to you then name? start a - growth to that be could around organic back more organic

Kevin Nichols

answer - Yeah, but so be today. at thanks. - favor look used only the come organic contributed a we growth continue wouldn't the if then we'll it two in and be to people I - that those Actually take quality me maybe what it I and acquisition sit would say, partnership. and for could exactly that's well the at of and ways, you're used have let the in opportunities, of for wanted necessarily a look assets and at dropdown into not - that, could down lot runway how story look you to

at a great think sitting positive level. I They're partnership it's very story. assets the

no in with dropped show the growth, to committed. organic and the very of a grow next year quarter over attractive no take timeline continue we risk, permit customers examples last XX% risk, to growth the system and year capital which with the Amberjack multiple at continuing dedication risk You no already

growth than and have So to from way drop the about assets slightly we most, coming talk both a we growth but look forms as organic well build we'll different within we organic consider opportunities we in of partnership. as

Spiro Dounis

the thanks color. for Understood,

Shawn Carsten

at Tag Kevin's Gulf on that and producers have in us investment, growth the - corridors no so that comment, the Gulf tariffs virtually no connect forget [ph] are as don't grows in to also to our to for or traditional additional cost capital comes us.

Spiro Dounis

I fair. appreciate clarification. Yeah. No, that's the

Operator

you. Thank

comes line walker Our next Bank of Derek of question from the America. of

is now line Your open.

Derek walker

guys. Thanks Hi, for taking questions. the

run delayed quarters it of seems on it How like in that [ph] recent a should in guess. about rate? just one the CapEx, came kind all think First maintenance I we as

Shawn Carsten

the we Derek, within for major we'll with [ph]. continue getting we guidance towards provided the material in end the the past around capital but it's the of are small full the year, year

Derek walker

Okay Zydeco, sort open for looking and of start another I potential guess some back markers that again? are process to you then of the order for the just what you're that in mentioned to going season

Kevin Nichols

a It's to continuing that and would of but given shareholders, the like to we does Yeah, there's do constraints for the Louisiana. the customers so how the evolves could is team way Things look and what our be. people expect, those have for at market a unfold, commercial maximize look also what it from how season would like out not then wide Permian play in looks value does from demand Houston something the best right the that. be with to is, growth do open range time and what's negotiations and how the volatility an that

we continue a out demand. open look trigger customers continue customers little we and run the So spot to dynamics season and that what have they would all whether the as terms we on or conditions as for to system around more together bit potential with at an those given accept go we and discussions will

Derek walker

then just any and I you one guess around dropdown, given potential IDR terms Got changed on be there - has it the would the the just strategy have and size so around waiver, central just color helpful? dropdowns, the

Shawn Carsten

Derek, is dropdown I change strategy. there to Shawn, So mean, it's no our

with think on we're of that runway. We uniquely will and I assets lot always have positioned unmatched set with of the a assets

have organic We a some to growth. connection will

as highlighted grow. Kevin As we

mid-teens continue that we guidance. we'll are with guide guidance will We that and for providing of XXXX

Derek walker

thank Okay, you.

Operator

you. Thank

Abrams line the Morgan from Tom comes of question next of Our Stanley.

open. now is line Your

Tom Abrams

Thanks. Zydeco I'll how but when re- the increments those based of much from on probably the we're and question other area? are follow standpoint, of IDR into contracting, conversations line mechanics just in type just at Cap horse a fundamental market the up that kinds might like on air it, more and Louisiana up link volumes down Sea Houston looking of throw that

Kevin Nichols

that's think I Yes -

Tom Abrams

lot? Does a that up come

Kevin Nichols

again. say that Pardon,

Tom Abrams

that comes a lot in those if discussions. just I wondered up

Kevin Nichols

grow Yeah, I of there lot have When conversations of evolving to point throughout. - market that There is Houston, the about are actually had other Houston, are into customers for as a on we kind land been think you're in of origin exactly projects it's that Permian projects which the announced Zydeco. come the Houston. I with hitting talk to that East landing of barrels dedicated lot some a kind

Zydeco refining play the the into the not they play, connected the I using into they - is only to in connected to flexibility that and we're going optionality. of as volumes marketplace, in but where look way James Houston, increasing out have years last my the is offshore conjunction BLCC they in other Zydeco really and of on that's deliver Zydeco several that's like can of to comes coming to points team think they're This connected the coming to So We're has with it's into last move the in Loop system. commercial conversations, Houston is project volumes export has I connected into where into Core system several finally Louisiana. we're to into also move of connected and all And center Needham, other to But no system Loop that refineries to spent then those other spent played we No, Zydeco Houston optionality connected need continues years on connected offshore system able what origin St to benefit in and Valley we've and kinds and the Zydeco. to creating try anybody conversations. wants is solutions think seen and of all in that at those kinds destinations.

as play see we've have what why building what lot flexibility that's to and as market. the capture out we far hit certainly So there's to go that projects and been forward a volumes this still coming what

Tom Abrams

lot. thanks Great, a

Operator

you. Thank

comes line the Schultz Our of from Capital next TJ of question RBC Market.

Your line now open. is

TJ Schultz

XX% are about radical there the Yeah, expiring contracts in revenue there are next batch when expire? or there contracts other three of of any runaway do and in contracts XXXX

Kevin Nichols

Yeah. question. Thanks, great

So from the that combined overall of will yes, revenue for XX% our filing three contracts approximately you see the represent partnership.

we in they from don't our on many joint because and of equity record remember accounting revenue assets come from venture. Now

available So revenue distribution of for income all it's per not and generated not - se. cash is our our by

what contract between contract of time As on range four guidance so expiring years let not a contracts Zydeco to first that we and expiring the long-term is When have five remainder. you main soon. our math five and I'll gave are on contract underpins we that the and three at the any we contracts they year do XX anniversary, flows years fourth XX% of the you here the

TJ Schultz

I that can math. do

Okay.

Operator

for remarks. you call back this I'm time. no showing Parker questions like Jamie the any Thank I'd to and over closing turn further at

Kevin Nichols

else everybody you thank joining. for No,

Jamie Parker

in if as Midstream My website Alright, information for presentation, you have be free additional follow feel the as contact presentation call And any to following Partners. your can today's thank well directly. in on questions Shell materials you me found shellmidstreampartners.com. interest please our very much

guys thanks So

Operator

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

a may all great day. have disconnect. You Everyone

Shell Midstream Partners (SHLX) 2 Nov 182018 Q3 Earnings call transcript