SHLX - Earnings call transcript Q4 2018 | Shell Midstream Partners, L.P.

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Operator

Good morning. My name is Jiji and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter 2018 Shell Midstream Partners Earnings Call. Later we will conduct a question-and-session and instructions will follow at that time [Operator Instructions] I will now turn the call over to Jamie Parker, Investor Relations Officer.

You may begin your conference.

Jamie Parker

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

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

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

Kevin Nichols

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

our Before This I a Shell America’s of impressive want a legacy as to for Pipeline, safely give begin, and it recognition milestone I an strong operational this years. in XXX been XXXX operating energy excellence. which delivering has company, is of year represents to special

through full fourth walk hope looking the reiterate challenges I that quarter and highlights I’ll discussing throughout we fourth in I'll you you and will ahead. opportunities then providing outlook, you both to Now offer financials. see a some today's XXXX, the will by realized who Three over take year ahead performance. call through XXXX Then finish pass year. brief operational have call I themes Sean, quarter the which today, that common to

our promises. have We against delivered

growth. to is we continue Mexico working corridor strategy capture Our Gulf of and organic

increase and system. fourth onshore quarter overall $XXX solid we we around volumes of beginning million income net quarter, across generating with saw and another adjusted an of offshore some in Quarter-over-quarter, the $XXX million EBITDA. Now had the performance,

Zydeco Permian to terminals the A the remaining in again approved strong driven with the and were business quarter. Company. to line to were extend an to quarter Halcon as and accretive opportunity continue quarter. at in processing system Halcon results onshore, gathering system provide Novellus Looking in growing continue the We where for the the deliver largely for Systems in by the was services we pipelines the our secure The Novellus to the investment Permian. first The shore highlight prior expansion fourth volumes project party third on December. Resources grow in provides Systems of

finally, in the system. system two increase And was coming quarter-over-quarter corridor, of little Horse first received by from see required. strong and Claiborne platform. of the the offshore, were that's an no on we continues to online. and growth activity our fourth higher new oil quarter driven Proteus the Foot production XX% and into December, growth Moving November to Big continue increase eastern day, wells the tie-backs drive in over from our And per that new and results to and organic capture in the in were prior slightly came driven Amberjack, footprint. This On This saw capital Endymion, Gulf XX,XXX increase With volumes growth to quarter. new in with by a Thunder into tieback continue two barrels around the alone. we we Mexico the we volume

growth saw impacts by this was partially the we temporary in of some quarter. Now operational offset that

weeks an eastern $X.X corridor Gulf production, for in the impacted recall, Michael million. came approximately producers As Mexico impact shut storm operations, And reduced the we Hurricane of while and October. any causing of you didn't two down through will our of the

encountered volumes. fields And impacted slightly online, system, which saw on just temporary fields saw offset production earlier. as saw issues, spoke new temporary the I we was well which Amberjack lower coming performance and producers, Mars, maintenance systems also both slightly from along volumes Auger about impacts by existing We partially quarter-on-quarter the unplanned

operational expect temporary we the in these return. and are to issues of volumes nature All

and up XXXX over turn the fourth the diverse quarter set As setting We performance continued that billion May, and on success met from that delivered Midstream that year. for I Shell $X.X year was with with we deliver its of assets. between billion XXXX summarize the $X.X and and promises. the guidance, expectation set X.X the Partners of And billion acquisition acquisitions would delivering another XXXX in partnership Amberjack of a timeframe. we drops

XX% We would also XXXX. we said through deliver that annual growth distribution

the the delivery move per of Examples growth distribution has Shell the eastern I grew annual am future which this the opportunities. short launched Midstream include Mars since company. underpinned as declared, in and the an driven continued tiebacks quarters day. the for had and by we has system new previous the acquired year Partners. system, we barrels is into ahead of of growth by around new by volume rate online the we've XXXX come distribution for in grown strength Amberjack, and since wells achieved which has in unit eight XXXX. the confident [indiscernible] Gulf organic recently shell some and we've throughput also The XX% time And which the corridor, we consecutive some XX,XXX With impressive tieback. capturing $X.XX over grown This per Mexico the we grown XX XXX% XX% this And beyond, growth year-over-year,

and strong asset base. sustainable resilient and via We Shell’s sponsor be portfolio strong to cash growth high quality will support, access diversification continue continued strategic A to flows anchored with three by pillars. the across framework

XXXX updates Fourth marked financial Before me give you let quarter will expire four XXXX. Shawn more will with in contract contracts third in the section. detail you the few system of XXXX, know Two quarter our a second and expired Zydeco provide at quarter last the all operational close, on as the impacts place. of I end and anticipated in his on contracts

in discussions existing while our run with I Louisiana between and spot the we on our and will webcast, As explained market continue evolve for capacity. evolving. and the shipments non-contracted we new to Texas last dynamics continue system And shippers,

our place. be had the earned will time, we have is the previously previously worth have noting on of less It contracted in structure or volumes in versus ship first contract predictable this XXXX, credits. shippers take pay will During half ability to that the

was will recognize recorded however, these such, the periods. previous As we in cash for prior and revenue movements,

majority opportunities and in With to that'll has connected to now a for have maintenance We the utilized planned be said, these will quarter. in first we of earned producer system offshore, turnarounds us we expect not that the switching quarters. expect third second our the credits impact our And the and on and of primarily the future. goal into organic growth changed that bullish and Mexico both remain outlook number

was Administration, the the to EIA, forecasting production that XXXX the future. Gulf and reported the they in has third fact, for continue are Energy year In Information record into this consecutive of Mexico

this B flow the Proteus to to Foot well in directly bringing coming from reducing first in an ramp X proof it the of Thunder XXXX, we production and barrels home, into Big and growth will quarter of announced continue out, Proteus anticipates the And see system. system. Examples of the billion Endymion this XXX,XXX additional per at increased full second online, emphamatics day barrels And points Horse the and this flow the include Shell which which of oil gains, newly further field, anticipates the up. up oil the discovery continued is of is Amberjack [ph] system. which And Chevron, with this footprint. ramp industry-wide around As produce producer to connected efficiency growth, our by connected pipeline, constructed growth pricing. activity Much to into Mattox third driven of breakeven around of is through closer oil expecting Endymion

confidence the our All turn performance unitholders. walk I'll that the the that's Shawn of this call Mexico the our growth and partnership see outlook, you of Shawn. for to the and through Gulf for we that, and growth continues growth to in the financial quarter With the and the on to XXXX over horizon on for drive

Shawn Carsten

and Kevin Thanks, morning good everyone.

fourth Midstream for As quarter shown was Shell today's a Partners. press release, the in solid quarter

by at base. perform diversified the to continues supported onshore our business Our offshore and well,

cover financial the for metrics let quarter. few me key a of our Now

about [indiscernible]. million. quarterly attributable prior about around In from down oil sales revenue allowance XX projects was X quarter. a investments Partially to by slightly, on other approximately expense, and of million the totaled about cash the prior expenses oil in quarter. adjustments total, of the $XXX roughly from was allowance from improvement million, XXX $XX lower Dividend inventory. million, to roughly our on revision income other our equity were million dividend and from After an less retirement prior Income lower the adjusted XX the even partnership distribution capital win Operating judgment primarily million, obligations. the driven Zydeco, and to oil, value estimate net due about was available related about to realizable million, a EBITDA million, quarter. decreased Our maintenance fourth and asset prior allowance down and at million offset $X is cost our from by quarter, down interest sales which was a approximately was in quarter, Colonial of $XXX $XX

XX% X.X% quarter healthy the for All Our the XXXX. of over very a unit, prior the ratio partnership coverage fourth of in this increase increase a and declared a distribution LP of quarter a $X.XX per X.Xx. representing over quarter resulted

that offshore, our now the income to range first ahead to to each the impact So, the the CAFD to during to we earlier, million quarter contract discussed $XX related In and the XXXX in be expect on we expect Zydeco several net turnarounds have million. $XX year. of to expired producer and looking Kevin

roughly Based current schedules, impact million the turnarounds a second cash and net and are to the quarter further these distribution expected Now $XX in anticipate this million. quarter. available in on we to by income $XX the million $XX breakout approximately third from turnaround

spend be expansion we as $XX is this discussed of primarily space, of which capital previously about system Kevin. year the gathering CapEx Permian gas growth The will capital. around in to to the in Finally growth million capital continued $XX related plan million my

So, now liquidity. for balance the partnership’s and sheet

adjusted X.Xx had which debt EBITDA. QX billion, December of to XXst, to on outstanding of about an debt $X.X partnership total equates of the As annualized EBITDA ratio based a

levels. the to with debt announced XXXX. previously first everyone We waiver IDR our will begin that quarter very continue growth be like to I'd also remind comfortable of in

distributions To has wrap $XX We and of on IDR believe flexibility follows. each this strong all as our results, shell partnership with combining as sponsor this further the sponsor year QX QX. and since continue course then over support $XX sponsor credited in IPO the growth up, Our $XX our of reflects grow amount waived million diversified affords will business. reflecting it and and a be of million this and QX in significant to the million delivery portfolio our a operating all our continued support. and we solid to our combined strong our of back

appropriate distribution the reiterate further follow-up our growth me XXXX. time, guidance Let at we And will for of mid-teens guidance. with

all Operator? So, we’ll with take your questions. now that,

Operator

our JPMorgan. [Operator Instructions] from And from first Tonet Jeremy is question

is now line open. Your

Jeremy Tonet

morning. Good

Just wanted in of to CapEx with to with It to to of distribution self internally opposed as there growth on change an like growth kind funding distributions the said up maximize growth. a pick regards you seems more on for trying XXXX. point there's emphasis been the to market regards last

to or of sense not Just thoughts or that have on it level moderate philosophy would of there. wondering if whether distribution make you updated growth thoughts any any

Kevin Nichols

that down thank and conferences promises Since Jeremy, of distribution have our we the rate. and is investor in this and we growth committed we that launched What earlier. that We on much. gave one we XXXX are our I things that reiterating to our of around, we’re proud company, say calls guidance would mid-teens the for both you question, this our like always the and done commitments are have growth. the our Hey, deliver marketplace for we Kevin, earnings guidance slowing get consider and is we very would in

into the in mid-teens said, distribution we that. guidance consideration We're marketplace. the to So, beyond as to guidance. specifically have we’ll and stick we're growth. XXXX all given look going everything We not that we're hearing rollout take with That future evaluating

Jeremy Tonet

just with should building of you more IDRs I But far or expect IDR any when the simplifications relief as of Thanks that new just payment with levels, that, kind are could guess, the it have as that share new I've space. you the of freezes come thoughts kind intent as with there in development you wondering And for is. the kind concerned. we And from occurring any if we’re front? eliminations rights of that. And seeing up distribution guys granted off agreement

Kevin Nichols

that what to No Jeremy. with that again sponsor. is we’ve thanks we're Yeah, will additional continued but give today, say prepared I guidance dialog to our have

Our options available are sponsor all to evaluate to that continues them.

the thinking at to we're good hey, I show effectively about distributions waiver freeze quarter least was of the think fourth well a We're that XXXX. says, going support to of this. reflect

on constant provide having company guidance a timing, the and and the are can't comment So, appropriate will our but at communications the time. sponsor

Jeremy Tonet

for That’s me. it Thanks for that.

Operator

Thank you.

Our Gershuni next question from is from Shneur UBS.

Your open. line now is

Shneur Gershuni

morning good Hi, guys.

on the maybe few ask little last Just and kind of differently. them to questions wanted build a

optimize just better. like of of sort In wondering, terms it of kind looking And ways it it's were to capital, cost of seems to you your I overall if kind was inefficient. at

a the Would obviously, future pie of use structure they’re distribution well the make at to X.Xx Xx. equity where Then You slowing chart, rate. funding access under consistently as of comfortably have in as, know future terms sense the do drops, around cash more in you the know foresee you getting it, to level. Xx of kind piece why not the level, secondly is you a you and have seem it leverage, growth flow distributable at

Shawn Carsten

$X.X continues our This balance our had units to important Good to our and to question. sheet, in liquidity of sponsor be have sort billion we is take about still Shawn. highlight of back us. that's available We willing MLP. to And

to of we maintain always relatively cost you sheet. and we do on hear balance conservative try question your a to So, capital,

as through, a long-term. So we or themselves, work in advantage as, might of able future the to can parent in market present take well whether acquisitions, comes opportunities be in third that whatever party its

in that your in that think provide appropriate use second in that's around and we’ll with more the as Certainly, So, question the well future. cards whether cash was and we’d guidance I future. flow

Jeremy Tonet

but kind say of to leaving down lines to down the of that recognize count thinking sort mean day something know of and DCF, you help equity whether at along decide I for issued of goes I the support let's ways you still of end by is showing it's to I to XX% drop by or is sponsor amount sponsor those cash lower to back to just entity the all taking the funding commit distribution. a retained the where going units, public a of by the optimize unit to future it, a optimize. was

Kevin Nichols

there me let the built entity. look so that that spending view inside had things to organic capital continue on the as piggyback we’ve within building time Yeah, that maybe would something that we've and scale over answered at we is Shawn the always company

pipeline our is the Falcon said and it those States those [indiscernible]. spends Let those that of look in some inside take MLP, we the infrastructure we pipeline one-third when me remind there take the that the and need cash of get and a with program for option. about you versus its of extent turned always United for an fund the But takes that's intention. cash on opportunities is advantage -- the Shell is, capital we Mattox grow overall of which the we’ll flows with but others we how at will have will long To and we to a have affiliates that need and as that can

Jeremy Tonet

us? IDR with and about that And the had in question. and do some up of time so degree you light there's a it know IDR that hand, then something I you’ve of they considering at that kept Are with options? end you kind your forth. the you've your following on to us something they more since comfort at tunnel last trying parent gives the on Is advanced all cards discussions of Have the updated relief the that said restructure? an

Kevin Nichols

I I from something my I thanks, I could appreciate give appropriate. from all it's am I tell not I wish What I and perspective you you where at sit. is minds. that just that can comfortable know of Yeah, this that time, on definitive And it's more but your

the and to the done the Looking not at the that's at IDRs look a the discussions, holistic longer term. only activity work being continue strategy to and communication but and

So, you. have we’ll comfortable we and I'm what's to stage wait at announce this can just done until being with something to actually

Jeremy Tonet

final Or the just to expect entity can rotate of in Okay. increased and the And regular consistency street fairly of question, and managing of Shell basis. a communicating some in management see with of kind terms philosophy there rotations so a within SHLX. people forth? of who's Is terms we on where

Kevin Nichols

those any plans. change been any to hasn't really of there Yeah,

and I well previous had out, for the we here while and announcement we place period there’s were I that my it least as out announced expertise, their longer that, change the be would to with in year came think that time market timeframe, Shawn’s kind that the people of to think I no at six be told appropriate when of announcement Shawn we in both of going in came as, range that. for a time was CEOs and

Jeremy Tonet

right. Thank really very much Perfect. guys. the you All I color. appreciate

Operator

our America. Instructions] Walker Derek [Operator from question of And from next Bank

Your now line open. is

Derek Walker

morning guys. Hi, good

Kevin Nichols

Good morning Derek.

Derek Walker

just that color turnarounds. potential the little bit, and just Maybe of Zydeco just dropdowns is and of that timing in you at so of the around of the half XXXX, drop? just XXXX of growth sort Then waiver, turnaround, for as of IDR sort that’s assume sort event. far back sort impacts the then some a mid-teens a Zydeco some gave But a that, does given kind as still Appreciate of know I the point. thinking you kind the of distribution about around --

color might of be there you sort would share any that Just helpful?

Kevin Nichols

give acquisitions in that the that moment win, it kind to do in I possibility may with drop everything is at to sometime that appreciate coverage distribution or a as this can not what part time. goes. the look so, does we specific year, mid-teen looking give guidance a about. Derek. We're you. like to of what of but A But we're Yeah, talked guidance be not to far at going I'm comfortable, as we’ve with again, going as thank

Derek Walker

just sounds just on growth on days quarter. kind spot it It the given the volume of Okay. running less you're of Q-over-Q. the like in maybe in kind And then per these we of and revenue XXXX? little like And Zydeco. seemed basis, that a spot on per a sort of, should how throughout the barrel I more guess, think barrel revenue came about

Kevin Nichols

Yeah, so thank you.

I in careful, think, At very commercial is appropriate don't in the we plan with credits this time, best to impact on are give million guidance can it’s $XX the that's going well, not million we give I the first, that and the guidance that you. and beyond discussions best combined I'm give Zydeco you to everything $XX ongoing QX the rolling off that can QX.

marketplace. monthly point bring at we in connecting at on With some centers, little and basis, as [indiscernible] to and Louisiana We asset. we on a for less continue both two the could for as the future. what to predictable possible be well season volumes call, Houston the we're and refining on be earnings the on system also strategic the It exports. and an only spot. is what see optimize positioned in the a I open That will value we the asset Zydeco to in rely and said, connected to is It that's again while run consider in market these the looking we said customers looking they bit always a us

Derek Walker

previously around of maybe outlook appreciate end on you by volumes last that. just XXX, the I one XXXX, changed to for And all? it. believe, that at Amberjack think has I alluded one to Got me,

Kevin Nichols

Mexico, the off on bullishness the say see saw in heard the line. portfolio. barrels on you you mean Gulf system. operational customers time previous exciting has it's But an its for Amberjack. nicely. we’ve with in a The two grown system few in And quarters, some nothing with I that us so our of and the progressing that had growth takes asset grown of a Yeah, this the me our I issues growth that as XX,XXX We

Derek Walker

I the guys. appreciate comments. Thanks

Operator

Thank you.

Our from Credit next Spiro question is Suisse. Dounis from

open. line Your now is

Spiro Dounis

contracting morning has Is you of want good get wait? that can those everyone. just to where case with any to a been the there Zydeco? start it of to not sort so you'd here. Zydeco price around offer a Maybe Hey prefer here to there most of for levels? negotiations just rather -- sense sort from Trying uncertainty commit Or much there and customers discovery is the again is they

Kevin Nichols

are and evolve. Yeah, of not the me all I shippers, the it's comments, as the to appreciate now. for continues With into your minds. is existing I it discussions, they specific really on new know But right get market best shippers ongoing to

been I taking in to way it's think now I time has all it's running one marketplace think understand everybody system differently the to the running that. used and and of from market

we're through I’ll discussions those some time. So, appropriate provide to at more and get going the guidance

Spiro Dounis

all Fair Okay. enough. Thanks had. guys. I That's

Operator

you. Thank

will I call questions. Parker. further no have back over to Jamie now turn We the

Jamie Parker

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

If website be you on presentation follow-up additional our today's me My materials, call presentation, found free well the shellmidstreampartners.com. questions as, following feel as could to on directly. contact please information any have

Operator

participation today's program. in gentlemen, the and your for thank This concludes conference. you Ladies

disconnect. now may You

Shell Midstream Partners (SHLX) 21 Feb 192018 Q4 Earnings call transcript