SHLX - Earnings call transcript Q3 2019 | Shell Midstream Partners, L.P.

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Operator

Good morning. My name is Kevin and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2019 Shell Midstream Partners Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I will now turn the call over to Jamie Parker, Investor Relations Officer.

conference. your begin may You

Jamie Parker

Commercial Thank you. for Kevin earnings call Ledbetter, third CEO; to Midstream Partners. the VP Steve Shell and are Carsten, quarter Business With Development. Shawn conference CFO; Welcome and me Nichols, today

Harbor contains X Slide statement. Safe our

will materially related future here from cause and that expectations forward-looking such events filings session. Actual actual statements and in SEC. yesterday’s under as with and in could be well included the statements as presentation Q&A making different results results be and We release to the during may are Factors to differ factors press Risk our

Today’s call measures to the Appendix measures. and X refer also of financial most this comparable including to reconciliations GAAP important financial measures. such Please the presentation earnings regarding release certain contains press for non-GAAP disclosures

at We end will take questions presentation. of the the

the will to With turn Nichols. that, call over I Kevin

Kevin Nichols

joining Partners turn call, through Thanks, you the thank to Jamie. the financials. for highlights will the as discuss On quarter to walk today’s Shawn for over our morning, webcast. for and Midstream always, everyone Good I few of quarter I me it Shell a will you and third

from Hurricane with impact of prior in Total one-time Midstream as quarter third generated $XXX the quarter for distribution $XXX the Partners available cash primarily to of down million pleased performance million the million, am net I $X from our up quarter. due income, Shell million Barry. second $XXX was

well way to delivering evidenced our our third growth by distribution quarter. puts assets the demonstrate Our XXXX. we on to for to commitments distribution continue to our as unitholders mid-teens and us move our engines resilience for continue This

systems. onshore in our major remains and demand strong and portfolio, our Across around offshore

The this quarter. the deliver the terminals onshore place. the and quarter-over-quarter new was onshore Zydeco line I first as system were with pipelines prior largely in look contracts continue increased quarter in full to driven remaining the and by the with As volumes at systems,

switch strong major I roughly continue around from previously to to see deliver Across If offshore, we quarter with even our value. the were the despite corridors, to and we Barry. in Hurricane footprint. activity impact mentioned continue look prior at our Volumes

hurricane. can you we we volumes experience the result and Hurricane Barry. within as damage on It a the is that volumes in saw fields soon important prior line lower continue ran Endymion all and assets up. back as Appomattox the up normal to to as we and slide, ramp related Proteus however the increased to to slightly of quarter. see Eastern were and note the And this Amberjack mainly Auger material did quarter provided we As were while corridor, not on you producers last And of on Mars impacts volumes our with to any that restart in the guidance on as

Looking Gulf Mexico. longer I term, remain of bullish on the

pause for a the me focus and Mars Let corridor. moment on

in corridor expansion Vito, at other This the continue cost partnership demonstrates we opportunities this We of PowerNap demand high the of Mars. new as offering capacity. and XX% of fields a from quarter with of over To Mars the volumes again providing with the to the is And rates expected nearby see expect increased anticipated with an see, growth for the growth for running be capacity yet past organic utilization we average and well meet we that opportunities positioned other capacity solicitation interest strategy to new prospects, we recently Gulf this an Mexico. and effective our reaching service announced such incremental year. capture working, to priority remain on that

I topic to can before touch offer IDRs. is IDRs and what on I me I sentiment discussions aware market our an our it understand around are let this ongoing. that Shawn, of and finally, turn is sponsor important is And investors to the over you,

waiver that I will through more in and provides. quarters continue this, But support as reminder, put to quarter. to let Shell the it partnership soon As we place me with value this a I have have in provide IDR And you guidance, have we strong to benefits the as three finish ago and know. let that the the partnership continues sponsor believes

quarter. to Shawn? So you with the turn performance of Shawn that, financial over to the walk let call me through the

Shawn Carsten

Thanks, Kevin.

our quarter for has of I the that results, As encouraged cover diversified our financial a let full expected me delivered I am quarter. for metrics the partnership, but reflect the portfolio key returns few on our

$X revenue was total Our quarter. prior million $XXX about the million, from up

being is along this contracts primarily revenues due sales, new higher quarter which a – for to quarter. in when to transportation full related compared the Now, to with compared allowance place second Zydeco oil higher

$X expenses of from increase operating Our $XX an were quarter. million million, the prior

as received expense, the the we Auger attributable available As mostly seasonal payment goods total, higher interest cost additional In income quarter. we insurance up million. equity Income our for the of million, terminals the by primarily Explorer. acquired a was and well second expected, million, was oil. related down driven after that other $XXX was $X allowance to distribution the sold million this investments quarter. quarter’s from other interest down quarter. $XXX in million, increase to was And maintenance is $X to $XXX business Colonial This related for $XX as full adjustments, $X capital about and in cash from was million in And the second prior the project about to EBITDA from million final spends partnership total income adjusted related interruption

a the And distribution X.X% prior a all coverage over LP of resulted per ratio This represented increase declared the $X.XXX a quarter. quarter partnership unit. X.Xx. Our in this of for

me to on move But few a now, let updates.

remind you guided Gulf. the First, turnaround producer in the me previously impacts let of

this to QX of – million assets from were time that previously XXXX. delayed to $X receive for when in in expect We to impact we Company. planned I revenue. as are expect fourth acquired think experiencing the an the $X was experiencing additional Pipeline the million Mars interest historic in are of quarter some we entered At transaction, QX. related approximately fourth Also the Shell storage around agreement quarter, we into And an the on highs in we turnarounds

So we as – the financial partnership negotiated Shell fees meet not Pipeline to storage certain the ability certain from amounts did thresholds. recoup

the capital integrating long-term which related system. million to XX, now, finally, as X.Xx And $XX partnership’s the Now, third revert of the gathering storage to primarily balance the million EBITDA ratio continued outstanding expansion And annualized subsequent total adjusted sheet growth trends did sponsor. incurred and to of growth the Permian the And had capital. for of our settlement the with revenues phase was based liquidity, which on adjusted transaction, in billion, we equates CapEx $X in to partnership of quarter, gas debt the is our EBITDA. $X.X in of September QX

to grow We are business. comfortable with our us balance continue sheet allow to which our flexibility will

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

Operator

[Operator first question comes from Gershuni Our Instructions] Shneur with UBS.

Shneur Gershuni

touch the Maybe what’s about of Hi, guys. talked good sort been obviously prepared of industry. longer morning it’s your can practice a you than the IDRs that within in typical on taking remarks, we sort

into the So I with to respect getting really before two kind IDRs growth. have questions of

one concretely next another declaration? resolution The can form will before or first be you that some there is confirm the in sort of

Kevin Nichols

looking at to question. directional Appreciate the we teams guidance a management looked this. than going strategy provide and and I strategy have the that the will and broader the ready. provide you. Yes, come I back that, am when this forward At IDRs on a or other the everyone’s will business when time, we put to Understand desire that be decision, holistic to date. of but some and provide the together, that sponsor is to timeline approach not Certainly, thank IDRs

Shneur Gershuni

Okay.

holistic are versus you think So for are option or absent Are conversion and strategy, a is just about you together and you considering conversion you that of you thinking that, what more scenarios an extension when waivers? are considering that the you IDR putting evaluating? C-Corp an running options a about

Kevin Nichols

Yes.

type things like include the business different in you the considering. With to update think look mixed of I guidance to have would the forward growth have to of can discussions strategy, growth So, based or on of funding company, we that I provided that the similar regards going the in rates various guidance regards types not and that for sets ongoing strategy sponsors you approach distribution there. am comment for things on the to guidance. past couple a and the With runway IDRs, the things of those the are in

Shneur Gershuni

mentioned through us given what sight you X-year to sight versus transitioning does the respect XX%, that that uplift EBITDA of line that a for a of Shell-X is are X this basis for growth it you of have in to Maybe of the up growth. I that the calls you fact on of line that know line kind thinking prior kind I Mars, you mentioned of EBITDA? but here, define of XX%, that and growth? MLP to materialize sight will actually have As kind and think example, you of you you Shell-X, sight now, as oriented how Can about line walk a bit Okay. with little how

Kevin Nichols

appreciate I that. Yes,

beyond. for go with I and think XXXX are regards to looking the clarity strategy you forward

opportunities, time. expansion. to of We one example mean, margin the guidance the are of is is it With I this of not going to forward provide types growth the specific at regards them today

that in new Royal It’s come similar fields pipeline largest And needs we the opportunities. And we and along there all our organic will invest and commissioned other United existing have with we Shell investments have the is that building offshore States. are place the opportunities growth Falcon in recently Dutch said continues that the to opportunities to for that Shell. We that systems. with Matics into infrastructure with seen that connecting single

just but things the this will that strategy. have are giving at refer the those we are will specific So we time, in when kinds will guidance holistic back future, give ready that I to of you we

Shneur Gershuni

Okay.

we very Thank much. waiting point. at for my lot a So, of are I all this guess questions. That’s you

Kevin Nichols

Thank you.

Operator

from with comes Barclays. question next Theresa Our Chen

Kevin Nichols

Theresa. morning. Hey, Good

Theresa Chen

Kevin. you my Thank for Good morning, taking questions.

would or one-off spot is given a the to like first into just Mars needs that the like your inventory this little expansion, to systems expansions inning more hurricane the many at in a looking there? I a see kind thing So of to service of be a like deeper dig producers of bright the GOM you this as continues the to past do fundamentally

Kevin Nichols

Today, thanks. Commercials. our have is Ledbetter here, Yes, I who Steve VP of

So talk you can maybe to goal. the kind Steve of

Steve Ledbetter

sure. Yes,

way thanks be to was question to The be really is this we Steve the think golf of Commercial being the and question, we continue – element. we am President is the I a to is this provide example strategy here is around for and expansion, one again This I corridor morning. Vice you very the bullish working this Ledbetter, So, there. Theresa, happy this with and growth needs or as to about sustainable characterize solutions I see opportunities the out our were continue producer one-time look

to characterize, continue about that them. we market time opportunities we present announce won’t have we will it at the or look others I at at while confidence the these the So be to and time will good

Theresa Chen

you. Thank particular of you ranges and economics. this of sort do certain for And terms in in have one cost mind any

Kevin Nichols

is creative corridor of also investment will around that take insures, the able Yes, we of I not where we construct so What happy commercial interest, we say the are say de-risk would the expansion, to solicitation contracts outcomes? I to the and we are that structure guidance approach And that the of in the the I can is desire understand also opportunities this are expansion, automatically the on outcome what at are a financial only but with way point, to but not and appreciate give somewhat prepared where influence our the the is but going can the that. take likely given to we partnership. to

Theresa Chen

Thank you much. very

Operator

Jeremy JPMorgan. Instructions] Tonet from next Our for question [Operator comes

Kevin Nichols

Jeremy. Hey,

Jeremy Tonet

only for touch seems to Shell-X in Hi, yield It now too IDRs like Appreciate a to the It at position good philosophy the growth this Maybe stage. like distribution guidance with provide having really in general. seems here. distribution forward almost but just right much on not is wanted growth a benefits that. X% morning.

returning what far wondering as can thoughts philosophically as about capital? you Just say

Kevin Nichols

that appreciate I again, business current come for being guidance, to to market I’m even and we what those. And give going the forward-looking ahead sentiment, where I will it’s better able today that market holistic growth when consideration, rate current of with indication strategy, going the you. desire think take answered forward. into back be of and thank not we provide we one to conditions or the Yes, base which with have folks an see

in already to really do we that no have flexibility business today, of have forward. investment healthy Gulf sheet have is Mexico organic the of assets set little diversified to a growth and business, a different we We for in going balance base things capital partnership strong our capturing

I I just we growth promise say be to So our holistic are will you that through confident am XXXX. strategy. that ask delivering that to And and confident our longer patient a just in distribution we is bit you what I’ll the marketplace be until little can give going

Shawn Carsten

creating long-term is provided might gain long-term I that of our just all Jeremy, the management add, this as MLP a for the in is past, the Shawn, for around to guidance as markets the And entity – a always, but we team is unit-holders. we this that’s sustainable committed reach

sure cohesive holistic want that that a turnaround. we so have allowed And we to to that strategy wheel make

Jeremy Tonet

my me. for Thanks all That’s for question. taking

Operator

with from America. next question Our comes Derek of Bank Walker

Kevin Nichols

Hey, Derek.

Derek Walker

guys. Hey, morning good

but Just Mars, in a on bit is be? you quick pumps wasn’t I around expansion of just Steve, us needed pipe thoughts operationally you a new one color a there, DRAs could – can that there, probably bit for a think of scope, but you necessarily necessarily little me little said gave give you any before of it what know it sort around think just I

Steve Ledbetter

as day. include are And wise thanks top a priority to correct, as both XX,XXX to win-win as What this is scope does around looking both of for this modifications beach piping well not producers large a the It the the which the the pumps some well. as side of we well is gives subsea. the and question. are partnership are kind barrels building some Yes, we – outcome as right you do now service for line is capacity trunk platform, solutions that from the offering of

Derek Walker

on is PowerNap, coming then is and about Slide just there, it. any just Got sort growth? elements really that forecast the And be should of that’s there we that Vito thinking really driving that – that X is that there just from other

Steve Ledbetter

didn’t the ahead repeat question. can sorry not understood fully you go am asked? I what am you and I I sure

Derek Walker

driving Yes, is there that throughput coming that Slide there PowerNap there estimated be Is just X it just is see is should forecast? Vito – on from and else an we to about? and or wanted what’s thinking anything

Steve Ledbetter

Yes.

the currently flow projects with will corridor. sanctioned are into our these So that

Derek Walker

Okay.

Steve Ledbetter

and And in the landscape, grow across again, as evaluate continue you we could look Gulf. to the as position in we’re in active our conversations opportunities

Derek Walker

viewing you a Okay, the belt, have of Kevin, kind a great. here dynamics little one contracts. are seeing? around maybe you Can you given And Anadarko, then now that on talk under trends with bit quarter just just recent how competitive new of your are Anadarko’s quick the we that one sort

Kevin Nichols

asset management. then turn the and aspect commercial to it and manages start over me let Yes, I’ll the Steve of who it

think we are exactly signed when So renegotiated unfolding that we and the we up I business customers envisioned expected. contracts those contracts how and the

volumes the LOOP ask connects system is full The is course, flowing. centers, maybe other as I’ll to the there’s part as highway building that more connected So an of of are refining that well export but Steve. into if any detail and

Steve Ledbetter

pleased discussions outcome the color, we pleased No, that now is I right say being in too but I are Kevin, optimize so much we of with just think are we about and with and strategy deliver more how are today. and there don’t that active route, that can we what through is that ensured in confident flexibility where we and we competitive, efficient, about pretty

Derek Walker

Thank for it. me. That’s it you. Got

Kevin Nichols

Thanks.

Operator

comes Akyol Selman with Stifel. next Our from question

Selman Akyol

that. appreciate the and delivering morning. terms Good for distribution on you. are And in guidance of laid you in I year that Yes, your hit have terms comments going you of out thank growth this to

I wondering think of I forward? that you am quartile to growth wanted – be the distribution just any And previously to sort hadn’t in longer outlook? also going you changes top there term your that wanted growth for is said

Kevin Nichols

Yes.

growth that. First to stand regards delivery we quartile right, stand opportunities I to holistic current into position what the that in distribution our in that are we’ll growth With behind our factor or or mid-teens top all and we distribution are XXXX, growth build we foremost, are want going forward, going peers forward going the you of strategy. conditions, for to where and market

So I that update time. won’t guidance at this

Selman Akyol

Okay, thank you.

Operator

question next comes Levine Our from Citi. with Ryan

Ryan Levine

optimize candidates in to last drop-down morning. Good become key And any have ready Understanding making? you decision drop that to timing IDR that consideration additional there are any of decision, the in that quarter process? is help a in the want the that

Kevin Nichols

Yes.

to going not of forward. to am a that forward strategy be or drops I component will give again, So what guidance going

as we As readiness strength a of our are asset, is Shell. far uniquely positioned well that sponsor where with

you’ve assets able Their in high-quality of we’ve assets but mainstream, have before we As not to really they and on integrated had past changed. acquire, the to our and these value of the been that seen a Shell. significant runway underpin talked high-caliber types midstream assets runway for

So a assets. strategy on execute continues organization of we suite assets of to for put could we a have My that set and in team to place. that have any available prepare us we quality

Shawn Carsten

so U.S. term, is going longer been just roughly going of also discussed this Day, Shawn. at group’s Shell’s XX% about that Ryan, there’s Management the I’d into into highlight $XX capital has is billion the And the U.S., investment

So in with infrastructure investment as new comes along goes new that.

grow. So continues our to runway

assets comfortable, to we longer-term, lots for talk of are we about. So very have

Kevin Nichols

have that the has ways one been runway. in access we I multiple different more component would add demonstrated have we Well, that that is that past flexibility, to that we can

Ryan Levine

one or drops? future that follow-up, challenges any could in to guess is those that assets. you working so whether it’s complicate any readying your I ready team elsewhere there process color. accounting appreciate I that Are the mentioned

Kevin Nichols

the Nothing it’s some our and to In out you financials ability carve-out prepare have them, have nothing but changed has put cases facing. we always of ordinary, from to some been what behind assets.

Ryan Levine

Okay, I appreciate you. Thank that.

Operator

Thank you.

further back We I Jamie would questions. the call now have like to Parker. no turn to

Jamie Parker

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

questions as If as presentation, please website, found me information presentation our any to you contact My today’s on on can be shellmidstreampartners.com. directly. additional well have feel materials the free call give on a

Operator

Ladies does conclude and today’s presentation. this gentlemen,

disconnect now may wonderful You day. have and a

Shell Midstream Partners (SHLX) 1 Nov 192019 Q3 Earnings call transcript