SHLX - Earnings call transcript Q2 2021 | Shell Midstream Partners, L.P.

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Operator

Good morning. My name is Kevin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to today's Webcast for Shell Midstream Partners. All participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Instructions]. [Operator turn to now Relations Parker, call Officer. the will Jamie over Investor I

your may conference. You begin

Jamie Parker

Welcome today's Shawn you. Development. today Sean Thank to VP, Slide are With Midstream Guillory, safe Steve me X Partners. contains Ledbetter, harbor and CEO; Commercial Carsten, our and webcast CFO; Business for statement. Shell

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

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

Steven Ledbetter

face to Thanks, strength and our to quarter welcome people our proud well Overall, assets quarter. assets webcast. performed and continue earnings morning, our for the that volatility. Jamie. in the second of Good ongoing I'm show

demonstrate report strategic pleased business. And online. for XXXX, quarter. to coming approximately is highlights asset to In a Gulf of the whole I'm continued last through system Zydeco that to value the fully the Mexico X% operational key system resilience onshore, Some are May now as our into with since include the which continues of our almost contracted quarter in up Delta the new volumes tiebacks

in in significant due Explorer, a to refinery saw the turnarounds primarily we uptick Midwest. Additionally,

competitiveness taken business ensure to improvement and all speak over longer-term increase to our we've me heard past sustainability. several You've months, the that efforts own

But markets commitment throughout medium track faces globally, deliver In pandemic that our portfolio million by to resilient affected proven We has significant internally $XX a taken to I of a term, million $XX number are on cost look has against year-end. Partnership headwinds. measures as and ahead efficient. our the we've to to summary, stay the

As units the for our XXXX. has partner eligible first general conversion waiver preferred in Also, and a Partnership's quarter normal the yet the know, distribution, are our full you in ended see distribution the to return to from market. business with

that days, in new we've As we environment COVID and variants there's rates the as macro demand regional see momentum, recent around our in continue gain lines by still how refined seen uncertainty serve. product continue softness will driven infection we that cannot Further, to impact predict to Colonial. additional

a announced, per its it have we our As is made dividend the to impact rebase Colonial could decided that ongoing $X.XX is distribution some facing, FERC to a with the decision of the future rate and not quarterly difficult quarter case previously this dividends. And of pay challenges particular, unit. view our to Colonial's in on common all Board negative this,

business the Now will to in the see the financial navigate we and believe helps our us to allow measure headwinds ensure for this we near midterm. Partnership's health

In upon build provides believe that projects of our insights enhance fundamentals which it our pursue the of as to revisit what over, reset refreshed diverse turning will of framework framework. want into this some Shell all addition, Midstream us believe we I provide we a before value optionality to distribution forward. to affords rebase But distribution move unitholder financial Partners. the and financial will the Shawn we portfolio, the of sustainable means will some

onshore well. The centers positioned long-term And continue there areas advantageous well diversified serve our the across to to logistics receive to position relatively country. remains Gulf First strategic assets, will and cash partnership which stable foremost, connects we the long-term we our with believe Gulf supply our flows. Coast believe in base, of us asset resilience market and when our combined key

Mexico evidence volume of to which of in are midterm. our As and of into to a see in dollars work, bringing capital tiebacks, corridor Gulf there our are near strategy action, number continue systems the being and put we

an For Manuel Kika second and BP's are into expected to prospect horizon. on with other producers half example, and the in XX,XXX more day our We incremental Delta will the XXXX. barrels XX,XXX to This of bring Na estimated in I'm West set a with pump to reached the Partnership was project platform. that Further, share on module provide Mars major month no capital incremental XXX a milestone the cash Delta expansion when the pleased to place last the outlay. just systems

this and remains previously, XX,XXX day, the increase our of capacity the per in Gulf. discussed project approximately an our barrels will in by As component growth integral corridor

Vito We in with is Shell's producers finalized of agreements expect the project schedule to be completed advance term, be development. definitive volumes to and the near in on in XXXX from and Powernap and additional

the Now moving onshore. to

existing advantage explore base market our dynamics. continue asset unfolding opportunities, of the to We taking with

As take efforts reversal. facility the complex quarter and the of water just our announced the James LOOP. And continue that we to we to to our provide highlighted barrels moving to Louisiana St. to advantage expansion Lockport possible barrels customers earnings move example, one of on in Capline and via refinery solutions webcast, to in evaluate first on options the South

interest projects partners through seeing are a these from various of customers. stage and progress increased gates, base we wide we potential As

to come take the And of onshore. positions have Gulf several are move Mexico of advantage we in closing, at as to will assets evaluating to and a of our degree higher these and them portfolio diversified team of In to opportunities we both leverage as value future We our Shell opportunities our the with capabilities certainty, to deliver unitholders. of long-term about time. market we the I'm Midstream's that excited

hand the over call So with that, Shawn. will to I now

Shawn Carsten

Great. Thanks, Steve.

on the have challenging our As to continued in this pandemic reflect assets perform I quarter, environment.

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

an from million, $XXX $X was increase of quarter. first revenue the total Our million

as was mainline newly this on our the second Now to contracts in started bringing throughput per barrels XXX,XXX capacity quarter, to primarily committed related contracted Zydeco increased day.

quarter. also to revenue We during product sales the oil increased recognized related allowance

lower this partially offshore was by to quarter. compared the first offset increase when Now all throughput

about Our operating quarter. expense $XX million, up from $X million the was prior

primarily the timing increase to is along with of on an allowance oil of cost in assets, Zydeco related spend Norco project this our and Now sales.

this Our turnarounds equity volumes refinery prior $X it income from investments the benefited to million, Explorer due from Midwest $XXX million the increased from as up was mostly longer-than-expected quarter, during quarter. in on

other these from for cash was increases maintenance available total expense, With of decreased million. swap well And distribution by important were the recognized quarter, EBITDA Partnership as $XX $XXX in million million $XXX adjustments, that and related previously this, was note interest adjusted Auger XX-inch Anacortes the offset as of Colonial. All cash the It's the all million. help attributable to after announced the Partnership second to partially earnings capital a asset to $X sale. onetime from

without Now been onetime cash under for than our cash and prior distribution distribution Xx about these coverage been available would levels. receipts, would have have million, less our our $XXX

a $X.XX Our declared Partnership distribution unit. of per LP

in resulted quarter coverage this X.Xx. of Now the for a ratio

to now and the balance me sheet Partnership's So liquidity. let turn

believe to the based these navigate XX, equates to on debt the As times. which We in as of outstanding debt-to-EBITDA X.Xx turbulent it $X.X strength balance adjusted billion, EBITDA. of of our a an ratio total us Partnership annualized flexibility sheet QX of had June provides

a year. of provide the let expect updates $X from me rest impact Gulf, In million. few an activity to now quickly for the planned of So the turnaround we approximately see

while come that at as products Now let anticipate I close, refreshed rates. And demand pre-COVID up And still normal XXXX. note we part down financial the will me Explorer has throughput are previously disclosed we the we as improved, $XX refined our to to at move this are refiners framework. levels. back I running million not of was now expected in Midwest and

future As walked I our the think excited for the about all opportunities I'm through prospects through, Partnership. Steve

strong and weather framework strength unitholders. flexibility sheet, our balance and to current long-term financial increased renewed the the value the to both to added we have the headwinds drive With

comes our in that potential flexibility to effectively excess value a deploy this and responsibility with to unitholders. manage cash ways add Now

guidelines uses take any considering when the we of for the into So cash. excess will following account

First adjusted X.Xx to Xx balance an or of maintain distribution levels. our between investment-grade all, coverage to to targeting X.Xx look average to greater. debt EBITDA We expect sheet,

prior consistent from guidance is the past. with this Now

we're could interest, our assets include which We smaller, projects deliver quick And And runway. that paybacks. unitholders, for relatively Shell's the from buybacks. accretive shareholders’ look to best opportunities acquire our ability if expect going highly it's to opportunistic our markets pursue in unitholders' have to we to capital and lastly, return to allow --

As I asset our our energy. in ability Partnership, the base we're employ drive as close, future and the value diversified America's we of we to believe long-term move energized to about

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

Operator

[Operator Instructions].

comes question with first Gershuni from Shneur UBS. Our

Shneur Gershuni

kind but rightsizing. I decision quick question. a and just it. start understand of wanted to to the to as belabor And forth, want don't off, across just this distribution so the really to Just really being come opposed I to want I don't around

couple I forth. on just it call mentioned the drove think the that known there make conference the A decision? the I curious ago about just the around was quarters some waiver expiration does the so other timing drivers you really about that specifically and of sense. lot of were were Was timing. Or a factors? it

Steven Ledbetter

this is morning, good question. I'll that take Shneur, Steve.

despite proud continues some performance timing is it -- business of all, pandemic the the first increase to what areas. the actually to of and team, with as like the say volatility what's continued rage going I the on and to the and As mean, relates I'm I'd that of uncertainty in

the X. notable goes, we without forward a far articulated without below to expect that there's -- have As would that that of timing rebase coverage couple -- benefits have would onetime I Shawn as as our put the see think don't items moving

Explorer now, in terms and we continue. saw to associated don't and we're was back in increase first and refineries with turnaround value in online The we the there that being expect with one associated the the of Midwest,

continued soft back to to we levels. not and mentioned, demand be As has pre-COVID

say in I'd for is The recent the the a and from Zydeco between that swap second one quarter. balancing asset uplift payment

pending it, headwinds quarter. linger. sense to around uncertainty for altogether well quarter rate well But timing. the terms the not pandemic Colonial But the that impacts dividend, the general, as particular, a The So softness as repair. we recently case mentioned, degree uncertainty in as that elected in into us Huntersville to of high There's And in that declare the as the the continue demand. that continues. I of in components think primarily this is do given around of to cyberattack second really went made

longer view Our believe dividend internal the makes quarter. And reduced potential of case from the analysis X negative we then outcome. that there's for we've done is than the rate a

the as then In in got Again, for distribution the preferred been units it'll And season. a to far, year, of next for And allow while off drove rebase reiterate the becoming foreseeable then you that, the greater this eligible wanted QX I way waiver the to hurricane addition and to conversion of mentioned, we've take midst we're X.Xx now. after us average headwinds rolling that thus us -- to we're to long it's or to decision future. entering kind those light go.

Shneur Gershuni

a it. of to that Maybe pivot lay down Got interesting you equity acquisitions #X, framework. out the consider? of actually would distribution to from post still that Shell. imagine from can to purpose return kind you're can we you internally if second something signaling Okay. third. Was you going dropdown perspective? drop put of that where cut, and fund Slide then me kind on Is capital that I It's

priorities wondering assets You from after think Shell? to and buying So should of just you terms we Xx are units? Are should priorities Just about how Or of the projects? of think here? kind small kind bolt-on we you about in rank levered. order get how quick curious payback buying a of back

Shawn Carsten

read on I you're just of use order our Actually, this slide. are these any. the options should excess Shneur, well. Yes. Look, is doing with have we'll that hope a cash you as menu Shawn. the into we

to expect and we'll when expect some Steve so get unitholders. makes makes will the that. excess foreseeable and we'll we sense the in some the earlier, headwinds time But future, it appropriate As we at have have, through at point, deploy and most sense it where it cash we highlighted for

think that have. of the don't the into on the I options just in read terms of And it's so order slide priorities, we menu would I

Shneur Gershuni

Okay.

flow So we cash should excess now. have you the -- is takeaway

a If return or some we either or leverage we growing level, the see expect like leverage you business? Xx capital get see you to to should of should

Shawn Carsten

We're how that. not guiding should interpret on you necessarily

So as the we'll we along have more move over next guidance quarters.

Operator

from comes Barclays. question Chen with next Our Theresa

Theresa Chen

for one. be was already you've just of the say could case, you asking the magnitude some are percentage where rate Steve. us now done decrease of it can it what on seems When you at it dockets the And that starting remind the since outcome first a maybe it So think Like, shippers several Colonial, to future rate? as then do the out since work like the negative, around could you of this shake decrease, point? I think far consolidated into weighted average as it,

Steven Ledbetter

again, Yes. further all modeling to negative outcome, Theresa. thanks, to view, would I point. that which is could do that hard determine quarter. just more and This and analysis the hard cash Steve. distributions seen that's again at we've our believe potential be than -- challenge we mean there this in is for a What X given the That's

back detail. Colonial point I'd case, rate more any for the around specifics you For to

Theresa Chen

FID can what is affiliates from And infrastructure if can economics that of kind Whale, your in you? an on for of way just then participate any And that generate so, SHLX there perspective? Okay.

Sean Guillory

ahead presence how is corridor the that is Gulf Guillory. in for Whale question. Whale multiple what can and grow of still Central volume And in of and the And map Eastern resilience opportunities excited have you expand the I'll and continued the Gulf evaluating unitholders as Western of for Theresa, value The look proof to see What both SHLX you you that tell we're see But would take that Gulf our combining the move extremely have another currently field activity in project doesn't with itself this the scenario our thanks at areas the Gulf we that forward. to Sean one. in go the the West. that that we Mexico and is continued the we're tell and SHLX just Mexico, point is in you if I I'll is any investment itself of pipeline. we and the basin.

Operator

with question next Doug Suisse. Credit comes Irwin Our from Credit with

Doug Irwin

about on follow-up I point. still like a potential see. one candidate sounds and dropdowns, Falcon System at are Ethane the which talked of you've it Maybe wait a kind as dropdown know

if still tied like, petchem make sort that rest type looks if be assets what SHLX? any color might even available that sense think of facility on could curious sponsor’s the energy what construction. dropdown, just there's some under the of of of I is you other backlog might anything to for I'm efforts provide maybe for the transition

Steven Ledbetter

But This are for of thanks. other The suggest of the be Falcon is as Pipeline, access for we've Yes, should that sense mechanically make can right with market wide a option Partnership could a you assets there's mentioned, Steve. see assets, not several complete, start-up make waiting about the our There menu given that array that financial what right now, the it and plant. accessed midstream we framework, and sense. as at we time. the might is talked

Doug Irwin

the the Capline potential organic Got with projects Okay. I And project I Lockport reversal. you mentioned, then, on guess, guess, it. around

about around and reversal some kind broader changing of And of that with online? of a what kind St. projects of reverse that Would could projects? more potential on like leverage there export to are system. look to able be a kind being pipes maybe the greenfield they in markets? already type terms SHLX James are level, what talk on there the dynamics maybe can maybe curious some you if Is of Just opportunities coming

opportunities what are as there out well? curious Just

Steven Ledbetter

that. There's lot a one. in I'll try Okay. unpack to lot a there, that

about I'll of maybe of So talk Lockport a screening and view and a little the of things others. bit have Sean and bit a criteria couple specifics of of high-level give I'll of more the kind a our then types

of strategic bit the we as of going but of Gulf ground, a for to forward paybacks the of do kind look way the the to deploy And the projects, we'd mid-teen the are at command sense makes unitholder, projects with Mexico that at at a the do and premium well those both thing the And projects is depending on way type most our As solution The that's again, capital, in to quick relatively we're and point. defend market, this criteria we as for a opportunities, screening type of we million evaluate to we now heartlands, capital to the and that we we several to see but take cards looking $XX them. of those advantage for in And the see depends grow assets unfold look solutions we area evaluate from our the returns. customers. on million, play $XX how onshore. the continue

of that, with turn projects talked you X So that on bit I'll the Sean give about. to it to a we've color

Sean Guillory

for the that. question, appreciate thank and I Steve. you Thanks, Yes.

Now right as to one to and competitive footprint mentioned, believe connectivity of would Coast about centers there of with that and is key the that diversified potential is opportunities now, ground -- we're that developing, project. our still the our we haven't the the range Steve what Lockport advantages bit in are I tell a of ability Gulf provide market you outlays. now, in assets the capital talked have but but the Lockport a potential you FIDed Midwest. been Right a number

have to Western With which come I we time. projects spend back what could mentioned corridor But will and key capital $XX of you available is definitive capture could available we those of on heartland, of spend near be million in in amount be that more part Steve of million. also a to Gulf our before to that particularly all terms provide of bit future. opportunities, for the developments we it the developing Gulf $XX we'll market something that the similar and in when of possibly outlay of our to would the assets, capital another connections. And on Mexico, draw of range at ability the But one to it, part future would could on in the tents the capital Mexico the

Operator

with from comes Next question Gabe Mizuho. Moreen

Gabriel Moreen

the that point, at still uncertainty a that? on say at your this is that had your do question -- actually parent think will just prefs assumption quick those around some point? I convert this that prefs is it you there's fair owns. Is to Or

Steven Ledbetter

read will will The option could the there's sponsor we that X.Xx rebased that's that future. average accommodated we've headwinds that the a way distribution and the we convert. certainty I framework, financial whatever Certainly, foresee have through for they to coverage foreseeable and has. the So wouldn't exist that for allow us an

Gabriel Moreen

helpful not then was of that has your That quite answering up by I the there. be a Okay. I parent terms been I'm sure done in sizable, what from Would a standpoint, I'm doing smaller to dropdowns been that's to that. possible and mean, transactions, potentially been not And the if the average and it sizing certainly previously value with wondering, you've guess, also have transactions? bigger transaction some large. just flow do improved, open cash just clearly, from profile one. smaller free be you'd

Steven Ledbetter

think good menu the a of a make to question. decision rebasing the of financial certainly, includes grow using all some cash for a to unitholders. I accretion and and and the and the us gives of that And distribution options, the it's framework the point good things smaller best

potential. the So of that certainly is in slate

Shawn Carsten

Gabe, And is this Shawn.

time, to history, smaller number we of our so right? look infinite, portions, I take transactions had a a ways to in Explorer kind And they're of sponsor's all of part ability acquired bigger transaction. have right? But So we a of back ownership the over often in make in part happen. opportunities times, but not if think we you

Operator

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

Derek Walker

follow-up just question. Gabe's on Maybe a

is factors is just just demand that's preferred just number? you coming you should converting? -- other into assuming think like things of the that Any you other about from that product else back X.X I are sort have that but are into Is of of Do know the that we not you distribution? about refined Colonial factored think or reduced anything the no sort quickly. there Steve, kind talked there distribution to baked on other we as that What of a kind X.X see, headwinds any Just coverage, assumption? -- capture it

Steven Ledbetter

Yes.

you're I specificity, a that. think looking I appreciate what more bit for is and can

conservative negative taken of it from and have headwinds, to about the model, makes them perspective moving many We the into a rebase for and outcome that puts than the all this X.X done, rate view X all our quarter. and the coverage Again, position account in including we headwinds of to -- know a potential we've the the from analysis longer with can us meet X.Xx distributions, case forward. view reduced a of average

Derek Walker

quick on cost it. do I target guys million. saves. reductions? you maybe on is cost you I And to a then for further do -- any And XX know that? Got your stand where that XX one just see Is million opportunities guess,

Steven Ledbetter

of I'm and contractor very we've of of third-party rebasing we cetera. million how to rebalancing multiskilling, at this we get usage, path looked as great. do and It on many rate all that. It's well team are run Yes, very proud projects, gone et done to comprised and different that procurement that. to XX and XXXX, and the million strategy, business exit our takes to deliver things, logistics, XX optimization

as or system. out have increase out of additional value to said value look costs take and part additional the the will, having that, costs Now journey of -- optimize of and a continuous our and base we business take to

Operator

this further Parker. like no to time. I'd call there And Jamie to turn are questions back the at

Jamie Parker

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

please have to My give free feel any can call questions shellmidstreampartners.com. a on presentation, on presentation follow-up Thank information so If our is found you. additional materials, me be website, following directly. today's the you contact

Operator

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

You wonderful may have and now disconnect, a day.

Shell Midstream Partners (SHLX) 30 Jul 212021 Q2 Earnings call transcript