ALTM - Earnings call transcript Q2 2019

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Operator

Good afternoon. My name is Natalia and I will be your conference operator today. At this time, I would like to welcome everyone to the Altus Midstream Second Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

turn Investor over Relations. now Cassidy, Mr. Director of the will to call Patrick I

You begin, may sir.

Patrick Cassidy

Operational Good afternoon Second and Company’s on Altus Conference and thank you Quarter for XXXX joining Midstream Results Call. Financial

and second call XXXX the activities. update Rodgers, overview Midstream’s and begin will performance President, summarize and with Bretches; our We Clay will to financial by an Altus CEO quarter CFO, an Ben provide

minutes Remarks in call Our the length, Investor the found approximately prepared altusmidstream.com/investors. remarks refer the Q&A. will on at remainder Midstream which also allotted may XX for Altus Investor during be call of our the can website with to Relations Presentation, be

conference can yesterday. reconciliation most the and today’s financial the issued we differences be non-GAAP news comparable release financial certain measures. of financial GAAP found measures On directly A in measures may between call, discuss the these non-GAAP

that to and and our based like on remind I’d Finally, discussions everyone estimates forward-looking will assumptions expectations. views contain current today’s reasonable

of our actual full disclaimer could number A with Investor the However, cause located today. differ on Presentation results materially what discuss is a factors website. from we to

that, turn the call over With I Clay. to will

Clay Bretches

the Thank you to since Altus update of the achieve to going we last our we and as Today, pursue industry. accomplishments in performance, an operational premier key goal on becoming selected afternoon. call, provide company’s and activities underway are our the midstream Midstream’s financial review highlight good and future company objectives

our quarter, the cryogenic and our Highway second financing option Altus number preferred significant first on exercised processing amendment Permian the During closed our a for and Pipeline. revolver We online, of accomplishments. achieved plant brought equity

plant option. brought exercised our addition, Natural Shin and In online Gas our Liquid July, second cryogenic Oak we processing Pipeline in

growth. the are beginning out foundation plan future for of this We the year, building a on at executing set

was rich quarter. quarter of gas with for price of previously processing Apache on rich-gas third call, Inasmuch, curtailed continued working cryogenic High, potential in beginning two the the in a at noted first online our volumes the to with the weakness. brought Apache new April, curtailments its Much gas deferred plants. As in are Alpine earnings portion some we due

the around lean into expect to the third the Express of we rich the gas uncurtailed. quarter, all Gulf and the both be startup With end gas system of Coast of flowing

We to service High begin this both operating monitor on JV in the address guidance continue pipeline will our performance Ben and that remarks. at full-year quarter. his our projects Alpine

operating Corporation, the year, with to Alpine production maintain Since value and worked we efficiently. infrastructure that processing Apache delivers sponsor, and our our of the building from High, on beginning to timely closely adds and have focus and services gathering

continue look cost our to structure our needs program and primary our to with customer, at capital third-party the future customers. We as align as well of

thus with am far. our I progress pleased

and gathering substantial a out built have We system. processing

decentralized, staff are will our from processed. optimize This shifting complex. We centralized processing streamlining operation head refrigeration lower-recovery allow to gas per unit mechanical to count cryogenic of a organization, high-volume us

Altus last steps financial number update. has taken to its also strengthen our position a of since

and pipeline his created our financing will invest remarks. our efficiently capacity proactive placement $XXX second exercise provide preferred revolver which our infrastructure, focus the Ben us have increase equity to credit These allows we initial million million. additional million to the $XXX to business. JV the on private by in a the amended During in issued $XXX during steps quarter, Altus in period in facility, and growing options, capacity detail

of has Our managing done cryo build operations the plants. of our job team excellent an out

exceeded per commissioned facilities. at have second service May, and in as than service the achieved production they day, million and earlier XXX we Combined, entered more last the cryo and first cryo can facilities month. feet the The entered process cubic ramped levels

grid power Each to schedule Our capacity day. construction when plant required a under of XXX currently has process cubic per around is is million third on feet available. and plant yearend, cryo nameplate gas

The demonstrated mode, recover with full more can butanes, XXX% ethane recovery than recovery liquids. in XX% that and it heavier first plant of propane,

and of on to begun cryo is match track The the performance one. second cryo number has plant operations

processing have similar with and cryo. We optimize learned first facilities to continue the the the capacity approached from nameplate results with lessons will

Kinder counterparties. agreements own Coast joint shift that of premier which pipelines. with and in creditworthy in business, are I’ll pipeline Permian Express, projects four natural binding operated Highway, long-term now now subscribed our all to two are in constructed venture which and long-haul long-haul Altus pipeline has gas ownership Morgan, interest by Gulf both fully by We being equity

Permian Coast start its forward of brought project The a Altus transport day XX% cubic planned Gulf per Basin is Construction to expected natural gas to feet designed gas Coast to Permian recently late Permian the this to fall. date the Coast. billion Pipeline a the Dulce. XXXX approximately interest Gulf Agua in Kinder owns Express. Gulf the pipeline, connecting for Morgan Express also Basin the from to reiterated pipeline Kinder billion is September Morgan for an XXXX. start cubic X feet day October begin per X.X

exercised is option Highway full the Shin line the day Oak capacity were pipeline. day effectively natural that interest on an conference pleased We with Enterprise Altus XXX,XXX acquired its Permian also May, Oak analyst on its during and to per service, one. partner NGL the in In initial equity line approximate liquids gas Shin with in XX% noted barrel the of Enterprise main pipeline.

it for advantage integration, to and integrated Oak Oak closed existing third of to and The June, for in at pipeline. Altus processing drives pipeline with a supply July, Mont completed and Belvieu, with through a multiple volumes gas assurance party significant additional is and was gas along plants, the Shin making the connectivity This substantial Enterprise’s basins. exercised business. Waha competitive attracting superior Enterprise’s owner provide option end which in it XX% fractionation pipelines this provides flow with for Shin connecting is lateral complex customers, the

our XXXX, with the we January in using is on service oil line exercised quarter, first equity crude service Permanent EPIC EPIC this Y-Grade the expected month. the crude interim line commencing option During pipeline.

one, As refrigeration plants such we year; quarter this on through of of the successfully JV prior for we from the secure capital our mentioned project. processing by continue end gas goals to use transition XXXX: financing to three are cryogenic three two, that time the execute pipeline our to to needs and on mechanical the call, meet had with plan self-funding; three,

premier We goals all midstream executing are progress continue and company. these on the successfully Basin building toward to Permian of

Alpine of Apache’s generation. flow to optimizing context continually are our goal free minimizing operations of cash in We time High within the budget, with the capital

growth customer and the commodity diversify portfolio our of footprint organic basin. opportunities to We are within also continuing to build our potential

Our are capital cost, and an efficiency, with outstanding on focused efforts execution, emphasis service. reliability, customer on operating

priority. environmentally sound and our operations Safe top remain

if only on the execution Altus and capital discipline the our and in well community, first our to the we are perspective, operations will employees and plan. safe, our and contractors, of are environment is and Our XXXX, successful performed an half From protected. execute preserved continue

I to will quarter performance and Ben cover our the turn this to forward financial detail in for the for year. over call now path the last

Ben Rodgers

Clay. Thank you,

of EBITDA $X.X gas. cubic volumes feet rich per million. loss, a issued yesterday, a the including second basis, was million the noted XX% processing $XX.X quarter adjusted were day. On period approximately interest, Gathering Approximately of second net quarter reported revenues volumes million. release $X.X on press XXX and in million for non-controlling non-GAAP of Altus As averaged

from lower approximately resulting deferred preceding by in price offset XX% at response Volumes The of cost the beginning during partially the this production quarter, April of throughput. was declined the to temporary savings cost Hub. disciplined management from as volumes impact weakness period in Waha Apache lower company’s

investments processing natural in infrastructure Capital during for continued and gas the comprises pipeline option the in which May, ownership GCX $XXX infrastructure. capital This pipelines, the calls gathering Highway quarter were includes for $XXX $XX JV of million our in Permian million for and exercises the EPIC, and midstream million.

on capital to of our in exercise Our JV Approximately options. projects. investments our pipeline XXXX capital focused pipeline is in our XXXX and long-haul JV related XX% remains of XXXX growth program the

Shin and NGL In option Highway that announced Oak addition to exercised line. we Permian we our the in pipeline, closed Enterprise’s yesterday

a the interests projects Creek Line. premier base. projects, asset These now Permian pipeline diversify option that economic a highly to are hold long-haul acquire in equity Salt As with the Altus’s NGL XX% in interest we result, four takeaway equity

our of significant portion, a fund expanded and placement to assets and The preferred growth exercise through additional order supports without our XXXX financing common of comprised outlook our to Permian growth of initial equity private solidifies issued million XXXX needs, the $XXX of capacity facility investment which $XXX Shin capital capital period In revolving by we our options the merits Oak funding Highway a capital issuing in equity. and million. credit raise

average weighted digits. at us with the provide In terms very addition, in significant these of and flexible liquidity attractive a incremental single capital financings cost

the previous EBITDA are to XXXX With range of to adjusted million. million, to change processing gathering $XX Oak. partially with a adjusted business, regards we offset million reflects performance EPIC a contribution from lower to midpoint expected expected of and the $XX $XX by and $XX guidance EBITDA reduction million, in than Shin This $X.X and the guidance, million from our updating out compared

XXXX be at EBITDA EPIC crude $XX would expense in a interim EPIC adjusted with investments. net reimbursement for the to for investments solely Grade year interim our to midpoint included lease payment reduced crude, to current unchanged our related Consequently, million it million ownership to for for crude interest and is outlook for have correspondingly. an guidance $X approximate capital We of this remains that related $X and the prior in originally consistent lease had been will expectations. This million positive anticipated note, Of Altus’s capital be EPIC beyond and were service, would our service. expense capital not Y

for guidance billion billion, We and midpoint growth updating $X.XXX range. $X.XXX guidance are our represents million this prior investments also $XX between to a reduction relative capital to range which our year

reimbursement by year charge capital Permian our JV the realize largely capital out the of associated into our adjusted mentioned with to along capital early. a Highway expect previously and We shift pipelines, capital lower EPIC savings option EBITDA, expected driven associated investments this exercising with of from with

in expect savings processing expected XXXX. associated projects projects our gathering gathering on deferral realize of other than into primarily certain and investments to and We with lower capital business, also the

current for XXXX a by current guidance processing with in existing It works at optimize activity commodity dialogue price years, year Alpine we High. pipeline coming of our XXXX. as maintaining through relative could worth Altus are in With existing next largely If a challenging and light taking we in guidance, close Regardless, the Alpine JV at regards High to outlook, reduction depressed footprint our see persist, process per for significant environment. JV a to our year Apache, to is pipelines its our activity business we gathering noting steps reduced Alpine is prices planning our High. proactive expect next our be it EBITDA portion unimpacted commodity represent will of and upstream the at that, adjusted its that

business development are on other opportunities We with including focusing third additional companies. producers midstream parties, and

have In avenues Apache. multiple we potential addition, growth of with

are capital and and gathering sales preserving assessing future emphasizing of assets. by We discipline unutilized liquidity and evaluating also by carefully capital processing investments,

assumes completed guidance compression, in existing late along XXXX. a is associated that Our fourth cryo, with

aggregate needs the to savings processing sales would of cryo through aggregate $XX assets, in provides receive deferral the of potential With extent of unutilized the cryo capital XXXX. refrigeration Apache’s could To and units, our in of million XXXX compressor additional to result The provides to and three regards Altus million. $XXX we include $XXX upside existing our expansion to it capital assets our spare meet the facilities, sale which dormant of are XXXX to will able spare million estimated solely mechanical and XXXX of proceeds we million fourth liquidity. and to units, $XX guide, pipe,

the potential conclude, High, challenges merits and impact while Alpine for on investment resulting current Altus price Altus believe the activity commodity core To faces the at environment remain intact. with we

and to in time, budget; mentioned were Permian takeaway earlier, we we options do capital equity; the on our needed and Clay growth two on safely, raised common cryos XXXX. premier without we service equity largest As been issuing doing brought four closed in said exercised what and pipelines. have in going we We Basin

addition, are future. In gathering and equity to amendment, to issuance for Alpine due funded High’s we the preferred and believe processing revolver meet needs our ample and liquidity we adequately foreseeable recent have

$XXX that expect the exit the credit increase initial year, this of would revolving revolver million. facility by we continue our of We which to end capacity our period to will

in Lastly, XXXX. attractive by pay adjusted comes capital defined cash beginning with an shareholders we when to be free as to us investments, flow free to dividend expect late flow online, cash enabling minus EBITDA Permian XXXX, positive Highway

I turn call operator now will the over Q&A. for the to

Operator

first Suisse. is of Dounis [Operator Instructions] Credit question with Your the line from Spiro

Spiro Dounis

Oak Apache’s with to the the just we But, we run about intact say afternoon, see to less guys. decline encouraging still next on, we cryos as XXXX, year rate get while more here. temporary could. kind It’s as year deferral of exit online, be there more Maybe Altus, any mean that of good curtailed? is or I with that a growth maybe GCX but guess, outlook may a if of online, are the Shin volumes it all fair think X Hey, necessarily starting is cap to wouldn’t end on in production for

I be those with I vastly improved to being, online. are And, going point guess, guess, the netbacks Apache’s all pipelines

that the like fourth run And least would rate quarter fair? a Is so, at it should create floor. volume seem

Clay Bretches

you I look coming online. Coast going NGLs netbacks to Apache, coming full to the here. Bretches at And XXX% really not the stream. Clay improve GX, really things that’s is to Spiro, Pipeline so, at need the the the recovery. And looking think Gulf one are a of that we’re take mention Express Yeah, for And in

One this something low technology, your at using, were we we’re propane SRX but on maximum the great still we’ll into butane’s be XX% technology clearly XXX% plus, as were even ethane rejection, ethane even on seeing about if go even to recovery. you recoveries, into – as if be your would that propane to go of this things is

customers better may we field able be to allow So in that other the pick to any much and up economics we think in that that’s area. Apache for going for

we cap-on commercial Southern looking area activity really be thinking we’re In that growth, are But think Basin the as about, a and thinking for Delaware as in this I do operation, customers that customer need other as commodities. team, expand far third-party base we are to around we area. business of see a about look at but is other other want also see we there but there, can other Clearly, in have, companies Apache’s midstream with. producers, we other only that we not to number of the out customers great a we

And at water so, opportunities. looking we’re

nothing far don’t what now. we’re as steel there’s having We’re we as announce ready cap-on looking at oil growth. the opportunities, believe that to we that But a a right believe and We that cap-on growth, have, that there to and the think us ground, operating and We center for on upside lot a that’s that boots ground, nucleus the the in there’s a growth. real allows area. the of down just grow and in

Spiro Dounis

color. Okay. That’s interesting. That’s great

question you us respect guidance variables could just to of you with the some the Second CapEx get maybe range? and walk of high- the maybe low-end through range, to just the the that

Ben Rodgers

Hey, Spiro, Sure. Ben Rodgers. it’s

was from $XX – now it’s million. we it So, it tightened million $XXX and

acceleration I is range deceleration, or think PHP. could the expect swing one million it be number the now a we an driver would $XX on could have any capital we on investments that acceleration any but

Spiro Dounis

a of I to I and made think mentioned of I sort then, That’s two, point selling for, think $XX clear. option of there delayed you the quick clarification. Okay. have mean, that’s potentially or $XX is cryo-X, decision potentially I you already one, guess, you with that guys you million; that’s just being said some one, right it. Got equipment saying Last a now? been are and an Ben,

Ben Rodgers

before. option. There mentioned are an some we’ve this is – It

refrigeration for two come those compression. units, it the processing primary mechanical in we the really at look of the we actual a needs and have piece kit the as then of with As compression. plenty recall the field And that components,

be well don’t some to as now. And would have. We just those spare of other talk the we for have in inventory that as that. selling anything processing we so, about the we’re And right of piece discussions

in other discussions so, folks inventory. And that we’re about with buying

Just don’t print have anything that. to yet on

Spiro Dounis

Understood.

Ben Rodgers

cryo as savings And go-button takes get well. cryo, five of fourth on before into kind of that operational. for talked to spanned XXXX. from we’ve It the over capital that It approximately XXXX quarters about that kind

so, of that the as fourth compression guidance our $XXX our million upside need that period, of $XXX And And associated to train, were would a gathering with cost the to and be guidance there as now. cost to is a million well of further right defer outside if the cryo.

Spiro Dounis

Appreciate guys. color. the Thanks, it. Got Perfect.

Ben Rodgers

you. Thank

Operator

next the Advisors. U.S. Capital Your is of Instructions] question [Operator with Carreker line James from

James Carreker

for Would need possible of you XXXX thanks levels activity EBITDA the quantify to to exactly XXXX questions. Hi, previously from be type it in Apache the hit what see to disclosed guidance?

Ben Rodgers

XXXX Apache Hey, has not with for good James. a It’s dynamic. production out High. of be assets, any going their including estimates really It’s Alpine to put question.

that’s information, that cryo planning when the to And getting in them into And more discussions that. we’re we now, now, on. a third we’re the be disclose there’s with so, right coming just XXXX. and able for right need But, believe close process we’ll for now have

James Carreker

But, that in understand. your No, would mean, what or of guidance I I for projections Apache rig order be they the either I aren’t should hit that what fairly from actually need I activities? understand I connects guess, well guess, out. you right? independent in do, terms to

Ben Rodgers

cryo, I’m But that is. place talked our not it Well, activity for their construction have what there’s We plan not is. our And, we count be before. side. can’t expect I are need sorry, we that about about year. rig we’ve this a for that may that on mean, to estimate there really – online it’s a and we plans the rates front-run we’ve third is But, hence are. reason finishing the the like talked I to And not and assumptions – again, said, what rig

large very exit the the right the EBITDA. XXXX, still within ranges and through the of amount initial we’ll JV think EBITDA of of for portion period. end from cryos to pipes we’ll our JV the a expected It’s the next the We’ve land I – And year. have have got pipes that our

have or to of that look will we and XXXX enter we at. full we So would are other impact for less how so as plenty opportunities into liquidity cryos the plan

James Carreker

Okay, thanks.

Operator

There are no closing remarks? further questions. Are there any

Clay Bretches

closing remarks. just to day. I no great say and you, everyone, a No, want have thank

Operator

earnings for Thank today’s participation. call. you concludes This your

You disconnect. may now

Kinetik (KNTK) 4 Aug 192019 Q2 Earnings call transcript