ALTM - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Altus Midstream Company Third Quarter 2020 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Patrick Cassidy, Director of Investor Relations. Thank you. Please go ahead.

Patrick Cassidy

you XXXX us conference financial thank Company’s Altus call. and quarter third and afternoon, for on joining Midstream Good operational results

Midstream’s summarize our We overview performance and Bretches call the financial Ben CEO Altus and will will Clay and CFO, with Rodgers, outlook. President, begin by an

today’s on A can be length directly investor can refer conference call, for found prepared Investor during Q&A. On the we comparable be Our non-GAAP in may the will between presentation, to most of discuss previously Relations remainder call measures yesterday certain financial altusmidstream.com/investors. found non-GAAP Relations approximately website be the remarks in reconciliation financial also the Remarks Midstream the Altus the which financial minutes may measures. Investor GAAP at our the the XX of measures with investor call on noted. and these posted allotted differences presentation website

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

number will to factors on A materially today. actual what cause located from call of the that, could results discuss differ disclaimer With I the website. to investor we our is with Clay. presentation turn over full a However,

Clay Bretches

operators joining production Good good call. many We third activity prices quarter commodity Basin. Altus afternoon had in Permian as you resume and quarter thank for and recover another its the on XXXX conference we saw

new have contributed Since drilling led High the the degraded Delaware opportunities which gas business focus to investment and evaluate going impacts its on On a an years Midstream optimistic with evolved joint us, the prices today’s public front the We XXXX. remainder headwinds year’s X year discuss long-haul of of environment macro shifting and our progress, options the adapt and company from Apache. signs in to company facilities alternatives. cost provide processing company’s in and operational implemented it’s performance nearly significantly queue. joint to initiatives further reduced review outlook, gathering still Altus to projects fourth changed. questions efforts all NGL we stability a are and our identify in at the to venture and ago those prices new commodity on evolved XXXX. decisions. becoming and adjusted and our strategic update will to Altus by front operating the has will I cover expectations has quarter outlook rapidly and venture the on XXXX. and XX%, in of Through about to pipeline and Alpine our a the there of capital validated we’ll from this pipeline us. analysts and commercial then take We then, and the cautiously since how quickly, changing the encouraging and Ben public pandemic While assets global This streams call, processing by concentration pursuit operations for comment any financial of haven’t of Basin for are and fluctuations, gathering and structure, in elevated to see revenue and since projects

Altus significantly focused processing and Permian midstream in And capital across nearly remains gathering decreasing We’re equally competitive two our company. businesses: growth of Basin commitments a all invested and are our long-haul assets. pipelines. our

EBITDA ownership today, next in our very where we equity we changing gathering Altus interested in profile. stand we’re pipeline year. recognize to While share still projects will the of JV the these earnings our contribute processing, drivers lion’s From and Midstream’s

with designed single-basin with up exposure projects. to company, complete. move establishes unique into I Altus release the with XXXX, to will It’s pipeline a long-haul more X very under Coast JV in all first the noted processing in owns the that and be billion placed JV in being pipeline Highway The equity of to our schedule Highway which will a PHP XX-inch approximately Permian in X.X of service day agreements the Morgan This XXXX. of per midstream project. PHP Delaware not expect combines operators projects is start pipeline to in I through be XX% fully a a in third service well-known capabilities G&P the result discussion service. Mexico beginning of in pipeline. Basin. feet Permian will quarter strong pipeline ownership respected XXXX. We cubic XXX-mile, recent and on Gulf binding the we mechanically is that focused natural now subscribed to state-of-the-art XX% quarter looked to assets, long-term through Kinder mix pipeline the is to transport of its early gas area like U.S. Altus is markets. from in Waha and base than

during natural continued Basin. ramp in Our volumes Gulf Crude Coast forecast in its gradually is NGL results were in increases. on modest ramp a Shin expected prior continues with forecast. production be steady drilling the Volumes oil reduced delivering Pipeline pipeline expected Permian as Oak impacted flat and We are XXXX quarter. other relatively performance, the to pick drilling the EPIC in Basin. to long-haul Oil Permian strong Similarly, by activity the as volumes Express, up to gas our pipeline, line with the

back curtailed volumes side G&P up gas gathering volumes On business, This higher recover seen XX%. the the we from coming uptime reflects both quarter, second have online. of the system and

frozen, market picking not gas stable prices. flow a with G&P market and more there deal is oil up of but signs more it’s are now, still favorable third-party and soft The right

Even from more seeing process discussions a to X of currently we are we that We are said have and we in with strong opportunities third not are sense seeing urgency couldn’t producers, months though gas. parties ago.

continue we third-party As to and have executed look larger we deals, for discussed previously, ones. smaller some

NGL additional outside compression footprint our High, expanding compressor Permian a We we and assets. truckloads both projects We aggregate, in In site. a have XXXX commenced Apache We EBITDA X off-spec service June in load cooler Alpine Basin business, of parties past loading electric to monetize recently completed compressors. million months. Building shedding looking will for their $X transaction installed on in are participate a $X we to third And two program we use grid of have year, with this, XXX our on with have agreements portfolio. April million per response an on contract electricity our the these stations at will at contribute working starting with and to expect in our and transactions underutilized we’re product condensate nearly signed processed additional over generators in that region. in we the facility in sponsor

diligence consider the the been to in reduced Before fifth I closing in And my have consecutive prevent by recognize in put the their structure. team ongoing additional is on you is not quarter, Altus’ we’ve on for impacted of cost basis. for XX%. materially and want procedures operating protocols moving expense the coronavirus an I to remarks, down this effort. note to our operating COVID-XX. and impressive as absolute Year-over-year, particularly the attack expenses have we that want to place our This continue to spread operations the our field

promising impressive, is which Altus for startup has ahead. of contributing execution more the the been since fact, its team outlook a the to In year

As reviewed XX over we among we to considered to alternatives wherewithal the our scenarios were Altus last the for shareholders. various months, and strategic capital timing return

contributions of held in-service our seen execution for flows cash and across positive our year date certainty improved increasing our from projects. with confidence distributable more imminent we especially pipeline also operations with needs. this the the The PHP, future flow forecast, of the view capital earlier and cash has JV the limited have much With we from forecast EBITDA

covenants. is Our leverage our within manageable profile well

able to in as on call shareholder now elaborate to expect For remarks. We originally a outlook Altus view maximize planned the I these to as his support will we over reasons, Ben best dividend substantial now option And this public. the him. value. turn beginning XXXX will to in went when this be

Ben Rodgers

update you, through implement comments on and dividend Clay. XXXX prepared outlook and a will conclude financial XXXX my year. the In and for Thank review guidance to XXXX third next I financing our with our briefly our plans quarter, remarks, results for

the release This units million. issued $XX in yesterday, approximately which million of end reflects included revaluation the derivative quarter. at third interest our non-controlling noted including Altus preferred to As in press income, an reported accounting of a related of quarter derivative embedded $X loss, net the the technical embedded unrealized

to guidance, capital fourth curtailments. Permian million adjusted XXXX other its Highway is stage. provided the to which complete. this recently this was Permian the commissioning XX% $XXX upper Approximately is mentioned still Altus of midpoint infrastructure during the planned preceding yesterday, spending significantly into quarter our which decline for midstream in Excluding to the and the included posted you generated also of on quarter website gas. were over unscheduled by quarterly as can both approximately presentation, On impacted pipeline pipeline in review will $XX EBITDA as items, Highway range Capital third third million. production for Clay quarter, A which, being slight $XXX the a this growth announced, and quarter limit refined $XXX earlier increase year quarter volumes but capital in in of XX% million increase year. the the million, our This Consequently, Morgan Kinder under million. moves approximately $XXX investments rich the were for nearly and approximately

share volumes the we XXX Gathered expect past, between capital that gross overruns. is for have Crude we level to curtailments range share the project funded gross guidance earlier the of day outlined. our volumes share of the proportionate XXX are will portion previously still be feet per taking As only expected currently range JV without the lower has discussed. towards done in our financing than account. of due and reflects pipeline project’s trending we’ve million this of a year our production million finance cubic middle into with EPIC Therefore, upside the capital to proportionate that to XXXX funding of debt project the

other to for we’ve has on JV guidance forecast the our adjusted G&P business. as year from EBITDA our the pipes been Moving updated revised items, in

to midpoint for the report. up year lifting of end raising last range the million, our in $XXX our to are million $XXX from We $XXX lower million, the

flow. distributions million. is XXXX, to priority cash JV midpoint estimated higher no with Raising and previous and cash the from $XXX there for range the also level to from the finance. in included distributable are based pipes. updating EPIC guidance, cash million between distributions operations DCF project line are expected $XXX on our given In XXXX G&P now We year DCF

zero guidance nearly that the a first Our is after quarter. XXXX reflects spending growth program capital

in forecasts include revisions EPIC a Please at our We on modest substantial significant also now to ownership expect from cash continue will outlook. volume details positive presentation Permian XXXX flow, guidance. XXXX financing ramp a we cash investor for to to by our next and exclude driven refer ramp yesterday I year’s Highway. outlook. on the Oak, our move to DCF XX% posted in Shin flow the in

foremost, First with and Altus execute and liquidity plans and XXXX sheet very balance strong through funding perhaps a sources has position. beyond manageable ample to

like Our investment-grade In $XXX and has at revolving the million was facility credit expanded million to was this the extends of $XXX through end third January, facility quarter. XXXX drawn and November covenants.

from available sufficient to combined to needs. capital cash more meet pipelines, our with on and than our our distributions be We operations JV from revolver, expect capacity

ideas flows anticipate to access covenant. we finance XXXX, engaged We When But taking I’d months, debt-to-adjusted the confidence G&P initiate has in dividend add Xx like facility with shortly divestments. of Clay’s leverage and leverage or a range to was year, a we with we review to came consider After below our well confident that on assets covenant from to demands, initiated of growth. Xx sheet action increased around and the PHP mergers our recognizing capital Altus a many examined. our X Altus among the to are our past scenarios to distributions We have entering bank COVID number the shareholders no strong And to from of outlook capital last wide range year. which in over to hit, PHP. cash this strategic several a the Currently, plans no Altus for comments service. alternatives startup our balance increased ruled through out. capital to We returning EBITDA with be next is decision pipes, our credit intention to we particularly our various of JV minimal to thereafter, the on stabilized. need a from and the were

year. under Following Altus this Altus a extensive flow share. per we to debt-to-adjusted the maintaining and proposed for I EBITDA still the are forma be range mentioned believe create of $X.XX the quarterly the also dividend within expect the dividend, of payout very Altus manageable the capacity This review credit we Pro potential reflects while through initiate to best of return Xx now shareholders earlier. assets, dividends, it environment. alternatives, otherwise a yield to dividend by approval previewed metrics could for of proposing seeking though to time the is the management that an believes Altus we next expand Xx right have XXXX revolver. for our the cash of income value Ultimately, is and a will now of will generating preliminary to strong option Altus this to now a over year, this capital Board we end way and dividend through is operator Q&A. investors in significant the this formal requesting received we start new believe and with yield Board also I for And turn an to call paving ownership decision. support, starved be

Operator

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

Spiro Dounis

Ben. are you Hey, Clay. doing? How Hey,

Clay Bretches

Spiro. you. Doing great. Hey, Thank

Spiro Dounis

Yes. my can I screen. tell by

for color against or think you up, that and you at have the decided I least shock you guys of bit provide more dividend little ramp reach with to would was over on uplift gradual Going been if right start more course, the ultimately out Why a a now. I amount? that, you conclusion? approach, another is $X.XX obviously, why time announcement. a wondering

would to you little bit why So about more just a love that went here? process know and how landed

Ben Rodgers

Sure.

our shareholders per it sticker $X.XX I kind of from And think, back, underlying you to a flow. that’s when at coverage cash our kind annual and look of But our it’s it. around kind when the I have – extremely think look in higher a midstream our X.Xx a kind of really look an distributable step that assets from from the in first The distribution foremost, going X%. The is leverage at inverse for generation quarter, preferred of is very is been actually standpoint, debt we of of to of the feel that ones. And our really of trending like have, does you to where has at and is that we’re and cheap X% a rate. amount year of manageable. which the next have kind when shock cash just peers prudent as lot return capital

feel we where have a yield. can us that so we And decent level sets like up to

outlining didn’t I on was at the that share we that, really week that thought yield were the was we price that based in I implied price. closing think implied just think last value. fair our disconnect a trading

we only And herculean very, us associated making very Shin that flexibility. with we’re assumptions a it’s and variability it’s Shin Oak, think Spiro, provides next the so year, that really well enough that, and we around you And not manageable through have Oak. may – think COVID. performed very When look even into and is dividend,

that’s be and driver so dividend in to we’ve any the of you again, that flat. going look even material through type at coverage, manage to variability. And flexibility keep with But the if to there X.Xx got that inverse, the

Spiro Dounis

That’s it. helpful. Got

business during the complexion third-party potentially this term, the guess like bit dividend, just Altus to this in longer here to and ability then guys agree, Alpine next with remarks. but consuming to over business little any remaining some Clay, a cover and It your of M&A. in of this maybe grow longer bit growth expanding the in of dividend after amount continue free a you I that further, like that about to time? is a strategic And And this free looks opportunities, you and to that plenty of thinking you growing a was period pursuing have the weighing to that. little of How that on cash have pursuing investment. a flow alluded you sustainable make prepared sure capacity on new so use good I near-term your are without High totally the sounds review, flow guys cash covered what year

Clay Bretches

rate potential as two great cash what good into of dividend in flow EBITDA from No, as then key Shin piece matter. that level Shin our upside. when assets of them question. base future, EPIC have then down a we the for processing and believe that business. ultimately, flow that here our And it’s is upside. Permian that But this because of also view cover stated, grow and the a Oak and gathering our we comes Oak current Ben now having growth of big and is one can to foreseeable Basin additional comes that potential to the being it for a We but

the of we’re of Basin of the some bit in like best still we’re return activity, a And once after of while this ability Basin. basin. third-party in that south the have go Delaware there will way our some activity the to come of and little we is We a the some to distance Permian assets throwing business feel

processing. older Altus What that’s some see become to for and really alternatives one of how So the when you going – of state-of-the-art that the ESG best the equipment equipment processors them. will G&P regulations problems and it’s we potential the potential G&P very with there of side, from plants, is most other growth do future, in to and going the think standpoint, that basin is for basin on we other an it’s is cause much into the believe gathering about some for and attractive in

good sitting So we we’re in a think position. really

side. structure gathering and cost our processing the lower to on continue We

either additional but additional type for we’ll good, business, that ability one. we’re the to is now an the baseline, be M&A increased that dividend flow with additional generate the for of very place, cash we’ll that’s really per type So quarter put activity, but $X.XX upside we to need bright. I processing some we And very that or gathering covering be think we it dividend, what or additional believe right think into prepared have

Spiro Dounis

sense. toady Great. Makes color a appreciate lot the care. Really guys. take Congrats, of

Clay Bretches

Spiro. Thanks,

You too.

Operator

come question from will Citi. next Schneider line Your Timm of with the

Timm Schneider

Obviously, your cash your just that guess raise maybe in much of JV through project. by good from under question. of kind of of locked longer cash Can you a lot us flows, has afternoon quick asset? in future obviously is just spot could today exposure? How flow coming Hey, run versus guys. dividend announcement a term confidence I Hey, lot what contracts that

Ben Rodgers

Tim. Hey,

have we’ve not by as done contributions JV. So DCF the in past, or EBITDA we outlined

can coming from You large next ramp year a PHP. see

aren’t any third-party. We in additional or including wells online any High turned Alpine

our so GMP to year look And at this year. contributing you is that percentage can compared the next

PHP, beyond And our so haven’t I from that. of EBITDA provided we over both believe, a XX%, it’s comes but breakdown GCX and

Timm Schneider

it. got Okay,

from in. you’re a terms confidence the There flows in will a and it specific what a – close not basically High, to So big read-through those have at is for of dividend those of having a lot pretty assuming edge, getting of is cash it this, don’t is cash basically, you going Alpine announced get flow JVs? I’m of sort skating than of you forward, do – kind what have to now. guys lot come But wasn’t

Clay Bretches

to a production decline not we skating this Alpine edge We take present High. and we’re a look take at at at the our close all. at Timm, look No. and

as Ben – not we’re adding third-party. stated, any We’re not

High. activity We’re at additional not adding Alpine

no what of in no very it’s by terms its be views And have coming whole will EBITDA to – as these So we’ll we state also conservative drills. – in Alpine the is new substantiated pipelines additional what then from forward. really present go with able of High thing deliver

Ben Rodgers

Kinder with GCX. to that – same just on add Yes. we’re partners Morgan that, fantastic that operator for And PHP, operator, with on to

time good Bcf to having a for It’s blueprint PHP. so experience the takes through and And happen it pipeline. that GCX X a gone going up that day get for large of startup such and to what’s pretty a the going with

announced, everything So around very confident there that on they’ll they’ve get that time.

we’re look Shin So a I that or able partner big stability lot standpoint, already use on million We’ve if up upwards well. of debt. at aside enterprise, this great third $XXX doing over on to is XXX dividend in cash as get We about of down – the party, though revolver. pipe a our can a, million Clay’s which to third we even does a you lot also provide you And to the volumes plus to got share amount flow third-party of point, And have per a from basis, for the cash day can that think, party. Oak, of we from that our put processing. pay liquidity of think a a

of new know you And so that’s capital, has where lot as a into. to go

And just you’re looking so gathering. then at

we So without a swallow Anything going look cash to having of keeping to accretive check-in. deals in is would bunch to some then flow accretive flow. be we at capital, outlay cash and leverage our be could which to third-party

dividend we of equity on look And it thought door we future. amount and have There the our preferred feel a still prudent doesn’t like lot was and also of anything debt. the have that very we is do, into as so we prudent, the that peers close just a like

Timm Schneider

of Got this took months, that couple didn’t it. assuming quick. one guys obviously, reach however last And long real weeks, decision, you here it a but I’m to maybe overnight, conclusion. happen

– this is election. this this it I’m you in with outcome have do being front to were at the else, regulatory assuming – worried anything it? about or point, terms So doesn’t presidential anything I of guys not is Biden on of mean, Looks like

Clay Bretches

look a just pipelines, on take plants look positions if a landscape, equity might but federal are well a our a what. the no throughput like of even at you the a through presidency do it feel pipelines. But assets throughput portion better portion on None the related systems. perhaps the matter pipelines and of And happen through at federal standpoint lands small do No. gas that land. from From our and gathering the to regulatory you is could we very take in a the Biden to small that political going of all because on under what the and our maybe ownership

from really terms feel little very we insulated be scenario activity that. the again, Biden basin bit may And a So presidency. it a of of overall in bullish with more

Timm Schneider

it. Got I the you. Thank all appreciate color.

Operator

a with Instructions] question do [Operator We Barclays. from Heather have Gornik

Clay Bretches

good Hi, afternoon, Heather.

Heather Gornik

Hi, good afternoon. latest I yesterday, base on touch appreciate there all the of commentary policy. see preferred on get anticipated the wanted in announcement that dividend. to the dividend just to Naturally thinking great out to I your the light

‘XX I timing shift potential in been in messaging financing there? peak But see if wanted or is out or early has late any latest think to the considerations the there timeframe. ‘XX the

Ben Rodgers

shift. Heather, and this We’ve our the got really is Ben. preferred. capacity a Not revolver under with the

or it MOIC I the late ‘XX. IRR think, puts the kind math, that the ‘XX again, Excel of look crossover, when you and early at

rate. work got, we’ve plenty to on through And a it’s the manageable refinancing our alternatives the of distribution So X% meantime, I in very time think, preferred.

of the ourselves protecting obviously, that sure next starting the and that not starting a options And hopefully, year, and preferred dividend we’ve And we so with over-lever forward. sheet viability markets. whole got make anything plenty – of our in do different balance we fashion in of is that the and you it do obviously, going to public company, as with think a capital moving prudent

from a that on can we’ve you instruments and place going this continue DCF make – cash see as flows in year. and The that from EBITDA sheet flows can to our obviously, we that can next plus how we’re you any done business put sure financing do to and a very that expect assets, year and to have cash into support continue the dividend, Our well that. we balance

Heather Gornik

it it. the taking me. That’s for Thanks Makes got Okay, sense. question. for

Clay Bretches

Sure. Thanks, Heather.

Operator

this questions for I [Operator will And are to Clay over there back Instructions] no closing time. at call turn the remarks. further Bertrand

Clay Bretches

into to the about I’d like I like everyone thoughts dialing our to leave today. for call with thank you Okay. Altus would following Midstream.

pipeline. outlook has the the minimum our fully volume expected improved Express, of Like commitments. First, Highway Coast startup considerably with is it Gulf with subscribed Permian

PHP. we However, ownership material in XX% have a more

guidance call upwards do the cash several third-party this EBITDA distributable Apache’s of We have at estimates morning. DUCs not our These include and including new flow. mentioned turned including XXXX, online revised additional and wells business for items Alpine X adjusted XXXX nor on High,

announced to note for of his I thank month, him. Frana September look our I and Directors. we working retired Board in to Board last company. to to Altus Finally, Midstream’s Joe who welcome like has that Doug joined with would We forward Board Johnson, that the would from him the service

Now I the return operator. will call the to

Operator

Thank you, ladies conference participating. today’s and gentlemen. call. Thank for you This concludes

You disconnect. may now

Kinetik (KNTK) 8 Nov 202020 Q3 Earnings call transcript