BPMP - Earnings call transcript Q2 2020 | BP Midstream Partners LP

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Operator

Good morning everyone and welcome to the BP Midstream Partners 2Q '20 Results Conference Call and Webcast. [Operator Instructions] Please also note, today's event is being recorded. At this time, I would like to turn the conference call over to Brian Sullivan, Vice President of Investor Relations. Sir, please go ahead.

Brian Sullivan

Hello and welcome everyone to BP Midstream Partners second quarter 2020 results presentation. Vice Investor Sullivan, Brian am President Relations. of I by our our Chief I Financial am Officer; Zinsmeister, remotely joined Coburn, And Executive Rip and Officer. Chief Craig

to Before our a please we moment begin, cautionary statement. take review

we presentation, plans and materially in this estimates, due Actual to expectations. the factors today's statements we that will During and could outcomes slide filings. refer and our results to SEC our forward-looking differ on make note

in non-GAAP to documents filings financial measures. presentation to related refer disclosures SEC information on are our These refer Please and Web our to supplemental site. also this available measures. important for We these also

Now, over to Rip.

Robert Zinsmeister

results remained the portfolios cash saw to At good and what second Partners, tough where today testament Brian challenging our report of and was call and we priorities. thank resilient I'm stable quarter, morning have Thanks quarterly volatile on you continuation is to Midstream for flows. solid joining environment. and everyone and a This a to a a focused pleased very ability you BP our today. generate two of set to our we

Firstly, holders other Midstream past sponsor support our would we COVID-XX continue second, through Partners stability. I this a safety, I deliver core assets for helpful our acknowledge environment. our as and such we BP to the the safe resolve to our had to on with the reliable the in maintaining pandemic, and strength shown financial challenging focused at as like operating stakeholders like in well remaining they the of partnership unit financial have dialogue ensure face during would everyone thank quarter. the personnel to BP operational and have And a value safety of And the health and of and protecting manner. of

We you. to engaged remain will with continue

response, cash flows. We generate described with begin that And are today Our delivering attributes I'll today brief of with Craig resilient will further and our our that status a demonstrate the ability stable guidance. underpin second you of to of and details financial our quarter. the results the much last quarter portfolio those or XXXX than COVID-XX attributes BP. update and and results be will on operational details indeed on previously XXXX minimum then through expected. presentation shorter MVC our commitments our as volume take arrangements sponsor, guidance our today's provide

we impacting then related take of Today, questions. have Starting COVID-XX COVID-XX pipelines. will We had the with issues your any our response. availability not our

conditions appropriate. and operating as continue to our adapt monitor practices local We

BP sponsor to their critical providing very this during resources to been and necessary. applying supportive Our has pandemic, frontline our practices as access operating assets

them the guidance, include Second, present is at reasonably time existing unchanged. of to our guidance. which shortly. many Craig will cannot are our impacts our cover these year There the XXXX guidance full estimate factors, we in

we full shortly. and continue However, there possible. where stability to we we financial the underpins operational with a with of demand strength providing said, operational and actions of in which continue there Craig guidance portfolio, performance of a take financial our a improvement all With ability conservative signs mitigate to although for enter And more are year. that volatility, and to operational will the of volatile are financial this very and in and framework pleased our detail our have confidence to that speak will we The liquidity position position. challenging strong some still from risks are financial reduced environment monitor

year. in June of for end Most Third, at automatically MVCs for except XXXX expired MVC to of Diamondback which arrangements. our one relating another the agreement renewed

regarding sponsor discussions holding MVC regular with are arrangements. We our

Craig. conclude these discussions to that, our I'll third with further quarter We results. hand With over and expect to you update

Craig Coburn

a to delivered Good pipeline impacts of Rip. results. Set backdrop the on product market The as Thanks, morning compared destruction mentioned. challenging the our of previously of year COVID-XX quarter we set everyone. first operational broader unchanged guidance a And Rip quarter. throughput XXXX during across and financial remains our resilient industry-wide the and in environment, full across significant saw set volatility a against refinery was much apparent portfolio quarter, demand we second the more U.S., utilization reduced against

cash total our and the lower XX% However, only gross quarter first to total remained adjusted to quarter. compared EBITDA notwithstanding around distribution these flow cash the was broadly Further during declined second quarter were flat throughputs compared the the earnings quarter, quarter. Even in second and conditions, though gross available in for our the throughput first resilient.

financial during our and of arrangements. second portfolio notwithstanding benefits and operating balanced a resilience, operational conditions, the stability the demonstrate the MVC quality of high benefits environment quarter the Our clearly

income Looking average seasonally this was tropical to the by in with around On offshore in pipelines Rouge jet was quarter. as the better quarter. pipelines more first destruction quarter, than with driven X the constraints heavy our lower was of optimization we reflected products dropped gasoline, our mentioned. This demand expected, quarter, due on of the refined second the production. of X% the around lower faster and was Throughput first in by lower with to Canadian lower on impacts environment for the the latter a day in This quarter the of on from second equity quarter and income this were onshore XX%, recovery BP throughput compared in we the and loan. for the demand second These XX.X only quarter. was the onshore U.S. due offshore a new interest COVID-XX attributable and XXXX. demand result by XX% early quarter two first crude offshore And Net driven lower for and distribution partnership detail, activities first diesel part quarter favorable lower oil deficiency million. to by utilization Again, on result Throughput on compared was when respectively. XXXX quarter maintenance at to revenue as interest Cash Throughput and Throughput first compared impacts throughput really and for second partnership of gross allowance ball pipeline the on in revenue resilient for reflected offset our from XX% second, XX%, million, second our oil were lower on price. second expense refinery lower XXXX. impact COVID-XX. destruction pipeline feedstock although volumes barrels a reduced storm the a quarter. was BP higher the the all second loss the than consistent the the saw onshore to lower to throughput reduced of lower the throughput crystal first, X.X than producer quarter on quarter for XX.X revenues, the lower the result impacts across around throughput compared was of second available recognizing second diluent That's producers, by result, fuel with historical rate broadly flat lower XXXX quarter. demand And Diamondback lower favorable million quarter River lower given XXXX. revenue the in notwithstanding Together first EBITDA the first only total per the offset method investments equivalent of of more the approximately of fixed XX% from around lower quarter, X% X% in the for with offshore XX.X quarter X of half lower was on conditions a macro pipelines. a was due pipelines. first lower than solid million reflected attributable the was term The Adjusted to throughput.

the you unit consistent in quarter X.X second The was as range for comfortably distribution for the per level first coverage of distribution General to ratio of a our Board the the earnings X.X distribution available of of second The our in X.XX middle Directors cents can see, of So distribution the Partner challenging a second declared times. XX.XX quarter XXXX. resilient quarter. remained of quarter face cash the of and with target of

quarter and ability strength further hold our in to confidence have second we stability. distribution the flow financial flat the cash Our demonstrates

our available to for cash to EBITDA year of is full to guidance expected range XXXX Full unchanged. is in XXX million. our Adjusted be remains be now year the XXX XXX distribution expected in million guidance, XXX range Turning to million to the million.

growth Assuming throughout distribution the we level full XXXX, XXXX be remainder the distribution will year over X%, full of distribution. hold flat year our the current

ratio guidance the to expected is range of levels. to X.X the end coverage distribution X.X Our the full upper year target times at current for of approach

based projects And cash to Mars year grow growth are underpins ability balance in agreements of our the to to and to the year. signed uncertainties. XX while and balance discussions organic grew managing the expect During project by the facilitate The through million and equivalents expansion the X we second definitive growth growth of pandemic around balance our quarter, by with long-term our pursue end cash around progress million. expected ongoing producers XXXX. our mid continued online cash be to the on our This to guidance, cash by this our we on

in shared remind our also In quarter, we're our our to you in them factors reaffirmed onshore reasonably that to Having of to XXXX order progressing in we growth guidance, like projects, guidance as we terminals. last well addition had factors could impacts including that the offshore estimate on we reflected guidance. not options, growth I'd include as that

such as impacts financing onshore time the have At first FLA Although now lower ones some we deterioration merged. costs. revenue, price, results, resolved reduced have reduced in of and from new oil throughput factors asset themselves, our continued included quarter

that we guidance. also last now reflects our is today two guidance in Our quarter included factors not highlighted

revenues reflected storage revenues associated the are with actual These now pipeline. results. in second Mars First, quarter our

has our affiliate to for the during if we the last sponsor These December text of our impacts upside This We are modest support operations maintenance waived the remain heading reasonably during remainder of second, sponsor in slide the cannot to guidance. and challenging not There reductions, our still cost bolded our guidance. factors factors the sponsor the these period paid the We under in increase of period. expect this reflected two highlighted reflected to demonstrates some guidance. omnibus estimate shown And in quarter. and of that an of XXXX. our on fee the them order year April in of include this in

and environment to evidence stability guidance our the operational notwithstanding uncertainty ability for further is maintain confidence the we ahead of financial Our the XXXX in have and partnership. the of

expected to the refined as across to product be Rouge throughput on to demand Proteus we gross pipelines. second quarter. offshore EBITDA ahead compared River improved the pipelines, forecast mostly quarter our third reflecting due higher Adjusted to higher than to is pipeline expect flat conditions Looking be higher throughput quarter, throughput higher throughput and on Endymion and the broadly second

supported revenues volatility with assets revenue our tariff revenue at are available level sure driven quarter, from may our higher the lower and to by and hand These and I'm equity largely higher quarter, appreciate slightly as and for the onshore change, in than We that, of favorable second given our back the term is be to as by and reflecting With tariff expect COVID-XX. to be deficiency third facility. on interest Rip. expected quarter ongoing understand expectations for increases will pipeline method loan throughput quarter. increases second higher surrounding you Cash associated absence as can by in I impacts increased uncertainty income the offset forecasts particularly the investments. third increased from onshore the recognized And distribution expected the expenses well

Robert Zinsmeister

Thanks, Craig.

few up thoughts. a wrap last me Let with

what We asset cash delivered today. Midstream that's we envisioned quarterly during have And portfolio solid our capable did sustainably another past we flows. delivering quarter. this exactly conceived portfolio an BP of When result Partners, stable

remained have focused our We priorities. on two

partnership and assets and core operational value and of stability. other second, the manner. safe continue the ensure our And remaining our in reliable of focused as financial of operating financial deliver First, protecting strength the as to we stakeholders, safety to health a safety, on personnel maintaining well

full our continue possible. to risks provide and the XXXX growth that delivering track to And track uncertainty in year our the deliver distribution of and we considerable remains mitigate with wherever balanced compared to you year a on full recognizing XXXX. on while will opportunities X% view there build macro ahead. risks to guidance of are We're We guidance, cash

Our balance strong. sheet and liquidity remain

growth sponsor. are in investment on our our this in action our with organic We third results. continue to pursue portfolio. update we And will And further MVC with for quarter you we arrangements opportunities on

available always speak are with our to Relations Investor results presentation. of you quarterly Our team further outside

Midstream week. at the take Finally, many City Energy BP look with questions. Midstream Partners you Conference that, of to will With Infrastructure speaking phone and let's virtual forward then. open We next and lines be the

Operator

the at Ladies question Tonet. Instructions] this [Operator question. go gentlemen, Please and today time comes first Our from question-and-answer your we'll ahead begin Jeremy session. with

Joe Martoglio

the see and you on the also similar for Joe second a say towards offshore. on a on and your kind of current both talked this trend volumes are recovering the there Did is offshore see onshore BP continue quarter. your and end bit Wanted can third X that in Jeremy. volume first Hi, Rouge pipeline? River you did to of now trends you I appreciate quarter about and you where the ask

Robert Zinsmeister

by its local respect the With performance right. underlying assets each driven asset being own market, is to actually

quite year, the bit frankly, remainder are It live now was a in and River half normal. volumes people of March. and and kind the So level we're I patterns turnaround. depths the us on the out Right Rouge, in Craig of if when our think traffic to of that above of we at we highways you look see each the bubble. back and in on would been we stunned the Midwest for of are MVC own at have the Both

is the at our XX%. what trading Whiting to view awfully So do. and of group XX% corporate down they kind local are good But

X% are more the fuel, above so to So in back so When the The diluent X% but or -- really is aviation always demand, winter. volumes go Rouge. Rouge's River the need going soon, with MVC isn't in season to asset. Diamondback, impacting jet circa not on that come we're River on diluent back we're I anytime there's sentiment summer seasonality

lose summer. We So lose a asset. work turnaround crewing, Then terms much XXXk specific top-line, don't a We on pattern. the staffing COVID to asset of the week and across that and going opportunistic activity. look hurricane see couple the in cover, to very impact difference assets, all up seasonal in you of to want any really year. a that our going is saw there our is about turn feel activity performing, you second see maintenance season a through distribution you more out there's COVIDs yet. each have think versus to of over still we're we to solid Craig not and And half the that we at and the of offshore blips basically the when on in We be if I'm supplement way. our Summing still okay. take

Craig Coburn

picking Yes. X. about I just I up Joe BP asked also think on --

across But historically, Whiting think second quarter. demand down running actually also at then I of the half nationwide where look the refinery have when in averages. diffs well. Canadian the X well. quarter the BP running really back kit is is third the Considering bit and little is you a been through

BP down MVCs We but differentials those there. coming less see do back little going we're So a volume already. there's X, by been protected

somewhere $XX differentials the back back, now, also half those to Does come between question, Joe? that of come on $X will volumes your the BP think answer there's year. X the in as I second

Joe Martoglio

information assuming Thank you you. if can Yes. about And there can I'm that the looking, opportunity? and the ask is what the there? appreciate scope kind particularly helpful. any the expansion really be any all KM color of Phoenix then, the growth I just terminal of organic That's more also thinking, maybe about there. would and say I'm I from

Robert Zinsmeister

to relatively succinct. synergistic that BP the JV the this Thorntons opportunities into when fair important the to the tie into say system. network there's We'll It's entered keep sponsor

principally. lie opportunities investment the where that's So

Okay?

Joe Martoglio

you. okay. I'll Yes, there. Thank stop Okay.

Operator

ahead And from question Derek comes Bank question. your Please from Walker of go America. our with next

Derek Walker

the on Good morning, kind guys piece, and quarter. but congrats the parts. on I a guidance reiterated appreciate strong Maybe just some of you that moving range

baked storage And you can revenues the second that the guidance just any at around And of clarify guess, sort in say the additional of there quarter lube? cost the to contribution of give I kind or change other what half So reduction sort to relative contribution color the that volume of of is some first what Thanks. is? relative year. to the expectations

Craig Coburn

we're the to Thanks, storage specifically money few a it But Derek. out of not some for downturns. getting to comment blips platforms Rip made of with And the on the that revenues. revenue about and COVID maintenance to sort between how those respect going of and the I say water and work. Yes talked storage some increased on increased think we're suffice up much that, handling

I -- increased in those with the about different very respect. offshore offshore there and were cautious pleased distributions the brought by mean, Endymion are because think volumes a particularly Mars fields we're that year. getting second see on of these it's the of Proteus we half on And the so, in out fields I though we do [indiscernible] around ramping Derek from this We're Shell in the world days. working as

clean make crews, coming things contractor well have you bringing down. you to crews have You as have have and to sure up the COVID and in with clean

And down so across have managing been that of have given volumes an of to job be all they they've facing. sort that that think everything I amazing world, done XX% through sort of only of

groups but a economic across of in, in pretty platforms a time was through what had that. through crude reasons, in, came of April, but smaller moving we shut due Saudi product Exxon, job of couple shaky a the Shell, also as done back we our So, to all there managed BP trading remarkable

working old that sense in on types don't your come back we that year. our being how of we're part terms are the headwinds guidance half the But was the but see getting offshore in the those the second things of way of respect. the and the question? in in So things in through world just off in What it's it, are not come of conservative

Derek Walker

answered think just what for prior was I factored in had previously mean, assumptions. pretty it. if looking think there's you adjustments the any for I I And of then, contribution to much I relative some that the add-ins. of

give diffs. how So around update and factors I maybe the bit XQ at some think little of just looking discussed us you X around appreciate of we results similar certain you've that are considerations flavor extension. a -- in anticipating have matter alluded around of it's being of up anticipate being Maybe little to -- I BP you're bit commentary well an that follow a for Canadian what what some are on and the the that. the just in But kind what going. you'll the of been And MVC can the the or discussions dip as extensions a getting levels. and multi-year And levels around

to coming bit like a get those have want and XQ of sense updates recognize results? with that Just little what of the been discussions Thanks.

Robert Zinsmeister

the very was whole what's Enbridge you current certainty have three we regulator give reflection of the to the to And yet decline some particular state. diffs the about it, in has there open line a Knowing easier. last we greater know on XXXX, and COVID the whole certainly there's when production, ambiguity of for what the time. COVID it's again will anticipated provide clearly would In and are an I If And of whole affiliate and and [ph] three is really has all we back But tomorrow. potential line forced don't we monitoring The So we expansion, apportionment season landscape appropriate it process us to going what's to and understand and would they're three we'll we for when signals in so on And responses line line like. the right? doesn't stopgap That long? this been XXXX concluded. greater a fair And went the there is lack gasoline been you MVC make that three. to also topic certainty Our Think when what or have not and lot decided respects, those with during a events. MVC. many that choppy access the can can't back moving type I nor still to build [dislay] we've diffs. any about on crude limited need some as term contributed this And the say, prefer year public people a suspended closure, Canadian market a that's and that's would how line on gone a on longer that KXL monitoring would has volumes anticipated, in be three that. year, period. in forth from have know market enforcement, actually look get color attractive, at speak, market measure been that not of this. three highly line and both was

Derek Walker

comment. the Appreciate Okay.

Craig Coburn

to the also Derek. with Yes, available but less XXXX. about the think increasingly say distribution I'd guys important of eventually and where that they quarter-to-quarter, longer less material XXXX they spectrum and move I like an piece, whole the smooth term. MVCs you cash BPMP into discussions have goes are will help The become in growth we as for we beyond

MVCs we'll about for growth the in be bigger and the together you pipes, we'll package all just of balanced a how portfolio. works the to so not offshore terms but to And you talking talking that on in what's coming about onshore be the of

Operator

ahead with your question. Theresa [Operator from Instructions] Barclays. Our Chen question go Please next from comes

Theresa Chen

and Rip uncertainty I to the there's commentary production touch to much topic. there. about of demand the a to not side follow supply MVCs on WCS differentials. I've to wanted by the gasoline of asking -- things how such. as Hi, the question upon your in related the side like demand just the start for further comment up And Appreciate terms

sloppy this utilization is about still As for, general what and macro renegotiating from inventories unprecedented some and you as working Whiting next affiliate we're beyond your outlook post refining the especially through demand perspective. MVC, a speak with the at year shock

Robert Zinsmeister

two say dying That your with advantaged probably outstanding some in pneumonia one of Whiting. we're in profitable. highly cold, an people when fair catch blessed or assets number are still and you're to is asset. [Indiscernible] your market It's that and

We to product have okay? in that what would making make ability the ability to still see refiners So any money, to market of haven't we okay? conversation we're market [indiscernible] fourth and seeing run actually like of kind to had terms has product, So a not at recently, perhaps quartile access really it. much of hints move

Craig Coburn

guess well Theresa River down build I being the Rouge, I is build July volumes crude with will you BP during already, and on The diffs. above see wrestling now, was and quite with in we're What sort slight is would June on volumes about really Canadian product has and that, talking recovering X August. to really MVCs of more into come that less a underutilized the quickly Theresa. and issue optimization I evidenced and a than the say actually strong second that we're back probably what that's refinery by, that's quarter most

expect we see normality, So, the volumes once to that back moves X. would BP to on

that ways in. two into pipe get there's So, comes another Whiting, food and there's X BP to

are volumes don't this of And decreased indicative Whiting I think thing. so, has through whole how been BP that on running X necessarily

Theresa Chen

that quarter. then during our to the kind flotilla mentioned through to so do way of headed near in as economics power countries up medium about How that? all order, offshore some to term OPEC second and ramp of going you the light you to think out the production work And Got we the the differential. in look widening on side, that offshore switching incremental from medium it. side seems potentially Saudi having And Russia to that

Robert Zinsmeister

vis-à-vis, we're $X attracted are swings a how start. personally, who we elsewhere at relative other removing March get in -- disruption speaking, because but the just surprised crudes and principally pattern. quarter prices supply QX bidding so this by in was value, various crudes, to different was historical crudes And I to talking So of premium me on world. because partly of were right in not talking I'll Honestly premium could people and barrel, we're only what the up wild the

comfort Shell I than the BP will between you any pipes, I companies can't our better think and all they're their and take in the market. move they of answer fields sophisticated Exxon, to owners give product we very that. and

Craig Coburn

a a second getting was I And time concern. And And guess from -- days. hearing we've bigger there, concerns we're I quarter getting better think these was visibility time. I see those in standpoint, our organization where that I we it only Yes. that from types a of guess think over there only saw trading not

it's -- the was it to and So as trading, and results high-quality majors from their saw groups. IOC the beneficial have of very you trading extremely supply

it's times of I think really the organizations good that when XX% move like onshore your the versus other to well. your as to the also is tends to And, down carries stand having very as this, also sales carries to some gasoline But BP through smaller players. product has supply through to other XX% it majors that type trading well, in supply organization, do of a also out important.

Robert Zinsmeister

quarter, there through for home if have it So was It was that. what happens crude. And actually a angst we're seems tank second tops. the really you don't in about

Theresa Chen

a so, just to in XXXX us able trim should benefit into beyond and nature? a expect that it's revenues crude, Got and group piece it the able the it. of for storage out and short-term finding there. that And benefit relatively how was home opportunities if speaking a on from or added super just result long Was Contango we were of for you incremental be that

Robert Zinsmeister

back to partly have go we on cabin a you If this are in a Contango right where amongst had been because at size BPMP in and now, don't a periods made of Contango bottom-line. in million we a soft any are XXs never best look, the so say kind That's further of have I'd soft partner, dollars Contango would single upside super kind for year. our our of is obviously history, finite, there shared XX This millions of right? environment expect guidance net. is,

to get nice benefits. environment a our large So a in But it's more it's that the of in it's have you market. results And mitigate outside not these all. a really difficult at

Theresa Chen

Thank you very much.

Craig Coburn

Theresa, to come number. to Rip I that million on speaking Just back was the a XX gross think

on mean, adding the told storage not guidance in I with there's right to our through. now. that it's not we're those upside in or if what you But BPMP. come guidance handling revenues, we've forward, guidance our was going So in revenues, counting it to will our -- it

Operator

gentlemen, and we question-and-answer today's Ladies conclude that with session. will

today's thank presentation. conclude we We will also call. today's all joining for you And conference

You may now disconnect your lines.

BP Midstream Partners (BPMP) 6 Aug 202020 Q2 Earnings call transcript