Phillips 66 Partners (PSXP) 26 Jul 192019 Q2 Earnings call transcript

Welcome to the Second Quarter 2019 Phillips 66 Partners Earnings Conference Call. My name is Julie, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Jeff Dietert, Vice President, Investor Relations. begin. may you Jeff,

Operating me. website, of President welcome Call. section information. Phillips Financial and will Participants President Roberts, using Mitchell, and XX President materials Zuklic, Quarter Partners be and with include Partners The Earnings Vice Vice Tim CFO; Conference on and the we and supplemental to afternoon, Rosy operating Events -- XX Vice Chief the Second Kevin Operations; Good today's the on call the presentation will along financial during can Officer, excuse be found Phillips call

present safe as Slide Actual it Factors X to session. that, the in actual cause contains well a statement. differ that our statements I'll With and turn be presentation harbor results will may that included could making during today. forward-looking here to reminder as we Mitchell. results our we differ Q&A is are over filings. materially our SEC It what from Kevin

This I an and a premier PSXP good a distribution portfolio further as and capital PSXP Jeff, general eliminate cost reinforces lower balance rights. This we incentive the agreement strong positioned morning, of afternoon, in sheet detail MLP you, the partners our cover of with the and growth a well is presentation. transaction structure. simplified opportunities. to more transaction Thank will everyone. in announced with robust later

unit, per XXXX and of second increase Directors XX% $X.XXX quarter the distribution common $X.XX an than cash second Board from Our recently a previous higher approved of of distribution. the quarter, quarter

distribution, delivering ratios. IPO. quarter a July coverage and to leverage We committed the while increased We strong distribution XXXX every the maintaining have competitive and growing remain since

record Bridge venture partnership quarter volumes The discuss the million, and reflects million. Bayou Moving $XXX Explorer, first from on financial of pipelines. to a quarter. an joint the during results. X $XXX on quarter of increase the million reported was Bakken to $XX second The Adjusted EBITDA improvement earnings Slide higher

In due XX. owned at pipeline and addition, increased by wholly Phillips volumes terminals utilization high operated to on our refineries

flow from the prior million, Second increase distributable to $XXX of cash an quarter was quarter, due earnings. higher primarily $XX million

highlights million cash our X facility. on our under with flexibility revolving liquidity. $XXX The of basis and $XXX quarter the We ended million available debt-to-EBITDA was Slide credit the covenant financial revolver X.Xx. and ratio second

XX to Our In was over projects. distribution The term, coverage to ratio distribution Long continues targeting X.Xx quarter, coverage up of we're second leverage partnership and its X.XXx. advance X.Xx. isomerization This capital major the was the at spend for Phillips Refinery pipeline. and included the to Clemens unit expansion, the organic Lake $XXX a growth million. Charles ethane new Clemens Caverns Gregory

secured of During this Oak JV financing the through billion $X.X will with pipeline Gray quarter, be second project largely the construction. project funded capital spend the secured Starting this for quarter, for a financing.

transaction, IDR now of topics elimination LP our cost to our Switching elimination improves the Slide structure. on which capital simplifies the economic transaction further starts X. The IDRs interests. Phillips XX and aligns The discuss of and

cost both third and for we distribution organic the Given party acquisitions. general grow the to LP partner. coverage our growth solid are through The and financial projects, and attractive enhances robust transactions of PSXP's position partnership's high drop-downs unitholders profile, capital believe ability lower our

commitment the to unchanged. strong Looking and partnership fundamentals ahead, our maintains unitholders is

of close common of elimination XXXX. for a transaction PSXP units is PSXP's closes, the Slide The Phillips economic the issue basis exchange XXXX IDRs will per multiple XX quarter When GP to to XX.Xx common price GP X, value fourth unit transaction This on the July the approximately the XXXX. outstanding to billion. by closing X $X.X The will forecasted a approximately distributions. details expected a DCF transaction August is This XX in transaction. interest. based accretive of represents is XX% Phillips on own units. provides on transaction of of is and IDR XX the and the million $XXX

I'll to now an turn it over growth Rosy our to update provide on projects.

X only We're the continuing lists touch projects have everyone. Kevin, few Thanks, Pipeline. the updates. I'll a ongoing, we on hello, to Oak Gray and Slide construct

We have permits remains The start received XX% Approximately, at acquired major has this quarter pipe XXX% of up all year. track right-of-way. of are all fourth cell been XX to the height. of installed and in and project the tanks on

ethane Pipeline Pipeline, this Sweeney, the XXX,XXX be to will and is in to that Clemens is pipeline New mid-XXXX. day Corpus per Texas. from The in this to customers Christi petrochemical quarter XX-inch CXG The serve pipeline run of area. the will is slide CXG have Caverns barrels completed expected in Texas the a the Gregory, will capacity

to market. capacity. we the Marine Terminal. The connection competitively of to that will provide export have per an product will its Lake During pipeline the product to Phillips up completed outlet the the Refinery terminal Ridge Charles quarter, The at construction the Charles XX of storage in XX,XXX connects refinery place the product Lake terminal barrels the Clifton day to

Phillips first sulfur this diesel XX high from exported This last week, cargo its facility.

with minimum volume pipeline We commitments the XX marine and have that a for includes long-term dock. Phillips agreement

ramp concludes on month, to in This the project below earlier The remarks. schedule this prepared quarter. isomerization And our completed and completion was budget. mechanical unit and Charles full Lake is to third reached up the expected production

line for now will questions. the open We

[Operator go Instructions]. from Elvira RBC ahead. Capital Scotto Please Markets.

Your line is open.

last you'll the bet you're is quarter this IDR probably get the questions. I glad

drop-down, flows, XQ for Can with elimination, rationale get beyond on absent kind time, or can't really starting XXXX, that. given paid the the specifically, of just walk any structure on accretive GP of the multiple IDR the in through we So you that. to the cash

why with do is the drop-down in IDR a really conjunction So elimination? my not acquisition question

any and as doing transaction, incremental providing IDR drop-down really in couldn't this straight the conversion of Elvira, to big And Either get of, the combination transaction the our over a we up way on conjunction benefit did actually simplicity mac, is we -- done doing Kevin. we consider a it. with we have this bang sort as it. modeled we transparency

organic of Now in terms remember it is to of to are have profile important growth a MLP projects the ahead underway. what's that continues the significant

So long clear that potential come that projects will later to an today, and of PSXP. in at of line pretty line you -- about a the Midstream they're level the in ongoing with addition, going the level, a what's PSX and and organic growth growth there's the PSX beyond sight think lot PSX the going But business place EBITDA into that level, on there the the through of just And a XXXX. projects on what's XXXX at are assets taking investment there's runway at growth to that's significant coming. are of the on still potential growth sight to the

you get to maybe we through to just So Q consider how walk get are accretive you this? for need to XXXX? Just to can us different things the what

Yes.

new Pipeline. about billion XXXX right? quarter quarter, quarter the think at simple $X.X fourth some annualized underlying third as of with and the just So EBITDA to more got growth we is in through here, you XXXX So terms, going look so you've then MLP, that rate, taking announced what's drive in just quarter, into coming got on Q this CXG and XXXX, newly projects right this in EBITDA we've

that terms go different the will significant level distribution MLP So drop-down the to in drivers the really form, those calculation think anything do come about you've look -- in the growth, as drive at you got potential issuance, that. but had aggregate and at units, we that, the any then in of not impact plans assumptions calculation unit that issuance you as all growth of drive issuance, through at can ATM, the walk market for which equity like you of many can -- so will

Midstream level Okay. strategic is, at PSXP Like, the projects just now And me last IDRs Oak one instance? the Liberty just you've on the eliminated views at the PSX and level? for that the then versus PSXP, Red what's from here developing

Yes.

not think I our views that So have changed. that on

of reasonably we've being to the aren't as not an reason balance to go absorb available, way comfortable assume we've and no place, at there's been in not change. standpoint, that, step doing capital sheet that from having As And balance at the a think really on MLP the the -- keeping sheet. we and back about much the MLP, can you markets while we as really sort to organic that dependent levering over equity it, like consistently will

the of the as MLP, a if So like they into of while decision Oak just will like, around decision projects same were projects be when Red the previously. that sponsor criteria come Liberty it's the sort where the and

Okay.

to do to amenable, own MLP But units Sorry, you PSX last PSX drop-down, then -- PSXP if elimination, I and even units from were mean if theoretically, just issue hop post IDR and would aren't that is up I'll equity now just more off. even outstanding, you markets to higher? and me XX% ownership of push one going the a that

you're by always and have It's number MLP. concerned it's actually are lot something the a nice impacting in Typically, to plenty transaction point. I in at we're do much, any because when move So you this mean to that back the Yes. you're is at right? be impacting issued numerator the thing to debt is the minimum percentage to available issuance you there's at that PSX, really XX%, of -- but a going a capacity theory, still drop-down of not could. there's denominator with units

ahead. from Dounis Please Spiro Suisse. Crédit go

line is open. Your

basically here the this and point. them IDRs behind with with at Sticking you

returns, open now? investor going pool at here, stronger on little if Just interest some maybe curious to of potential stand box faster check position you where something enhanced that's go get we if the that's potentially, to and here, up grow more bit a the and into point you a especially, XXXX can the so you're

being, Yes, path. for consider, time option been we having it's we've an the we, hasn't It's Spiro, a as done reason as as looked compelling it's to us. it, that's it, go again. The that for date, nice not down long for there but as to Kevin us something for is, out would thing to

but So it's something hasn't so priority a far. been we can consider,

private pretty which sleeve, fair. about you pretty maybe forward thinking things wide about That's there's here still a you forgetting then is and and public, of financing just Okay. own. of wholly that. most this is, arb have equity like and projects going interesting still some guys And Obviously, growth issuances

curious you just any joint you're got if CXG? of venture these like So projects maybe there some seeing or appetite to there's interest that

joint but You your really that. venture depends bring like would project table to it joint a partner on what could, what the -- on partner the venture

win of what be to for needs PSXP you've So more is and the overall got up that. want so give think sake value transaction selling it interest, a for to down just just that, there like in we ownership do there's economic don't to to our an than

Last be any the providing Fair to cleanup slow increase is I specific XXXX? Okay. a you're one. IDR distribution guidance know here, a remainder reason just or expect, enough. of may speed removal, one the not of sort any for in pace change or up the quarterly down following but

distribution remain you IDRs right. pace with Well, but XXXX, the with IDRs guidance late at place. the quartile could, increase comment faster is make We're top of PSXP ability the expect way, once you're a sort it than to would distribution out level, has than the not competitive giving get to in to I mid-to other one the of

you have the do to so, you And so past a get that. year potential once or

there'll not or that, be Now distribution go we that very whether for do is a well continued and positioned lot we're that another into of growth. to but matter factors choose

Justin Please James. go Raymond Jenkins from ahead.

line open. Your is

in for Thinking in just here me. being of from of Is I operational here all in PSXP? of nature flow a there? quick cash isom the that X in July. much through the ones coming pretty terms guess Charles of contract completion Lake Any the with ramp couple day

isom. Rosy. this you say fourth third -- Justin, that or modeling I quarter the from anything perspective, probably will excuse a for quarter see until the don't is me,

thinking questions for through, I Perfect. guess of Bridge... line And Bayou similar then

about fourth quarter, I'm -- first sorry, the was the thinking it I the -- was yes I sorry. said Lake time, Charles pipeline, right Oh, I is

through type profile Bayou And same XQ, it. flowing here, expansion? type of earnings Bayou on in of I month think thinking in, two through probably same Got ramp only we Bridge, Bridge of question guess for should a is or of

quarter. the Phase in X we right improvement saw second you Bayou an The third Right. that's so see the months quarter, Bridge, would two only in

Barrett Blaschke from MUFG Securities. Please ahead. go

Your open. is line

relatively has Is there? a in willing high. there I PSX of that calm in plans hold Any comfort at XX% the is terms the of level mean it LP, this percentage point? to and

growth really it is a not on the not and is morning answer we'll specifically, that's really it's came call. be making where really question, ownership targeted And about sits. our But its PSX an on -- driven there's a it's PSX question that. this percentage Barrett, That is percentage, as of is Kevin. Midstream level in decision whether part strategy we're up PSX determine and executes the various integral that And there'll it PSXP ownership factors, the no that. around around target unit

those rate then one And transaction? just thing pre the cash as Would GP was faster that that gets of distribution looking to assumed million on growth multiple Okay. numbers, that at you I'm flow other would XX.Xx, $XXX year XXXX. imply so in me $X.X it in is on value, elimination, to based billion a the about that have in

you a comments back that earlier IDR that those what yes, are several in Well, determine to little we'll be. the take what distribution will determine structure there the do IDR factors made I I would it is, that

around distribution one LP a the them be other that think and so about growth that's happening can units. the things very is of also one but a one, And significant you and important

other ATM or impact are unit a back as the a take preferreds of So any form would one of that would issuance impact conversion that. will that other drop-down the preferreds program, also outstanding, is units well. the any And

final parts will moving several you So member. that to get that

Please Christine Cho from Barclays. go ahead.

open. is line Your

this PSXP. this PSXP If could if and that more you we're look you look assuming more IDRs PSXP, cost at than new weren't this the we lower? to were done if Now projects weren't spend new Are we capital and do restructured at to is have to money then your assume transaction? of

a reasonable Christine. think I that's assumption,

that from to execute advantages key equity the no the of of drag no so the holder standpoint, of longer an positioned has having IDRs that that on longer your LP One projects. the does drag, has of picture MLP cost that out make is better

we're if -- sounds this like the the theoretically, then of the And assumptions assumptions It different in the well. accretion timing Okay. to -- also then also equity two should this, if could the be assumptions at different mass as for scenarios? growth look like are

yes. theory, Yes. In

Jeremy from Tonet Please go JPMorgan. ahead.

Your line is open.

I'm talk as there to kind go the on than of, if wondering Bayou more earnings the should pretty I capacity some good -- think run you online? there's here we guess, of expected be given Just squeezed were wanted to results is line was Or coming equity JV could the could if if rate? better one we a to this came out? that as Or in drivers knew strong. going to we how Bridge be particularly about well this that

Rosy. is this Jeremy, Sure,

JVs we from three this So came had the the actually contributor earnings contributed strongest that to quarter, Explorer. probably really

the then the in probably from X of outages you the simply Bayou was from more first to up on Explorer, -- and there the So quarter to Bayou moving pulled Bridge thinking think to second due about quarter kind most seasonally, as coming Phase third second the the some stronger I'm more products area. pull online. it come specifically, the quarter, up online saw during about was got products to second relative as the X refinery Bridge quarters that tend quarter for Phase be compared Midwest had just fact just you and actually, Explorer

relative think, in And but was barrels to was day, first not so per Bakken day the that stronger pipeline that XXX,XXX was the the astronomical barrels compared -- anything it improvement quarter, XXX,XXX changes, there. quarter. was to had The I per performance first

pipelines those really of well. three all ran So

Explorer you because in see a well. to XXX,XXX one. could answer in quarter improving that XXX probably capacity for third third barrels production somewhere ratability really one Transfer X XXX my issues full now pipeline. day, second operate that Its stronger the at best quarter, Bridge, assumption just per to running quarter perspective, I be being will to but then the probably that the Bayou quarters and again, is Phase think from Bakken continues Energy would

projects in thoughts the factor thinking IDR slid all this good sheet hand, chaining a you with helpful. amount good were into That's guys you have at balance have elimination there, just the or ATM equity on need the the sit just about now And DCF, you wondering, that for And point? process? organic does you how of on that

Yes. sheet's Jeremy, Balance you're right. in shape. great

-- ATM, We issue us, may have a markets issuance. any debt if I the we're where would the equity? to you and We on discount with And think, capacity. hefty forward now we thing issue under issue look the as we're in have behind we -- are nice is would a there, what take position IDR's we

so forwards. the flexibility MLP's it to just And funding gives more structure going

you. Got

quick there? it's expect yet complete if because Gray could a when you Just Or landfill at do started had Oak, percent see point? start one. all housekeeping or not not you XX% that to this it's

not No, in No, at started. pipeline have probably We start miles lines -- actually XXX million the is about it point. the wouldn't has of this installed quarter. $XXX just first sometime

line So with the me, point. excuse or fourth with -- the quarter the being completed line at quarter fourth the that

about MLP other I PSXP there, X.X other as Great. I to kind to lot of steps, I the part been if with was compensation? one just IDRs of compensated could. regards wondering here? from about guess, evolution to as one, thoughts Clearly, MLP investor I'm evolution any talked And investors of Or that requests guess a last just have here. moving you eliminated, there's big thought have PSX how if a far

going some seen we in -- to that are and like governance we challenging of Yes. some that's vehicle, sponsored matters the so less be structure sponsored more are. likely PSXP, and other changes with see probably a on we you've a to Jeremy, acknowledge MLPs, that those

of, is That sort still have So change. to overall nature of that. sponsored not you going PSXP

Levine Citi. go Ryan ahead. from Please

Your line is open.

IDR Can you financial third-party forma outlook? on in appetite restructuring strategic and your acquisitions of the pro comment for light

Yes.

talked level, a So as of well. us, both we lot going organic the PSX at have growth the on of activity there's about, as ahead a MLP we've and lot of at

so M&A of And party for us there's third sort go no to action. need down a

where However, But so the have well, and were we organic us, the and are into PSXP come return we right portfolio, that from alignment, portfolio portfolio. opportunities sort overall the greater How the look of look building third-party of of, consider. it's something opportunities, from strategic both the at have with you the certainly behind when and has could the those within standpoint the they opportunities more nature compete we've along, because today if standpoint. overall obviously do flexibility been strategic competitive out in been as to very we always, with to fits the as IDRs PSX them what across fit

around So sort industrial right to that. the it well logic has be as of

I compared before, is consider probably to think, gives the do. to than flexibility we we're So third-party reality it but more bit not us it's acquisitions something that a had

that for strategically priority specific the few Are portfolio? the over it's characterizations a there years that around any next rational fit the description

You know really, not that point. we've worked through at this

Chris Sighinolfi go ahead. Jefferies. from Please

open. is line Your

the particularly being claims to different used the accretion, every baseline we've understand one I the often process, and there's helpful your in Kevin, and so because there. accretion don't about transactions belittle of mean but them I point, but want to to these thought it's questions circle of seen earlier many assumptions back characterization, to

-- quarter then drive equity If the distribution flow. coverage, plan cash you items regard So The the unit the you about X.Xx conversion. running south growth that for penny quarter It no quarter on us issuance, mentioned leveraged guided certainly per to X.Xx, We've number still price one conversion. that coverage, think what well and that last of with of was a X, different call under haven't see, your a IDR rate, growth I slide that. one you're I drop-down. had seen the immediate target assumed you

help different guess wondering use just that accretion. I the my I'm any was address that and understood than share we it could same colleagues there I to assumptions place. that, one I or of get get meaningfully is struggle all if to us if those So the

number. in coverage I not all not the given IDR on guidance giving that No, that items those sort when both mean really giving year we've will structure. and in of drive flows leverage, cash mind to Bear of we're we're next minimums, guidance a

be So to our, of X.Xx is expect of that. -- is would we coverage north

wouldn't So that calculations. hardwire I your necessarily into

to continued a issue -- on markets. we ATM have but been We blackout of going to assumptions the we're of transactions. those few ATM in And have kind market, for drop-downs, our around guidance when what never periods we weeks, for then we've any have own been the we've on quarter do in given we've example, each

given lot what the have of part think, is XXXX. and the a around than with specific end target guidance all, growth other of guidance I struggling we've just previous So you're at distribution probably EBITDA of we -- never by

those so have And calculation, are. in the of don't I parts what assumptions factors you are think we're those but drive to But moving will our in all they're sight clear that it. there, our are -- line

Okay. for be their may do this and eradication, follow-up they purposes full one to calculated they guys for We were when Marathon I went X.Xx payout. IDRs, IDR guiding eradicated X.Xx the something of ratio, went could thing. in example, but approach? similar if coverage at you And they saw, Did on when and just

No. Definitely not. No.

have further We will time. over now back turn the I questions no this call Jeff. at to

November give Day, a you, X the to there. reminder, Thank follow-up you. see and meantime, Analyst available and I questions. would will be for Julie. the Thank I hope again, In any of you and Brent you Investor

and ladies This concludes Thank today's you, conference. gentlemen.

You may now disconnect.