Phillips 66 Partners (PSXP) 31 Jan 202019 Q4 Earnings call transcript

Welcome to the Fourth Quarter 2019 Phillips 66 Partners Earnings Conference Call. My name is Kenzie, and I will be your conference operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

the to turn President, Dietert, now Relations. Investor will call Jeff over Vice I begin. may you Jeff,

Good to will and Vice and call. Vice afternoon, Chief welcome and President, Participants earnings fourth President Zuklic, on conference Operations; quarter Operating and today's Vice Tim Officer. call CFO; include Rosy Mitchell, Phillips Kevin Roberts, XX President Partners

Slide safe with events Phillips XX the statement. presentation can supplemental and Today's financial of materials our be section found X operating information. website harbor on along includes the Partners

We could forward-looking will our are here statements today. likely be in to be going making to included Actual different. cause are as filings. results Factors differ well that as SEC results

over Kevin the that, turn With Mitchell. to I'll call

Thank you, Jeff, good everyone. and afternoon,

advanced position. and its During the fourth quarter, Phillips XX growth performance, strong maintained major financial Partners operating delivered projects, strong

unit Board Year-over-year, approved Directors common the an increase of fourth unit have $X.XX distribution we previous increased distribution unit, quarter from of Our common per XX%. per cash of quarter. $X.XXX per a the

maintain XXXX IPO. We continue July since our increases distribution to the quarterly of record

Moving was year the Partnership. another XXXX on Slide for successful to X.

to ended continue a year safely We rate record and run billion. of the EBITDA $X.X at EBITDA. adjusted and earnings and delivered operate We reliably

is this unitholder transaction XX% a our year. sector-leading XXXX, a we on Partners general made strong distribution partner's MLP. program incentive with delivered eliminate During completed In We PSXP total a sheet, organic a to alignment. good growth XX sponsor growth Phillips our attractive rights, XXXX, balance structure, simplified return. progress opportunities, and

Pipeline. started Gray our In largest the November, project Oak on operations the we initial to-date,

were meeting These Lake Lake and Charles to our Charles EBITDA assets extension, are the addition, isomerization pipeline, projects the well, In and Bridge expectations growth. contributing running pipeline the completed. units Bayou

increased on wholly-owned fourth to Slide Lake EBITDA a $XXX earnings assets increased of volumes full of quarter improvement third quarter and record isomerization The the the on reported contribution our $XXX adjusted results. unit. million million. quarter. X The $XX from reflects from EBITDA million Moving Partnership the financial discuss to and Charles

record quarter terminals the million and the decrease joint flow pipelines quarter, Fourth of for from volumes was also year. prior distributions wholly-owned of the our cash by Our driven from achieved ventures. timing $XXX million, $X a distributable

our debt-to-EBITDA we liquidity. our We X.X. ended million cash paid basis Slide was and $XXX flexibility $XXX notes quarter million credit under financial ratio million highlights revolver off the with X facility. due fourth on covenant and $XXX October, In the of XXXX. available revolving The February senior of

Our distribution coverage ratio was X.XX.

leverage and of We over distribution X.X. X.X ratio target ratio continue up long-term to a coverage to

major pipeline, capital. The the South projects to funding $XXX Partnership for advanced its Texas million during Sweeny the spend included CXG Clemens expansion, Caverns growth capacity the Terminal. Pasadena quarter, and Gateway This of

and strong position disciplined we maintaining As allocation. remain to committed XXXX, our financial we capital begin

our update Now Rosy projects. growth will an provide on

Kevin, and everyone. X the hello, have lists Thanks, Slide ongoing. projects we

projects by are long-term backed and to All these deliver typical of are return. expected Midstream volume commitments

the started XXXX. crude second Gray to pipeline currently Rivers. This and we the quarter is Gray progress Texas continue initial operations Helena is full central of and November. in Pipeline service in in expectations Oak from moving section Oak of The with operating towards line junction, Three to West

Texas X.X of day deepwater docks, connect the million two storage Christi have terminals XXX,XXX export per to barrels Corpus throughput area, The of capacity. to South will Oak up multiple barrels Gray marine will and in including Terminal. terminal with Gateway capacity

$XXX million. growth third start budget remaining of is listed a Partners million which XXXX. capital. million XX% XXXX Phillips are in projects progressing expected is for projects The capital XX $XXX the maintenance of terminal, includes This quarter Partners as planned. up XX the in $XXX owns interest Phillips and to adjusted

prepared our concludes remarks. This

questions. for will open line We the now

you. Thank

Barclays, from now will ahead. question-and-answer We begin Instructions] is Chen the open. [Operator Please go your Theresa line session.

you to provide Gateway expected can the Texas to the up there? facility Terminal, Good I the pace on is third understand in taking question. some afternoon. color up and that South but Thank initial my service, you start of timing the for full quarter ramp Rosy for service with the

Sure. off and here can of as with is bit of us and course, I'll Tim start bit well. he a little give color little a info, of

started to X.X storage. having as capacity So barrels you back let for And with million barrels expanded X.X storage of VLCC-capable since first with facility this me then, up initially million now with, be know, at facility we've and two docks. Buckeye the

to then the they've dock. and permit be the of on Army been able direction. U.S. received the Corps of moving In on in everything start the been the working has XXXX, to Engineers work the right fall Buckeye since And dock

good perspective. everything from looks So that

this with is and are time. It's same quarter anything. we don't dock to be going way I So any projects to exact third as as the become size be see scale, available the at a if tanks it or all there's phased becomes that the approach. available those from Tim, of available, know color obviously when shippers. sort be to going our the to not in available It's the going timing made

Yes.

to coming out, third – quarter, again, and mid-year and first are tanks with the excuse tanks, there's getting and then terminals, they facility. on subsequently filled a then of as the We’re third time, terminals, both start we'll have one would as the we quarter in and progressing don't utilize with potentially same early which through we dock, commissioned, get actually expect Multiple come far going me. then the – can up docks burps barrels the around as

you both service? all docks when X.X Got it. in and be think will And do

I to it's sometime to things speculate don't later We'll the point, but probably I just ready year, honestly would in an progress. number. too wait this as exact see have tell. At and have

up $XXX $XXX that should be third-party I qualifying PSXP. at switching on bit, on more inside to Midstream of would more it. call at cash consists end assets much related touch Beaumont, the of flows of the we Freeport wanted what Greg's like some ultimately comments amount, that refinery call Got the And by how million of is to income the gears such? export and a And assets PSX backed infrastructure the to gate inventory the that versus attractive large-scale how million could

is this Kevin. Theresa, Yes.

talked So million the continue grow about that's amount EBITDA investment the of that he yes, or that at also clarified that level there's fact underway so And Greg we’ll course, to PSX number. $XXX drop. of of existing to a significant EBITDA in available

you it's arrange appropriate – $XXX refinery that that arrangements it. consider would refinery of put – so sort Midstream the we is fenced sort the around million contractually And the true what of infrastructure assets, if not inside all of type

make could it You Midstream qualifying.

So would consider through it's Midstream all what EBITDA. we

are equity pipe, secondary avenues And Got it. in or again, for of on other echoing currently doing Greg's thoughts words financing? Any closed. financing, example? of press Would a you terms that markets another consider

financing always the really our what be. triangulating we funding future balance at coverage speculate around wouldn't the as I around look leverage the those ratios, Yes. maintaining sheet, transactions, of and would any And of we're kind transaction.

me form I a is an issuance. equity of to mean, just a pipe

you you all a of equity sort just in of offering go through I That's or think about whether a mechanism. sense, broader sort of pipe-type about through it a go variation. And common that the public so

the end up that standpoint. in You from place same

successful that's look obviously done to The speculate us. on that far proven – not that what we've very, and very But be preferred the exactly going We've might past, too is to for certainly another in option consider. to I'm like.

you. Thank

Philip Stuart Scotiabank, please ahead. from go

Your open. line is

of EBITDA ahead little that the we ramp kind hitting $X.X Good schedule. was XXXX. a of morning, could EBITDA talk growing bit throughout and I everyone. that about great guys in XXXX of hoping annualized rate Congrats job on kind maybe billion another kind Obviously, in you solid run a quarter. of XQ of did

look the it seems probably basis, XQ out Gray going XQ how still low have seasonal throughout on if fact growth I that a going figure. contribution to turnaround stair not to is given $X.X we was As the through you're if year? good wondering run XXXX us a like full exit rate maybe Oak. and is from point, the of the XXXX be could guys of EBITDA kind kind a steps billion And annualized quarterly that you walk

Yes.

Phil. you're So right,

seasonally main MLP, blending. coming One, is reasons. we're off butane quarter the weaker two a for quarter there's normally and of First

first quarter So blending, up from fourth benefits coming butane the ends having quarter that and the XX% off. volumes

being for first headwind And a quarter. the ends always up so that

they And the in guided then XX% tend just call, in additionally, about first to quarter. to have heard higher turnarounds may refinery little a general, rate. the utilization be earnings PSX bit you that in And a

very, very or ran or the so that the you are whether you the PSXP Borger. was about refining PSXP it fourth – at about, tied system the to about utilization. And think me, quarter, ran assets specifically then They if asset. excuse And think that Ponca well, XX%

utilization an you to rate, XX% that's so additional think And so if just going headwind. overall be

the with to of Oak being when it's not Gray Gray really we anything ramp going And up, full is to headwinds. then Oak, as substantial part those be really, second of two offset expect quarter

the certainly will stronger if history just then the it And quarter. look the weakest than be you a So way bit first is first. second little progresses, is quarter the at naturally quarter

what second. XXXX fourth. quarter still than ends And that run the quarter the is the $X.X fourth strongest believe up third EBITDA quarter billion being stronger the then we is The the exit And always for with. rate we’ll

year. of table that projects organic the this at look you if online growth come And

– Gray Oak is Texas making from Caverns a you one XQ. to South XQ then got the literally that's Clemens XQ, Pasadena go really you contribution. and at is So first Sweeny expansion. Gateway,

come those, project. in Gray as ramp a an projects by kind of up as most So year of the Of there's individual Oak up. terms through nice the is the significant far

understanding I kind kind has Gray first as quarter full service XXXX that of updated appreciate far the appreciate commentary being of on And Oak goes, the the of just there. color kind Great. as initial then the began, and service. XQ of really

a that that if wondering need hit maybe to any bring and now really milestones material bit? then between forward be that could are or push it back there little Just

at is the finish it's – the Really, this point line. milestone

I've petrochemical terminals, they you're ground. with completely finish are connections, now seen we to project. the lot a the to on up of I in really It's a got power at I&E but many just terminals, of fronts, in get as in we're mean, spreads regard got multiple finishing and big, connections, this any – finishing previous terminals. done. pipes So this the the hydro little but point kind things the where facilities. in up testing, weeds experienced ready is all we've Nothing working typical work, getting different to

we're where that's at in homestretch. So this

All That's me. much. right. Thanks for it so

from ahead. please Chris Sighinolfi Jefferies, go

open. is Your line

earlier the I a wanted to Obviously, just right From the talked regard projects. you have Hi with growth the just comparing up slides, to capital – PSX these the everyone. quarter South and Texas was about fourth Theresa's by guys to quarter, there discussion change, to came Gateway on about Good been Sweeny talked Rosy, Terminal. afternoon. follow-up on third scope the Pasadena. cost about

I'm that gave today. assuming been already gave the budget given given what because that with it's you there Or was in in consistent offset you what December elsewhere? original that's contemplated Is were right?

million right. point. CapEx changing right. is this $XXX That's The of That's not at

you change, then and decks slide I'm mentioned And had Okay. – always out. added what when curious what comes gets just

I'm You all. an been a Midstream hinting see on to in noted organic about this I comment such had you curious at sort And changing slide. featuring multiple guys your consistent the have on prepared you've it's a eight don't you're six that that multiple. remarks made it if backlog same time anticipated at just as and of

the it's you And if not layout know actually thought and these the in up. have noticed that more bring of someone the preparing slides, slide funny new cleaner I changed does and that boxes. look And we we No. it's it much a slides ticker actually don't because would look,

it script. So I of a that's saying made why point in my

the then budget. noticed when me, final guys I gave and And for you enough. original the question fair Okay, this

if that's what Just we that? guess, look last is and maintenance step-up that at there I the this cadence, the Or I to from future? what's driving the in a year driving significant item guess, change, budget particular year, is

isn't particular There any one item.

XXXX, integrity we general, of the that and we've a or program in lot it's whether an that throughout PSXP. reliability And for identified. company, just pipelines have PSX it so the that we Just have happens

increase a and to reliability both XX-year the pipeline have and system throughout we of of PSXP XX-year, this want pipeline and We XX-year vintage that the integrity PSX just lot systems.

a lot that on things doing good news we're is really The that they the more before identifying work the of happen. is

seeing so increasing. really And what is in we're you're XXXX actually

going obviously EBITDA, as, what EBITDA. So has is which our been. like we the forward, X% we'll is spend of that that see But it'll be more – X% spend like historically is have what of more

where in is maintenance just up XXXX an growing of of But EBITDA, are the probably compared where historical million that. we're finding more more But it's bump X% expense It's because a which, level more And that to been. has a XXXX anomaly to it level. we is been like I in simply end say of up will $XXX that would be. so being the again,

Okay.

maybe general some as programs. there because that just probably of new in more acutely driven grows, think a So the particular business ballpark. that's But fair… you the Is

will bigger, be a as amount get smaller. obviously the That's right. percentage but The will business

Okay.

PSX whether You'll find the it at our level Midstream maintenance, PSXP. it's across, the for with when or you look

in based project but on a the number size, a for not And of have year, region. complexity per it ratable a is specific again, really We quarter.

not really get it it the not and regard move our it list. or the is, needs But and really depending other always side quarter is which on and big really to it good. when what like a it's just So done project with is will to on It be based isn't it's number, predictable said, and of year-over-year you the fourth does ratable such. – priority the such does, highest

at Okay. conversion me. whether equity the position. regarding Kevin. or that for do or point Or you that could, simply? if And of remaining of do just just stake? I more know But contemplate you contemplate take that I some it's don't preferred this I preferred you question out for a is for guess, one

the Well, that preferred the to now, holders the right at things convert equity way right common their election. equity stand have to

know certain which anything of units time, the met around October And price this is that being that I so in that's really haven't to a they question and interest signaled do upon of don't an for I thresholds them. year. point certain think common

have We those if the are criteria right met.

that point We have that's something future. But the a conversion. for force right to the in

assumption, our for it stays in equity it preferred we where just being. as time assume So a is the

lot this a to took guys that. I me morning. enabling right. of All appreciate Okay. time you I do

again. thanks So

Thanks.

another from do up question Capital Elvira We come Markets. RBC that's of Scotto have

is go line open. Please Your ahead.

afternoon. good Hey,

in year of kind a of can out, we The a keying late. growth I for absent longer Is and that maybe can big year think that PSXP Sorry kind CapEx a questions about? there of that projects are like level certain of project. growth find in CapEx level have term certain smaller sustainable

we've just of more I combination earlier three opportunities, there's stages through – probably the that. I'm MLP in projects grown a thinking cycle. And the lot organic a earlier I so there in mean, the through level. at is, that two which is mean, as more dropdown, the the you know, sort originated PSXP’s last then years, of PSX of been or life albeit, significantly

the path look we still that's And growth MLP. probably the at so as at it, to that think we continued

continue to growth good place, infrastructure that nice return do boost we projects generation. a to do are find come that in little small investment we opportunities the give to upon we have with EBITDA What relatively

I there really defined And probably level. don't what so is that think a is. we've

would sense we've be Obviously, the makes sort opportunities that been that. lately, grow. growth. total type the we're be number, and at additional than that, something we $XXX the lower provide and portfolio where have significantly almost spend It the significantly sort where incremental that continuing with to million is continued of be would return of fact lower it'd of size that MLP there to capital But than it

PSX about that I And should through that the relates enhancements, $X.X talk is, going any question of the that. call, end level level or how to flow have on the advantage provide they that's it for of then the XXXX. and as think to and think the of I Does to billion about Thanks last PSXP advantage through how we about PSXP? at

that I think where manifest level. PSXP the would itself will – at

being of done of an is there there capital terms we're capital a element our of of execution the extent more that which the effective seeing the That's benefits MLP, projects. are. that to projects So course, at in

it a show value from the that's MLP focus our around expect see around really chain you'd of at end. that not standpoint. to going so up same hydrocarbons. the sort we how from look to to because the in There's beginning And That's all significant

a which same chain value of sort And more so the not MLP tolling like of model, that times sort is a focus. type volumes, see fee, volumes going arrangement you're tariff to you're or less of a –

area is chain value identifies focus we previously. might done other investment But have the not opportunities that that

sense extent you'll make the there. opportunities – to see you investment benefit some so some And get for MLP, the those

terms then drive do level of as the PSX in digital the assets, better having as data using of analytics that is data And for MLP. that sort the MLP let's from to other how say operate around assets just decisions our at benefit we ability the will and operations and element actually those and much the

of there will some be elements flow for and the are the benefit of that MLP. So certainly

very Great. Thank you much.

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

Phillips Thank your Partners. in for XX you interest

If additional Thank questions, call or you have Brent please you. me.

and you. conference. today's Thank this Ladies concludes gentlemen,

now You may disconnect.