Shell Midstream Partners (SHLX) 3 May 192019 Q1 Earnings call transcript

Good morning. My name is Kristal, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2019 Shell Midstream Partners Earnings Call. All participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. reminder, call a be As Instructions] this may conference recorded. [Operator the now to like would call to Officer. I Relations turn over Investor Jamie Parker,

your begin may You conference.

you, our Kevin Nichols, earnings and Shawn first Midstream Thank Slide With statement. CEO to X CFO. for contains Partners. are call harbor Shell quarter today me Carsten, Welcome Kristal. safe conference the

and from non-GAAP and factors of session. to most this under SEC during the certain expectations financial the measures. regarding could with will We Actual presentation may results for Please different measures. Appendix X events results future to be and important in making as the in measures, the Risk are forward-looking release to and press our disclosures including refer such differ reconciliations actual cause included materially and filings press comparable release contains that well statements Today's Q&A statements call today's such related be financial presentation as also to GAAP Factors earnings here

take will I'll of Kevin the to over the questions end that, call the Nichols. turn presentation. With at We

financials. On the you, call, a by that then hand the capital the morning everyone to of then quarter are -- off and who'll results. for update the on with projects will thank I few Thank sponsor. being being are currently you offer first Zydeco, through where Shawn, Shell quarter Midstream on and built an through call update Jamie. close performance, I'll we currently by taking first first the with walk I'll an that quarter for you our joining start Partners are you Good me today's I'll we

of our base generating quarter continue with continues portfolio volume EBITDA. strategy offshore, the as value Gulf against adjusted and our to deliver and benefits with in million start And asset $XXX $XXX beginning to healthy deliver performance. to we partnership growth at Mexico. the if net our in income look million unitholders, first the So from The we of

total Proteus down volumes the quarter, Appomattox that system Now, in the to were in offline, we took all as oil. Pipeline Endymion for slightly preparation Mattox this first and we connect did and

yet growth. came the ramp Foot of Amberjack and around system, This of quarter fields as drilling another increase the volume up Jack from continued Malo. we activity Looking saw Claiborne St. the as well infield at Big

the continued have in barrels additional XX%. three impressive fact, an the continues And eight of this the tie-back activity turning Amberjack since tie-back to This the some And have over In quarters another a strong our delivered acquired grown XX,XXX the tie-backs activity to theme Eastern were on organic we this -- in to XXXX. activity that Corridor, year. producers asset, XX% quarter, growth last equates led building as growth And expect this around day. growth has volumes we an footprint. with

producers pursue robust this And Finally, compared remain we've the strong first demand in-field volumes when Mars, XX% development. XXXX. for system growth as of organic quarter of looking at the I seen remain to expect to as

that this the in a proof of States. all production production of the additional United Now Mexico Gulf part and story Mexico provides activity important of an points remains of Gulf

another making breakeven leases their XXXX. total, the resilient barrels of show our Gulf forecast of bid with Gulf and Agency, out X.X million day XX Mexico the sponsors to from And in leases. commitment future continues In XXX and X.X current to recent and of to high successful the industry In just Gulf our Mexico Energy continue portfolio. EIA, to the took fact, the Mexico Gulf And record that's the offshore, costs portfolio new part be in of industry they our positioned as expect all March capture updated to with the the Information significant yet bid progress, now and in for of strategy, these to this of a we prices, the lowering volumes developed up where million a hit Gulf XXXX, day round. a strong a make barrels continues corridor aligns developed. have And

Now onshore a portfolio. look let's at take the

the remind Louisiana to to only markets excess And Zydeco serve as connects to export grows evolve the the Our as hub pipeline the as performance and volume continue in barrels St. the and in me storage this be day continuing markets terminals U.S. We exploration deepwater role refining of well rest contracts. exception discussed, barrels quarters. And And Onshore approximately region. with to all LOOP. better this operating the saw and Nederland is you, both Zydeco assets quarter. the revenue that per performed to was was of this a cost. LOOP well is XXX,XXX export primarily positioned Zydeco, per at play show due of and line and two previously on And supply continue the I to as in compared assets in the first handle is and as built the previous in key XXX,XXX of Texas this Zydeco routes only prior of throughput with day down onshore both Houston to growth, let quarter Zydeco as James the crude time. supply. to key

open Now provide launched we while update and additional the marketplace. preserving the will delivering in you the will that at for time, May will have by appropriate you value to close which outcome an we optionality XX, Zydeco open information. and the we in leverage best near-term, dynamic maximum will seen The believe on with season recently Zydeco season evolving have

the will gained Pipeline call Mattox in Ethane to and I was priorities; and Falcon Mattox an system key of well Ohio, the the supporting pipe the complete is will over Ethane now crews and Mattox well you over supporting Pipeline XXX across under also when and with Shawn are of and sponsors now completed to receive And like MLP, Endymion, budget way ultimately I'd provide on is pipe the before space. thanks and offshore Proteus U.S., all connect in and system projects, Virginia Pipeline feedstock through online, to into the -- team's Shell the hand innovation, give for And construction with complete, markets. these project. ahead plant. in people West great project capital to of construction specifically preparation, well ready phase the Appomattox right-of-way the are Now Shell's from world-class potential midstream by investment the under Falcon to the installation. of Pennsylvania, Shawn, schedule welding the first the The Once for oil midstream transport candidates Delivery and the under the ready two are oil. onshore will continued examples future and update stands growth onshore. the Falcon efficiencies Both ethane petrochemical to stand projects of

look our As scale, of company grows in partnership these projects to and the build at level. will size midstream we types

that, financial I'll now hand the over performance with through walk quarter. So call Shawn? the the to to for Shawn you

morning good Kevin and Thanks, everyone.

press by deliver our As release, supported in value portfolio. unitholders, our yesterday's diversified to for continue we shown

our key So a financial metrics quarter. few cover of let for the me

about from quarter. was prior Our $XX total the million, down $XXX million revenue

related Now this transportation revenue. primarily was Zydeco lower to

offset Corridor. completed in quarter Eastern the Auger the revenues As of to higher along continued the oil, contracts. results, from expiration and where Gulf, the following was our see partially product decrease Kevin two we with the full strength related of allowance mentioned This by earlier, this of is first sale revenue increased the

Our expense decrease operating about was from million, quarter. million $XX $X prior a of the

Corridor project by an lower asset had increase offset certain sale retirement and we in the This allowance with in driven cost a and market revision the Now obligation. having an not lower was this timing in assets spend the adjustment cost by was spend project oil, to of improvement quarter. on of prior for like partially the associated a Eastern

total partnership the Our roughly income up quarter. investments from on interest million, was quarterly $XXX was million. million, the million and and from from other $XXX lower was Poseidon. to adjustments, to about an was total, In down income revenue $XX maintenance available due distribution dividend attributable expense, dividend adjusted other cash slightly $XX Mars decreased $X due million, equity increased EBITDA After and capital to prior for

partnership were provided both ratio on based earnings net our announced we the growth favorably partners coverage by how allocate the income waiver $XX under agreement, impacted previously sponsor. IDR attributable Now our by to and limited million our

prior Our this X.X per ratio a distribution a increase unit, a And resulted partnership the quarter quarter. of $X.XXX all of over coverage the times. representing for declared X.XX% LP in of

second So guided, contract we now a to expire previously few regards Zydeco, moving will have additional an With the updates. quarter. onto in as

expect quarter we income running Now spot had of coupled The the are these volatility that to continued the effect million. system net the CAFD contracts, volumes in $XX on transported. impact an and have shipments on approximately first of cumulative already-expired items and with

which as that adjusted balance as Permian allows We Houma compared is in total In when $XX and the first outstanding quarter QX annualized CapEx be primarily the significant growth XX, million our partnership's incremental of incurred quarter to income $X.X the sheet, And EBITDA. which with tanks our first The of comfortable of $XX forward. to quarter, us million of debt-to-EBITDA $X on the billion, to the expect balance was and flexibility project. related we X.X of the equates related which the We're to gas move ratio each net in times impact capital a liquidity, expansion gathering system to partnership sheet CAFD million and of $X to second million debt to impact. our we March growth based continued finally range space, capital. conservative in

Operator? we'll your with now take So that, questions. all

question [Operator you. Chen Barclays. Thank our And Instructions] from with first Theresa comes

is line Your open.

on clarify just impact the going to Shawn forward. your First, comments, Zydeco

EBITDA the million QX? through So in that from third QX on QX to quarter per even rolls recognized detriment for off of in QX, basis and the $XX $X to was DCF the contract a middle that your is incremental million though sometime million $XX

Yes, Theresa.

the highlighted, Kevin in an season. of As we're middle open

QX, million our $X incremental $XX haven't provided any provide and So related total as to the have guidance we'll beyond you to expiring, contracts we were guidance provide that million later. more combined are we but

QX for this time. only that's So

for dynamic to and pipeline bring you in competitive open the your James open bridge, season that they're of middle comment the is to that service buy onto now the barrels portion also St. in additional of system? Can current their relation an on Great. in to season

No, thanks. Teresa, way. the expected morning Good this Yes, question. by I

systems say competitors So to not positioned of you competitor able that me Zydeco system are first, crude compared more to better and to is by markets, let service. that the sources other destination of crude being more and connected remind that

previous the quarters, pretty to of So you the competitive the competition. rates good more we current And feel either to look Zydeco we've system and in out when regards connectivity than positioning rates with is rates, some put the rates, about of out being said information, so by very are system. spot that as public contract and or the

open comment out on open to Now of specifically season. with be right the commercial the you open appropriate. that when terms update the wouldn't have in comes the me give the middle season, to what season of We'll that's of of the for just an it with aspects

Turning offshore. to

exactly to So there? capacity to clarify given committed all competitor what just volumes happening insufficient Can Amberjack alluding of you shore. comments directly has that recent its deliver is

Theresa, question. thanks, fantastic That's a Yes,

is activity referring Gulf with in in First comments. strong comments. Mexico. I that you've good I to time a Grant Genesis think for This the And of the heard my agree Genesis and the Gulf. you're about

assurance all So that to XXX,XXX connections system And over to of that provide whether stay our to a a the we we the regards to that offered. With is day one barrels overall. shore different they to customers. on built Amberjack system, Amberjack choose whether to it's exciting an flow market and or have customers to time ride of on Amberjack in way go choose the the

possible. which have ways value shore, and me flow way And gets as to through as no is connecting choose paid many to customers producers you assurance to We other to get remind that that let matter the shore optionality get first. carriers. But Amberjack to our markets

And carriers connecting so is thing. growth a not bad in

because thing those fact, interest In good some in Poseidon. carriers our like of case, in a SHLX this it be can connecting of

get onto paid And in get ride because of on we that they So we'll growth to our well. paid first, if as get Poseidon on sure, ownership then to customers choosing choose Amberjack. Poseidon for for position Poseidon, Amberjack and

the good Amberjack a Gulf, So or if Big because with do which the producers growth really when carriers those Jack as we provide. riding beyond directly connecting well total relationship Foot thing, into Malo get shore capacity, we optionality have St. through it's us that good customers takeaway those or overcome attraction. get to to And need is our on of some XXX,XXX we businesses constrained has tie-backs that we of with to with in attract not a like our new that barrels to situation we're connections of where and a And deal that comes. positioned allowed

Thank you color. the for

understand gravy and for incremental that paid an the first pipelines. be Amberjack gets completely you interest So SHLX, anything if in would have other

well? shore divert for Just a they just when customer have you producers, to negotiated just agreements that or some from budgeted point need at originally were would as to pay and from half planning perspective, to your these they -- volumes to clarify had management they way with relationship the Amberjack

discussions, customers ask all is, producers can shore, coming on our to the first looked different connections. and or through of can't speculate what one on in chosen, production at they our my things but those whether I system profiles I barrels those we through have it's from get us

And do what demonstrate. so that's and we we

if our connected the in optionality most valuable in with in that most then also Because they they on very remember that's for highly We if system. there's an provide shore, to desirable. Amberjack and systems disruption, particular because you alternative way a customers customers, have know won't one that's shut just a of particular have a the get you because issue to an

system customers. to part all how our our of we market that's So

our next And from Morgan. question you. Jeremy from J.P. Tonet comes Thank

Your line is open.

volumes Kind Hi, Joe this just I been throughout trending for to how Jeremy. Zydeco the Houston Zydeco maybe two have -- impact any if of then on quarter volumes question, generally ask quarter and to related Nederland enters service from about phase the you could of is anything following portion Bayou previous and the the if Bridge wanted share area? and -- anything you when the versus also saw about

thanks, lot regards of I know there's with to Yes, Joe. around a Zydeco happening. interest what's

couple remind comes at and longest Bridge biggest first term the competition, in take actually Bayou Bayou try where With and a point to one we regards have let you me of marketplace that at to and goes a that is contract. and me Let those where time. at St. Bridge James, out, our Nederland

happening into volatile, on volatility quarter, -- With for we've be way is volumes the through right And secure said will it it. to of it's at predict this second to volumes standpoint wouldn't will contract depend to quarter So of We're the that us this from comment for me bring what that. be just and hard and competition. entering customers regards to that what's partially or in time. us

or So to From bring to it's offshore. give really in you -- that. us Houston, not guidance going they'll to Nederland I us on the in they're bring do where what from can't it volumes it

season forward. outcome some of open depending after volatile and guidance for you little on So the to we'll more be the able season, open give going while be we'll a the

just about then would timing. the And maybe think you drop-down potential how

You Shell mentioned ones you'd either thinking the assets? be assets, about kind of those if a on focused of and couple are or

not have liquidity point, balance haven't kind sheet to guidance what of so will on about able there's this be through and around a that need markets, to do, But available of at guidance our we $X.X way one you future we do done. maintain to We we work the normal something we fairly providing our billion to any drop-downs. further if any so we're just sheet, provided of that balance drop-downs conservative remind reasons and with are we're I

me. all That's for questions. my answering for Thanks Okay.

diversifying point Joe. we I of I want maybe to other Thanks, provide there's we the would also I I and know one asked And when to around a only this our and with has Zydeco mention add as when some of look Zydeco. rest if been quarters thing previous the portfolio our a in information, have flow with lot you got portfolio of that But think is line the performed I busy question onshore at that And passion certainly we the portfolio had actually you we'll a you a we've that. more have out Zydeco our or stable growth outside cash saw offshore. very growth. have take and -- the -- And strong system

Thank you. from comes UBS. And our question Gershuni next Shneur from

line Your is open.

Maybe to like been respect kind the I it IDRs, missed in remarks, feels of any with latest thoughts but it a about talking this we've prepared year. for the

of could the sort Just some into be at kind of thoughts point? simplification latest a some there

you have with the with the than kind continues evaluate of term The the sponsor long much said what to don't what through we mind. thinking this the a waiver in when the more in to I take what the past. That's do give waiver. term the They sponsor unanticipated. granted long to view. are Not have was They IDRs. of role

But that regards So growth soon we worse to to the as additional do. update the time. no I an IDRs. no this with off you with provides at as guidance Will have was there

a possibility the there gets Is that waiver extended?

Yes.

So not what going or talk about happen I'm forward. not may may to going

quarter in sponsors extends this is, best do to little the space. talk highlight until A just what the to in think I wait of I'm a do about this through position the thing year. third [indiscernible]

it impact multiple advantageous the as asking or to a I differently. kind Zydeco. open know little how for address about put Maybe large at the ratio potentially perspective? contract if like from and you've would sort parent isn't coverage a your doesn't a coverage would you on sponsor season a could If as of Okay. or contract the questions to the successful it like, going year. question the I'll gotten it we Would bunch more ask -- of Just the you're an rules? dilute risk of drop-down a of consider as

Yes.

that the to And about different not I entire have we So in commitments. things confidence that you. over throughout a I is say that thanks. happen that could deliver or have public type will situation, and we our demonstrated the we've of to not -- talk that I'm time confidence been against we've continue in given to time what our I the various think ability deliver that I but the the company don't commitments going could we've

enough. Fair

You've actually so have delivered on forth. and your growth coverage on and commitments

to that you'll way coverage is So continue one a better or fair hit end by the to or that this another assume X.XX ratio it year? of

Shawn. Shneur, this is

We to guidance coverage, reiterate on point, are comfortable growth be teens just Kevin's able [Indiscernible]. hit still we're meet that provide providing and that and but commitments we our mid we'll

Thank you. America. Derek from next from Walker comes question our And Bank of

Your line open. is

from non-firm line? Just one some to preserve to can as real have firm? quick. as you season? just Maybe far a just in to I'll with couple capacity open me. the get down want the optionality have So your about you sounded you comments like It any the Zydeco season versus approach decision open Maybe talk the

can certain you only firm under FERC, space, a Regulatory there's circumstances offer First, the guided Federal which Commission. and that's by Energy

what the contract. line throughput So using is in a up that the existing contract, was agreement existing freed deficiency the case and we and particular from this on offer capacity

so the go the that. And to way that's after regulations under

can it offering, extend free service up expansion some in really from into the was or shippers. further this If you invest was made particular you addressing capital line, previous offering the about space make for capacity. then change want or But to the that an

commentary the sort of eventually that sort potential pipelines the parents was IDR development marks, think give maybe your give size. I will to drop-down, on the the of of a the any are Is that -- -- was Is thinking MLP process? color mentioned MLP would appetite you're the appropriate on start of at Can how just a XXXX about an when taking projects maybe MLP or I happening this to the got that you then you formal there appetite when sort You kind at little there And do thought opportunities and at but an more level. a mentioned on you that just organic that around after that be color of there's bit to of timeframe? on more sort sort level? XXXX, simplification, guess a

Yes.

So one building infrastructure I realize the of alignment is at to kind infrastructure and goal. thing the that, think the in the Shell ultimate partnership here the is first midstream place there's level within

Now, it before to out relates cash cash back in. comes

project when function that looking can which takes the afford. going the at for you of the we spend have as forward size bring on what that's much different project. to We're gets and that how maybe ways as that the some can between guidance duration have sooner. when turned you so you contract to is I But to and really as well in far And also that of participate no happen give or it as

maybe that Is just we on then think for back sort taken expect mentioned Pipeline. a Mattox should Endymion, levels? sort about XQ levels you for complete XQ? should the And Okay. all just quick and to to last one me tie of of just and How the one into -- now we down that those Proteus is are

Yes.

new up which all is as over platform that pipe organization comes SPXXE, took Horse is the called rest. pipeline Thunder my and as and complete where So the as a well project actually brand and over

from is connecting the other were Horse forecast took see we that running exact but a return rate system of that I again but while and and normal system the Thunder in platform, volumes. give as a flow expectation. we you'll a and you And volumes, offline, So reasonable won't up to connecting is forward

Markets. our Thank Schultz RBC [Operator you. from And comes question from TJ Capital Instructions] next

open. is line Your

me were for credits those clarification utilized Zydeco, to Just quarter? guidance first on credits during the impact from on the trying earned XQ? all one the this the for for Just understand

of the have well. portion even statements used kind the you'll a see contract expired. We financial been those that credits continues majority And -- actually of -- were which the of good roughly on vast XX/XX use $X as those those credits for million in that credits, used. contracts have an The about for of

So more charge to against many we have won't the MLP.

our I'm And remarks. questions showing no I'd Parker back over conference for to you. the closing lines. Thank to phone like now Jamie from any turn further

call interest Thank you. in soon. our concludes And Thank you today. Shell That Midstream speak your for Partners. we'll

Have a weekend. you, good everybody. Thank

thank Ladies today's in for the does participating you conference. This and gentlemen, conclude program.

You all have Everyone, may disconnect. day. a great