Shell Midstream Partners (SHLX) 2 Aug 192019 Q2 Earnings call transcript

Good morning. My name is Kevin and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2019 Shell Midstream Partners Earnings Conference Call. [Operator Instructions]

I will now turn the call over to Jamie Parker, Investor Relations Officer.

conference. your begin may You

Commercial Thank you. for Kevin earnings call Ledbetter, second CEO; to Midstream Partners. the VP Steve Shell and are Carsten, quarter Business With Development. Shawn conference CFO; Welcome and me Nichols, today

Harbor contains X Slide statement. Safe our

will materially related future here, from cause and that expectations forward-looking such events filings session. Actual actual statements and in SEC. yesterday's under as with and in could be well included the statements as presentation Q&A making different results results be and We release to the during may are Factors to differ factors press Risk our

Today's call measures, to the appendix measures. and one refer also of financial most this comparable including to reconciliations GAAP important financial measures. such Please the presentation earnings regarding release certain contains press for non-GAAP disclosures

at We end will take questions presentation. of the the

call turn Kevin With the that, over to I’ll Nichols.

Shell for second Jamie. quarter for joining Thanks me Thank you morning, Midstream Partners Good the everyone. webcast.

will our today's take On you performance. I second through call, quarter

We with it will Zydeco I’ll Mexico. the hand our and of then I’ll our season, open results acquisition. close about Gulf recent the update strategic speak position of on I'll key in focus walk over an most you of Mexico and last Shawn after that, with know the Gulf the storm you impacted and he you Barry, second month. quarter tropical to financials with to through will provide regards guidance updated which as on

the a and which pipe. results of are barrels onshore. which represents this U.S. the XX% And a of products largely premier over of combined X,XXX refined the earlier day deliver increased approximately the United So by of started. in X and related supply. states Quarter-over-quarter were products Colonial refined closed total roughly with let’s these this miles million acquisition Starting network get through pipelines June, two to distributions driven Explorer the

supply from this And strategic services acquired of Midwest and diversification and include the the Midstream advantage of Explorer companies. and on sponsors’ Shell advantages Partners key Gulf serving these like the and with both interest of these Explorer. Colonial access acquisition, the Northeast ownership has enjoy Coast in to Both of while that markets in all diluent

The in us another forward forecasted of to our attractive to access times our on This is of multiple unitholders seven completed an acquisition to accretive deliver was EBITDA. sponsor, assets our high midstream example enables which immediately yet commitments. ability from quality

Now let Zydeco. to me turn

season, subscribed. As being announced June, which completed pipeline in the open in we fully successfully the Zydeco resulted

matching services to our We marketplace the are the and the demonstrated pleased the with of of needs Zydeco have by asset of the competitiveness customers.

And and today efficient onshore, in via connectivity of Zydeco key in expect which competitive as of hubs crude hub only is the of capable export through to export important addition to VLCCs. loading Zydeco’s play to route role an LOOP, training the evacuation we an

to to Our And assets Texas assets in of will and our and long-term maximum opportunities we some customers Louisiana value advantage continue this always, unfolds. most it as Coast business are optionality this our positioned well and to provide unitholders. marketplace area as of dynamic evaluate the flexible Gulf in the new to take for

again Switching saw continued as turnarounds. we second partnership, despite strategy differentiator to announced to a in corridor producer grew deliver for planned offshore, the our volumes key value quarter, yet our previously the

of saw per to have Proteus which up expected peak total announced into connecting from Endymion barrels production have and XX,XXX per of production Buckskin, First to come X% day line. and million prior production production growth initial barrels story volumes XXX,XXX online pipelines. the the Poseidon announced Appomattox, is and System into in is day the contributing X.X Shell Our day, May, expected from Oil connecting new which peak to we the were quarter LLOG from our barrels per

Now exciting as up production in Gulf. a new this the it is news opens frontier

continues fields Fort into Gulf, Appomattox of could as all I as to Sumter, replenished. in funnel tie work the on remain which continues be the on Vicksburg, appraisal continue opportunity Dover, Rydberg, the to such bullish As future. Long-term

the online projects Shell the announced day Vito VP In per will addition Phase day the Thunder XX,XXX Along project, of yesterday previously Vito took just and expected both with the to to development this or located projects Shell FID Proteus new XXXX and Mars expansion which in Endymion X announced PowerNap two Horse barrels be XX,XXX barrels corridor. are by into per XXXX quarter. these announced flow in

innovative to and accelerate the prices. in down find discussed past, are I've production breakeven producers drive to As ways continuing

on In first $XX fact, expected than PowerNap and date expected of two Shell was the the per price the field breakeven less able oil barrel. to is by years accelerate

I operating and extensive combined what with footprint basins producing strategic us continue well partnership. the Gulf This our Mexico industry for our of future. positioned for competitive the to and of provides to encouraged experience holds by remains refining region crude the that The the needs. the other leaves be types

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

Thank Kevin.

This contributed meet quarter midstream quarter. our unique coupled diversified the high some we another our sponsors again with to access demonstrated unitholders. to assets Despite headwinds, quality portfolio commitments our to our flexibility to strong

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

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

this transportation to turn quarter May, producer related eastern this our primarily finally and utilized due corridor. Zydeco in revenue expiring to a third cash in arounds deferred planned lower Now being was fewer contract

June of or of have with majority contracts credits been expired expired. used Zydeco XX,the either As the associated three have now

prior increase the were expenses from an about of operating quarter. $XX million $X Our million,

first as the in quarter. All project lower this second sold primarily Now oil the and an higher typically having we experienced cost asset spend on higher quarters. as a was on offset goods in was not Zydeco terminals, obligation spend we related [indiscernible] the of increase to in and third expected, retirement partially our by as this adjustment had

primarily first its from now are Colonial Our result a $X transaction, recent an as in up method acquired Explorer equity investments. driven million, equity and we about additional accounted interest $XX was income and for Colonial from Explorer the investments and by million of quarter, the

quarter these the X. the of our June we For income investments from closing date of on recognize share

income million, down $X and Dividend quarter. were other the for $XX about million

Explorer [other] a difference partially this related Colonial classified investments. the again to primarily in interruption receipt was business now as producer by is XXXX. Now impact final offset being and related equity insurance of method the This outage to [ph]

and to million. available $XXX the In for total, distribution quarter. adjustments, total $XX from adjusted about after capital attributable the And was million, up maintenance million partnership interest other cash expense, $XXX was prior EBITDA

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

a Mexico With to the regard Gulf we the various few $XX impact storm income available onto degrees So now distribution the in let experienced to the of volume impacts quarter. third Gulf anticipate Coast. cash me asset Barry, We our updates. tropical around $X of in and for million approximately move million range be to net to and in the of and between

storm. while the this in the do in our of shutting assets, damage the of is result to Now any material production not producers impact bulk advance of we suffer

the of also of now the expected We the an million let as third expect turnaround impacts in quarter me Gulf. until the been now guided XXXX second in impact some $X for And delayed previously turnarounds quarter. fourth remind half have around producer you the

on And Permian related we finally $XX incurred the of the to is which The in expansion to and million million quarter, $X gas tanks] capital. the CapEx continued growth primarily second in related space, capital was system [Houma gathering growth [ph].

liquidity. and partnerships And sheet now for the balance

XX,the EBITDA. to debt X.X As of annualized of a to partnership outstanding of June adjusted billion, times which $X.X EBITDA had total QX an on debt ratio based equated

sheet our with we business. flexibility us continued allows which our grow balance as comfortable We’re to

So your Operator? will all that of with now we that, questions. take

[Operator with from Instructions] question Tonet comes Jeremy Our first JPMorgan.

on for Jeremy. Joe This is

thinking for still First the waiver timing in to that the IDRs expires you're how it about fair a guys waiver you want I talk could you ask wanted soon would and as of XQ, is about as that? place about to through kind think solution goes and recognize

investors understand given And frankly beyond this guidance a haven't to and the the regards not all is with of I it’s to happens of question we also, IDRs. as that on XXXX. our new minds what

So and beyond. XXXX in guidance looking for you're

the Specifically to decision. that’s the with IDRs, sponsor's regards

the time So further at to or say will I'm time. anything or regards this I to will with at say guidance this IDRs. I’ve not something we decision no that related but going the soon timing to have in to as as space we give to as timing the guidance that

you what what for little impact maybe And the about type see then of but the you bit - in quarter kind and Gulf the fourth there. turnaround a should could there and expand talked of Barry

further if you to answer but not it’s anywhere question events you are of your understand impact detail I to Gulf inherent risks the question if is of look Barry, and risks want in kind ask much - that I’ll think operating of Mexico some future there's of or weather. in the course do to Shawn if of I so follow-up Yes, so the Gulf asking one of about weather the Mexico, have

advantage I the Gulf confident more going that weather operating events, I that predict capabilities, will in I am has forward say of that to no or operating Gulf am the the but forecast there's and not Gulf operator more Mexico which of also the And of like a I'd strategic remind Mexico about for our than partnership. everybody operating is expertise Shell. knowledge of to benefits in

continue aligns and no also things our footprint. to acquisition portfolio. able expect is to Gulf just the and that across but There of Mexico and growth example portfolio advantage and the further capture mitigates elsewhere we Colonial not of which to we’ll Mexico, growth did we've our Explorer the to an nicely that the corridor with risk the our And for as very take little capital been I include strategy expenditure. that in in of Gulf And existing diversifying be it

all I appreciate that me. from Mexico Gulf That's Okay, thank you appreciate of growth. the and I

[Operator Instructions] next from Derek Walker Our question America. Bank with of comes

appreciate don't above couple well. I how as should impacts or volume of we XQ. seeing a But perhaps There these for given below growth XQ maybe just And give guidance, some impacts. of quarterly you the is I XQ some and you’re the saw but color the just directionally me. see from know

this Shawn. Thanks is Derek,

have XXXX. $X we million continuing impact some mid-teens into seems $XX was to to So million With in thought a I guidance of going to from plan also storm. so an tropical on regards of still the then QX the we that pushing for growth QX, in million to have be in $X items after QX. this Barry be couple specifically And we hasn’t think turnaround we that changed

of bulk QX. QX the expect would would I that versus hit in So now

that - color, remaining you you - been with Have just of recent that transactions process Kevin just conversations maybe ask just the out year? little some there. then differently transactions the, mentioned had and And given a unfold recent the the may Shell I IDR have you maybe just given sector how I’ll guess,

the done we as in or really activity PXX the aware they flows the that what sponsor are the the of and The both things and well company conversation Yes, past the Phillips other sponsor. between leadership up thanks, I of said PSXP watches and and and as segment the changed has hasn't have ways continued are the back actions what well that same. to dialogue unfold. Shawn and marketplace and XX

that from important to though that, this The in here. very reasonable we've quality answer currently time you’re to recent transactions multiples. we while an this period And are the that for high would are asked of for point also form support the these and have really waiting answer question seen that, assets is this know to in I this strong us we've for you sponsor looking which waiver I you at communicate under. the sponsor of acquired, everyone

transactions. sponsor And take these then units willing being the with back to

continue So they we to open aware of conversation and the well marketplace. as I would dialogue just have say place are in what’s taken that

Mars as recent need whether you of there last barrels anything to and one end to that or you from first FIDs. that you your you Proteus, enough me, see of much some couple take this a excess it’s an on is these it's from the on as not And there Endymion operational just projects on maybe from need do? to or receive do Do oil one capacity far perspective mentioned that

the we about I’ll good is with look take the feel grow. work all. Mexico our the and one. flows we is at any appropriately coming you continue where point, Endymion I effectively have say profiles in those it towards like and What Ledbetter, as planned constraints into de-contraining for This Gulf system. Steve question. this so, we is Yes continue to I’d appreciate At the to Proteus we be that to of approach

UBS. comes Gershuni Our with Shneur from next question

just proceed is when I questions having which the just again, that back just with in the pay to all waiver is I it IDR we also sure questions wanted to to on RDS? respect way you're say with the part [indiscernible] into sponsor circle with to Shell am the about conversations maybe to IDRs, general. But there [ph] back] IDRs you it what that conversation extension as of actually or premium [roll the

in Thanks Look one five Shneur, would have this first the the this we’re the midstream that and operating as I Shell all things assets organization. putting tell actively to back and entity, one assets dialogue you with the United years they into is conversations that States. concentrating integrated entity over not had very are that this value of are pleased are around. sponsor Kevin. are of They strategic the and performance options Shawn that’s And under busy I performance. this looks into

we So space is do of I and going first the changed not this the in that's give to as day public. and long-term to sponsor that the take very since entity you they a view while very what won’t playing guidance went

works to or recognize looking entity paraphrase options exist to read or continue the investors I you what back figure just want trying kicking like value can whether conversation IDR out what add labors - will that challenge did So to really highlighted they to you on properly? from the different how its and

the I going how say do so to strategy LP I the concretely of the unitholders one would would unitholders. going RDS win and chunk and way as like want? price win not at grow for or LP just forward looks good units sponsor value we LP owns Yes, see look and the specifically this and remember How am RDS another. does the stock the that a well at speak for that is our RDS looks the to like

that And the our Shawn MLP - we is this sponsor Shneur make I long might for add work run. is how do this sustainable around

I out is and better a hope around. markets questions it answered that of Kevin once will our our come goes you able of the a explanation few So have and to be where kind we give to about

a up IDR a strategy leadership the I that think the you and that the putting good sponsor forward. I to that’s Shawn decision. and Yes, are busy and point Well for going point together bring Shawn. piece is holistic the entity

appropriate the we that back of can time at the for So the and entity. give you guidance kind of strategy come the

comes with Selman Stifel. next Our question Akyol from

start me may a then couple larger with housekeeping be Let and one.

some up ended the deferral those Corridor that impacted in being sort about quarter Eastern is or in you turnarounds have - So talked have of back by seeing? of those you're the

or new understand So the ongoing make to? turnarounds around I the sure emerging question was question issues

and of due wondering of continuing just see those that is am volumes Well part complete guys lower what I that you into? you turnaround if to the in Corridor referenced are Eastern kind just

would mentioned will say third and from have extend fourth that on schedule work turnaround then by third other quarter. to Shawn quarter into it earlier Yes, some quarter the we the I activity continues so as movement turnaround and

SG&A anything there is then there ticked And anything up sequentially unusual?

some quarter bit activity assets, particular the corporate nothing a to nothing for general well into in the little middle as the so think I in Yes, about our of of read some of it’s balance some that. as

sponsor if kind paper but I you piece holistic your down, a of is drop terminals getting that I necessarily assets is not guess sort sort and just back what guys be your you about I'm of think could to comments list, acquire thinking strategy wish and pipelines, going assets you just offshore, would then you on there more asking there? the and thoughts guess And more of had onshore, blank are you looking when any you more more to of about want the for

of commercial also provide like product have companies and of that for contracts very upside things of types, question. couple but to is years types refinery and are also original diversification one. back data markets a we lenses, a but and offshore, the our kind we ago. at thanks a a ratable can the Amberjack cash crude can at I We contracts, number number forms, Diversification so go have that geographic, others that Yes, onshore, oil growth of around products ratable did entities flow look fixed in right, like Yeah takes of gas.

are as around we So go. there you any that as and like but given FERC moment you the would will different will announcement we know to and unfold what the the concerned I was markets time in view we notional we things where tell their made where what's in have some when a happening at back shift, FERC see in see to

It what so made key regulated, see or is going look sense for work strategy there our to where we we diversification diversify change add the risk, the is could valuing more our things and market view as that we on forward. but at

question Mizuho, Gab next Moreen from with comes Our

to your a there. term you on shifting view season bit the about of to Can maybe of open multifaceted the dynamics maybe results. and in pipeline little Just on question longer the medium talk sort Zydeco

decision, there the maybe if and I delivery speak market, could to aftermath little that for there's a some a in there contract I in pipe, so be offshore along the call the may to bit. mean, you some tariffs friend or other shift open Louisiana demand you renewals area, refiners where whether higher was season? of ports and were to whether that went shipper let's then but possibility maybe also your know shorter-term it decisions that not

make break answer Steve on going for am I thanks sure to completely. question to just Ledbetter, I this Yes, the call, the again

term. our season bit trying give cannot to a about we the a Let little talk you little to me the approach medium first talk about color open near, and

As out of shorter-term of there a announced in terms view projects will at come you mentioned took various customers volatility still to balances indeed demand on bit a fruition our and there's that are quite supply being that.

we have route and Deepwater capable the multiple an But export efficient hub. flexibility as important to in training being and piece well hubs, the belief what strong connectivity like do. can connected functioning and only it an being the the refineries have through system VLCC The

was our that the in fully believe justified system. us the demonstrate to we contract And ability being with

we demonstrate the leverage marketplace bit ability to match in If you this customer capability our probably to But in our that move us think we we for if of you allows marketplace. total area that and footprint, even continually in believe of the a needs may around asset play have be that? quite this the able longer-term, in There's future. that unfold flexibility pieces of will in to the the whatever if

in of example break wondering one for further Yes, you can demand, whether the coming example, terms greater or in for shift terms the of I the opportunity the a down whether pipeline on demand just was tariffs pipe, a further higher of out of season little that see to down whether the its prospectively happening? there’s things are piece open you line if

Okay. Appreciate that.

our of frame valuable move we play And successful with to continued the the the who indeed or we terms open have Whether St. James need, was or have and to proposition future, value shippers that to to approach the season we we see such about of as export this the into flexibility. terms proposition the building what way a our the conversations that’s a the refinery move part optionality what market, being important to in So current have right wanted the that. of in they shippers hubs outcome. trading needed matching way

we��re proof that This a get over add is were of to and if is thing ago, to the XX-inch. Kevin. we market a the about might to nominated I demonstrable is our being flexibility few constrained rewind St. years concerned ability you was on our James know, One and piece I

a at or little in that able backdrop announced of additional route up LOOP pieces a and And competitive cap the solution put by we were space and offer on projects an the in winning look to that Zydeco through in had offering we on against Zydeco solution putting were James. create St. and tariff a and place

with just the to create an we So work system how different value. example that's the pieces of can of

I kind hey or And make be what circumstance rather to even ever decided spot kind the on see I much. want last take look be term you go just - Would hey just of risk hop so are giving guess shorter sense? here the maybe it say, on they up where one here contracted on market much volumes your and my you may a is if spot you to we Zydeco take viewpoint don't and contracts is that end of we’re

I evaluate those spot whether and for that fair in the this we market Yes, continues the we unfold, of that of the terms again the get when put part and can will assets contract position. of make how it’s offers ultimately is The of market. it and was we run wanted sense believe some opportunities think question the our and to the for and most of we to value as value it decide needs in to we evaluation decide also the best a customers the fair use unitholders. And driving meeting the

you. Thank

call no to I turn We Parker. Jamie back the further now have over questions, will

Thank today. you Partners Shell very for your in interest Midstream much

My If as, can information website shellmidstreampartners.com. any as presentation found to follow-up questions directly. you the well me on additional free feel contact have in presentation, call today's please be after materials our

our this weekend. a Goodbye. So and for call have concludes today, great

this concludes presentation. today's Ladies and gentlemen,

and You have wonderful now disconnect day. a may