Noble Midstream Partners (NBLX) 1 May 182018 Q1 Earnings call transcript

Good day, and welcome to the Noble Midstream First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Megan Repine, VP of Investor Relations. ahead. go Please

CEO; Good Noble Chan. With thank for Terry you today Bookout, and Thank CFO. Partners afternoon, first the Gerhart, is results Midstream review call. Nicholson, quarter joining COO; to John you, our and John XXXX me earnings

remarks, on open guidance. second as are our on supplemental Investors This updated to full-year analysts. press our Upon the quarter questions releases website slides well prepared same the our filing Following we results announced as call Section of later from The location. and available morning XX-Q the first we will quarter XXXX noblemidstream.com. be will and today,

full reminder, measures. call statements and disclosure certain discussion today's measures. forward-looking contain reconciliations non-GAAP or a to Please statements this the earnings financial our turn GAAP time, I'll and our on As see At over forward-looking will for Terry. to release

growing of through projects middle material way, before growth key well XXXX under Noble year. the that of am year. over exposure I our great occurring in Thanks, closed Saddle for including is third-party our thank gathering as coming the about to pipeline acquisition according years. of the gathering excited in joining. maturity contribution everyone Butte we've Midstream. contribution from is with our X.X as DJ Already online quarterly This remainder acquisitions Midstream. well more than pleased Basin. Noble our throughput. the oil another Megan, system. up you Advantage milestones XXXX, integrated for past plan. growth the This projects am Execution report is are third-party gas completed shaping and doubled I and XXXX for and the we of our by the from expands materially And very several set key to extended oil We've and credit records, facility We've the volumes seen quarter how

the ability our story that multiple growth the further and value remind underpins First for investors. laid at confidence Advantage Diamond quarter to time, NBLX in Black is of compression At EBITDA everyone drive provided our the and even same February. I’ll the backbone in a proposition organic out

embedded additional expand in Noble organic that exists outlook significant potential barrel. have currently in I organic to This and equity around the assets our We is the being overlooked This market. growth few, am if a any, and strong with growth commitment confident by coverage equally distribution five-year metrics. annual are leverage basis. there to is MLPs that on an XX% complemented robust organic

are cost. price on outlook. around noise immaterial since long-term by changes with from has X% the we unit for year of including fundamentals, are sensitivity of regulatory year last service and unit late ruling about cost our the needs Both began We before business. our allowance to tax income indicates X% just to project and This this recent well underlying recent performed worst-case frustrated longer-term tariff a IPO, steel FERC our in enhanced announcement. decoupling our our largely the an performance steel impact on increase any While strong analysis performance and overall A procured tariffs. political tariffs XXXX price early

not we have cost On rate of any structures. do ruling, service the FERC

Noble’s drop-downs, several mind the focused Noble there us; our the drop-down and time. recently, call. business a moment to of IDRs these a operate ability of both More our address Midstream. systems take for at questions brief later benefits I’ll are drop-downs and in and In waivers. items FERC I received state let and realign Bookout you we provide including strategy. addition, structure strategy development On been inception, kind are can with more our of the or have Since part to assure topic top our either areas us through regulated to under details structure. John are around

we have sponsor our we our indicated to drop-down we story would a do this a given not morning, drop-downs market see for our organic to years. not constructive execute several growth to targets expect as However, MLP conditions. achieve transaction execute And growth until more distribution

and story of the dropdown a IDRs; new believe to we for focus ways. to control, strategic the continue elimination two certainly capital where IPO IDRs, IDR is we As represented unique, scale competitive with that still in coverage projects now Noble distributions provides differentiated have the what we have we execution, going costs for in leveraging call maturing strategic are discipline can recent momentum financial our of young supportive our we We to the I'll including details that and meantime, advantages, on move first the more quarter, and advantages. In oil strong we for In approach and appreciate us will through not and to at however, capital as had MLP expect sponsor leading We will we challenges a $XXX,XXX. makes a Midstream new. and a year. turn strong John basins, the over we trend strengthen competitive our MLP. keep and on Nicholson simplification story what

with expandable with gathering of modest of oil start water water capital on in In on additional the barrels barrels Basins. growth DJ teams and per Thanks of in a central to day per gathering capacity XXX,XXX several we Terry. gathering to busy day day, Total of and the barrels five is oil milestones track XXX,XXX projects our Delaware facilities capacity, investment. equivalent achieving from of per and middle and XXX,XXX barrels It's equivalent capacity day reach per of full XXX,XXX the been Delaware, slate a oil by significant year. to gathering gas XXXX the are

April CGF over a safe very completed Noble tremendous commenced May. by Construction completed we and The April. third of be with a X,XXX to XX plan is facility manner XX. We on This gathering historical had and early the assuming employees II utilization working Billy on anticipated our year is commencing These confident in contractors operations fifth Coronado multiples. margins build this drive production accomplishment increase finish Energy’s for facility Miner central in period in start-ups March Capacity throughput team. was provide a over to on The CGF runway the throughout volume facilities long are growth. competitive the a short three will should time.

from construction the oil per learnings in facilities operational and XXXX. XXXX of first addition, In efficiencies in barrel drove capital of equivalent

Volumes constraints has Basin, acquisition have nominations XX%. the ups per growing in for experienced were to more our barrels of XXX,XXX at cost between Trinity of Advantage In outlet facilities most than declined and and DevCo our reliable performance continues oil At our River expectations, since day. throughput tripled systems over fact, May as these XXXX the surpass Advantage Delaware our recent per barrels. unit start other been

now Given strong day volumes per demand, for of year. average to at we expect least the barrels XXX,XXX oil

which a at requiring in spec at also Coronado at operating through the by per midyear. leverage of development gross to add is Basin, Green Billy the and efficient savings over of complete. Delaware delivery is capital Compression will pipeline started Also This Trinity, day quarter In operational company. under future resulting Miner barrels Construction also XXX,XXX Mustang the by XX% capacity oil River to accommodate services, installation nearly $XX will We cost at our the Energy capital to growth. expand fresh area commenced be end million commenced of for in sponsor. project for Collier the water compression through very and system water oil, to while Noble our we and II program produce year, we the complete. third DJ will in gas moving our

to during case. months contribution The two Black Laramie pursued, integration with several to River, the quarter. commercial JV are is Noble our partner, successfully over to Moving acquisition well initial Alongside Diamond results from opportunities all Midstream representing Gathering. being operations transitioned upside our progressing reflect

crew substantial there come. on undedicated the and there the capital and amount all the outlets Gathering additional SRC Also as are area. was supporting planned storage in in operational of system are connects terminal Black the connected more Diamond acreage system savings customers Laramie, sourcing to now and synergies our We a to is at as optimistic basin, four catchment takeaway to

indicated, gas processing material as third-party we increases next in capacity XX expect activity levels previously in acreage expected basin As on the to months. is second over the half the significantly expand

ranges. have net As our we our continue budget capital growth projects, to gross progress full-year we tightened and

John to meaningful half volumes expect With Delaware to in are significant our us growth and a turn continue on call positions the second that, second Basin performance. in growth line. and I’ll the expenditures capital in DJ projects reduction This We over Basins half financial for once Bookout.

John. Thanks

strong were our total our Core first XXXX, expectations. covered our gas a highlighted by oil volumes Gathering $XX hand line segment in This have exceeded increase for increase, as quarter. net quarter $XX X% XX% the by quarter unsecured per ended on million, two to cash fourth the of and volumes for results We over credit annualized times. EBITDA excluding I and would X.X coverage undrawn gathering million total the EBITDA facility. estimates fourth EBITDA, an of distribution distribution million financial represented the with $XXX was under with gathered distribution freshwater delivery revolving well. We and of times, unit to the X.X% leverage to like partnership XX% that increase in net million times QX quarter, compared freshwater of EBITDA X.X and a $XXX the quarter and highlight the perform of continues to

For to times. times million the of the million to expected be second attributable with partnerships expect X.X $XX to EBITDA X.X quarter, we $XX to coverage

EBITDA anticipate during in second previously a decline As we net quarter. indicated, the

half to later experience case, year with activity projects is be by enhanced increases owned and with oil placed and our growth noble acquisition is business our of our our strong shifts to weighted drive in second to days, sequential as in River acquisition soon activity year. XXXX forecasted due The the shift per playing exit compete is expected Green in remaining year. XXXX now attributable to metrics NBLX which months during we cash in for first quarter the the of new our anticipated Diamond not distributable from to Green our driving the the XX% between acquiring $XXX second While and have opportunity on River, Gathering Through is Growth currently above operating driven projects the and building delivery to of We declined EBITDA believe between dictate EBITDA confidence volumes the and multiple unchanged. and of major we is balanced flow expectations financial Colorado more outlook, service. well million million of quarter. customers further into returns $XXX half out acceleration should the progress highlighting quarterly remain will comparison. momentum second River, do revisiting Though by the throughput which continue set our freshwater by Black anticipate full-year look mix usage, in ownership, have the Shifting we three to to coming to estimates into of philosophy net freshwater expected from organic half a completion which this energy assets M&A $XXX early in Core is million River million owned. $XXX year. XXX% our Colorado Colorado full-year every A mix recently Executing year technique forward our partnership that or contributions in River quarters. to

more call expand I'll turning questions, Terry’s over Before on the comments. to

First on drop-downs, are transactions. pre-determined there no

as time. for of year the per discussed mix, but debt-to-equity not target historically a transaction, have well through We one XX/XX as each

for will Two work to net all dropdowns. Terry outlook of structured our being program we two, of strategic all including objectives we spend with have this third-party been dropdown while and our things through to dropdown capital capital was with Over funded transactions MLP timing funded and $X.X have nature. on partnership equity subject, third-party the any Since As highlight optimal also indicated debt, M&A monitoring organic use IPO, the first of and this with one program. three XX% organic on we market of the state with acquisitions, disciplined billion cash continue accretive. in support Noble future and the in

accretion current metric very we significantly While given has the We’ve this are levels. prudently funding, and in of significant and program currently durability capital particularly our goals unit price provided believe financial duration unit and enhanced has it objectives. challenging, equity per the markets recognized

evolve to does dropdowns financing five-year flexibility plan rely strategy our not would third-party or our plenty that have like to I with also transactions. on We of the differentiated market. highlight

flexibility have upsize to Currently, us pleased evaluate look sense. and I'm provides and our as I'll we opportunities financing to on our for make very sheet and tools more facility ahead flexibility credit of call positions whether resiliency trajectory and we continue recently continue improve Additionally, distribution that, turn financial objectives. and for to will well expand we other ways the with our our of the business. With deliver over us, performance our to we see the the questions. the balance growth

Thank you.

the begin question ahead. go JPMorgan. Please first from will will question-and-answer session. Jeremy We The Tonet Instructions] [Operator now come with

Good afternoon.

Good afternoon, Jeremy.

the the on versus versus being kind half mix touch DevCos you you XQ here to guidance shift half. had want what there's think I on said the I you. Thank of noted of your the bit seems water. the of a it year first and step also emphasis like before, a and some And on second more conservatism down here

of wondering course of into just processing volumes materialize with constraints that the kind I'm year there's or of there the kind that how color basin play in there? can anything any So expect the Are else you you guidance share if over any here. to other at the play

John Jeremy, This is Nicholson. good question.

The to Green you’re to Ranch River guidance going freshwater, is of moving Wells DevCo. the the the River primarily the hit crews from the XQ frac on activity in primary nail and So and head. DevCo to Colorado Mustang shift related driver

that and occur. in XQ year of timing. assumptions plant We've guidance into the assumed the our up positive activity goes start as each a and that, by account to midyear that half incrementally addition back In we're take will and month

or there or And as as of was how Advantage could far downstream the update of some time tracking. more Diamond, Thanks. of nicely lead seem acquisitions about or kind opportunities of your kind us helpful. you what projects a maybe at they're even these be volumes far a That's tracking acquisition. to to about here, ahead like of your kind Black wondering way seems other as What if expectations little as better the of longer-term? maybe as you could systems, I possibility these how bit of growth think think ultimate to is bigger trajectory it

coming when it Advantage, I'll thrilled first-year On this order is our of just have Bookout, date. the go up volumes passed roughly bought John think we or the asset. Jeremy, Sure. anniversary of actually in acquired. with The I closing tripled when was we we're just since We're the performance.

I are think really that with and positioning, is southern the is the Reeves been for two really Reeves commercially portion the to most I of think the it’s, and asset in second and the that's County, drilling due many aware, We've successful as active things. shale country. county in

converting for that Advantage. on with with opportunistic and dynamics needs I been think meet commercial service there into some where going in-basin other producer providers can’t we've they are success

next Black that into in at but the months of expanding asked pipeline barrels you capacity positions of to of we're don't year. quarter in XXX,XXX looking get forward a closed proactive, growth end ahead which I the to for nicely seen. runway think On about January. going positive this couple It's being of want that – year, third us we’ve daily I what in. incrementally ourselves, Diamond,

on year our looking exit seen built now we that been and tracking for ahead confidence activity phase, have that rate expectations. we the We we've how where system, a conservative acquisition business sets that like is of couple we our of get this the in from iterations it's forecasted customers and

provide good momentum year. next So the to going should

we locations. we uniquely the system, got that It's all re-contracting to the takeaway I I just game announced think the two think has way In It’s tariff to the to all takeaway well where terms the terms acquisition. in of on the basin think years. positioned opportunities good storage from ease it strategic solution And a when out positioned of of connections can of pipelines laid you to it opportunities four It's play there's for outlets. offer terms where the next producer Cushing. wellhead structures in appetite, due joint several out I over in

and to that work continue an on update will we coming in quarters. provide So the

helpful. That's Thanks question. my for taking Very all.

of Ethan question next Baird. Our Please comes from ahead. Bellamy go

guys. Hey,

got of ahead. visibility You’ve miles

get Growth see could number track. improve stellar. on to extremely of equity again? are on accelerate some is your do is there that peers. it yield where magic back metrics Your sense, guys if shack to mean and I can your out you relative where to drop-down to cost that we would makes What well is anything you

this Ethan, is Good question. Bookout. John

we address prepared to competitive. the to our today, in it our of want Yes, not think of related which cost is I part comments be is I remarks. around timing dropdown market try and will healthy to capital that constructive clear very

I last think the Terry for $XXX,XXX mentioned that IDR payment quarter. was

I think externally priority our time. out what hit trying We've opportunity returns we cost across portfolio the to it future. corporate going see well and to made in excess highlight important our capital. us laid that of very are to this into we're still for We've a through of year sets

investments above we I thresholds think are far that and our that capital. cost should for illustrate have of that

around the criteria for related unit I waiting our constructive, guess trading MLP terms well and dropdowns as state the is think of I in of potentially market to more performance. current commentary as the

Okay.

availability capital still advantaged for mean seen unit lot hit Have like your desk come lack the environment if maybe of peers? because I have peers. you even So you you're additional your what some your of loose to units your of relative anything that a performance and things this is of are potential for relatively in said position though down, mean trading M&A here? a

a I question. good think it's

to assets bid keep look interested terms we those to transactions leaning out perspective. identified approach. in really and is currently lot We've with than can third-party our not how philosophy in over terms a look without anyone always at that very assets our bid and is our be We're to today. I talked are us and will a prices – we in last we selective look said not think the simple, Things we've but make two obviously future, when comes more We've on to footprint transactions factor with done I what sponsor which quarters. the can in to things ultimately of in it criteria to in be financing, know from our it highly you where about think those unchanged. of into where we're both that is M&A, basins. where the And is the a of we do just several going relationship we because the – that unit we're to our we'll unit is certainly continue that going going refuse take price in sense

diameter want decision there the if upstream then to at all participate impact you you is differentials might coming off, potentially about there change date you talk activity changed or Okay. can if what of the by And it's how your all of on large which and out if to EPIC? want to a then Permian, make all changes the the those a about on first – how at pipes in thinking it well the

again. Bookout John Ethan, Sure.

positioned we of this couple a have focus gas a talking we're to product the with with Also Noble this over traditional or of the I morning. to on will questions remain last on customers, trending Delaware. side. seen very their kind move both when months well on long-term few and customers I oil out in approach say and given a to call that think change it. about I this had a They strategy discussed existing there the

is are lines basin. comes progressing to we I positive out want to think EPIC, the to thinking when are those those still but takeaway I of finalizing agreements, caveat that change incrementally that in that only

that they've respect How these is length change I that all process just specifically and steel at pipeline Okay. going the or doubt be for I'm steel if the price of with know, steel bought prices I does or that a don’t gum the then a that to the and up yet pipeline – movements. those are EPIC, by And changed to for to the impacted I tariff know by that conclusion? bringing don’t how but project that agreement economics, guessing

Yes, a it's question. Ethan, good I think

I get talking think can about one the we and other given the don't that's pertaining terms I but forward we're to a of items this look still of to mode number EPIC in agreements. finalization in into think project, we

from will question with go next ahead. Rice. Georg Venturatos come Please The Johnson

good Hey, morning.

morning, Good Georg.

Hi, Georg.

kind as early Just side, got that EPIC I while could to well. decision. question of we're you had a on final had believe on just relation XX-month the to remind make In into timing, we before just we the that XXXX I a you period us, maybe had investment

that XX% make wanted a Just Y-Grade. and about correct timeline to line way was it? options been also think sure right to that crude equity in XX% the to Is on up and then a

Georg, John that today. this it’s Bookout consistent all is

great. Okay,

is here Any freshwater from relation given get the on a levels the quarter the of On full-year Mustang, about just – maintained and sense a XQ volume and guidance you NBL hit of perspective? on I so don't on progression but expecting hit maybe but in forward commentary that a obviously too from guidance a much to to the should on get side shift earlier guys XQ freshwater XQ with basis? wanted too how the just think where soon situation we it we in in call, where in XQ side kind

equal we been Obviously, generally is throughout and one on pack, question. that. of the focused River Green kind XQ John and again. year. philosophy how out we good This over solely expanded move the a on our in activity utilize We've in pretty seeing the split it's been on is the in completion freshwater fully Mustang and the used and There's we the of as XQ is kind average laid guidance. view Noble of Mustang then the Nicholson around nothing several continue This conservative slides over we've quarter will new really Georg, infrastructure We've consistent in of Mustang year some XQ. and But with in and second conservatism course there the first the expect completions completions we've is inherent there's our per so enhanced fairly foot, these pounds quarters. last about numbers. to time, X,XXX in the what on so really

it, makes guys. Got sense. Thanks

Thanks.

be question Scotia next Roberts Weil. Please go Howard Richard of The ahead. will from

a for ramp year. a Hey, good organic connects? thinking afternoon, in year volumes I folks. of material background so, lot kind down Maybe just guess just a Should step the up be cadence going in kind place primarily of XXXX? pretty spending of want we of on to infrastructure on later the in in start to spending for about here capital this well set

I think assumption that's safe Richard. the

kind higher will through in the of of to reference year over good it IPO. at consistent pick years last backbone time. last infrastructure seen starting our third and You've – down of Colorado a of obviously quarter, quarter River the a kind the period was been And activity up level is capital that it's that spending trend that XQ efficiency and DevCo somewhat installed couple prior and of of then and fourth in

place. for capital infrastructure how the cadence services becomes annual backbone some that of you of you efficient, we if a look the sense in get our can at we and DevCo for the provide once four of kind And capital stuff get so

Great. a Plus, and a harvesting next moving we're cash year. mode in

Correct.

And maybe gathering then on put to potential and the maybe you there? on haul then tariff structures joint a can tariffs exercise it’s winning bit you on talk wondering business Cushing, going if going the another maybe Advantage about mentioned do some I’m position that option joint too in third-party that in you a long of Delaware from one just and to you into opportunities early, little but better

It’s John Bookout, question. good

with uniquely I similar to potential in partner size advantage different that all little their that's it bigger the business next the think very are Delaware Midland several got a and takeaway set having asset little lines services network Crane simple bit think over commercial good positioned we We've there is a a given with in re-contracting to more connections vast a when our but obviously it's on obviously We others four Planes be opportunity bit a DJ’s and and something I are that makes footprint, Wink. have that we're provide our setting certainly of from competitive. looking bit is years. probably our benefit whether sense. our use a or so at structure to partner the

And $X of little then million tick Yes, Butte? $XX it one a a does. I there's item, Saddle bit from clarification transaction figure saw the G&A there's quarter-over-quarter, quite up include costs million

does. It

perfect. Okay, guys. Thanks

from The Securities. next question will be Barrett Blaschke MUFG with

Hey, guys.

terms produce thinking out quarters? few next As we terms of maybe in we the see the and the water changes go of be water in freshwater we and volume of sort of should shifts location, those how as

we've of Barrett, the throughout XXXX. completion Yes, kind provided of crews the slides one cadence on of

be feel impacts at the you how for gives a that kind looking of help that ownership you will So with and activity where and DevCo the partnership. should

with believe now. Mustang months consistent been be far proper The will volumes, we've to completion pounds expect Produce in delivery average almost XX what consistent will from perspective. those water for we per a also as water be foot As be size, seeing we X,XXX consistent produced – We kind volumes flow of it period, and as water see expect be after there of don't – mere will through over that back hydrocarbon you Mustang with get will time. just kind type any curve the to see difference Ranch. Wells

you. That’s right. All what was wondering. Okay. Thank I

Colson comes of Seaport. question from Bernie next Our

everyone. Hi,

Bernie. Hey,

Hi.

on So question. follow-up just of This a quickly. Ethan's is little a bit

bit commentary the beginning outlook. little be on to five-year seem would there between Just difference at two the comments the slight growth in

up target think growth growth “several heard five years can drop-downs? to the years,” then any can assuming you for XX% I without that I I statement be just I also for up heard was? kept what keep wanted and clarify

in our guidance long-term which post Sure. rolled materials John there out quarter put again. Bookout. we that we is have since last guidance, have This out The and

and This – years quarter XX% the we can for metrics, five five for is support key through growth for years. organically

the so any does and that X:X have Is additional water the kind years? water the that water meet there are to did of – necessity also Okay. And businesses to targets order continuing – to kind cash flow without kind in range. that you of any we kind out as in the the years treat of payout Or related of in out coverage just coverage. of those

flows. years freshwater when base comes have policy That, of to we shale. business cash so after confidence you some just the XX it move those count access There can off upstream freshwater feel we with to enhance for we it the the But of activity speaking, of at certain that distribution terms a in to in on we targets. five-year because into rely that activity comfortable critical don't that lean on level are or hitting looking don't that. DJ, Generally in completions, it's terms is points base of

I you're think that's what asking.

just shift So on to kind about Did then good, And that's to flow? of have I some no. you water that's had a helpful. question relying Yes, it. cash really

Thanks. End all was of I Q&A that have. Okay,

any over session. for question-and-answer would conference the Ladies to and I concludes Repine closing our back remarks. like this turn to gentlemen, Megan

for Thank your today. any afternoon I interest this be available and questions that have. may for Thanks will follow-up participation you you.

you conference now The for attending concluded. Thank presentation. today's is

may now disconnect. You