Q3 2019 Earnings Call
Good morning, and welcome to the enable midstream partners third quarter 2019 earnings conference call and webcast.
Participants will be in listen only mode should you need assistance. Please ignore conference specialist by pressing star key followed by zero.
Today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw from the question Q. Please press Star then too.
No. This is that just being recorded I would now like to turn the conference over to enables senior director of Investor Relations that Beasley. Please go ahead.
Thank you and good morning, everyone presenting on this morning's call her rod sailor, President and CEO , John laws or Chief Financial Officer. We also have other members of the management team in the room today to answer your question.
Earlier. This morning, we issued a earnings press release in father Form 10-Q with the FCC.
Earnings press release Form 10-Q filing in the presentation that accompanies this call for all available in the Investor Relations section or website. We will also be posting a replay of today's call to the web site.
Today's discussion will include forward looking statements within the meaning of the securities laws actual results could differ materially from our projections in a discussion of factors that could cause actual results to differ from projection can be found in or FCC filings.
We will also be referencing nongaap financial measures on today's call, which we reconciled to the nearest GAAP measures in the appendix today's presentation.
We invite you to review the disclaimers in this presentation for both forward looking statements and non-GAAP financial measures.
That will get started and I'll turn the call over to Rod sailor.
Thanks, Matt Good morning, Thank you for joining us for today's call enables third quarter results reflect another quarter of strong cash flow generation as we achieved a distribution coverage ratio of 1.4 times funding a significant portion of our expansion capital spending for the quarter.
We also achieved another quarter of growth in our crude gathering business as we reported record crude and condensate gathered volumes driven by last year's velocity acquisition and continued volume growth in the Williston basin.
Well the transportation side, we're very pleased with the progress we have made in rate case settlement discussions with key marquee customers and I will provide more details on MRT later in the call.
In addition, we contracted or extended over 575000 Dekatherms per day of transportation capacity during the quarter and recently signed a precedent agreement for the mass natural gas transportation project.
Turning to our gathering and processing highlights on the next slide producers remain active around enables gathering footprint with 31 rigs currently drilling wells expected to be connected to enables gathering system.
Our market share in the Anadarko basin remain solid with 44% of all active rigs in the scoop and stack plays drilling wells expected to be connected to enables gathering system.
Well the Anadarko basin faces some challenges sentiment we're partnered with the best operators in the core areas of the Scoop and stack that continued to allocate significant capital to the plays and deliver favorable results.
With the Anadarko basin crude gathering assets and producers continued focus on crude directed drilling we expect together crude oil and condensate for approximately 90% of the active rigs on our footprint in the scoop play.
Furthermore, we believe that we will continue to see momentum from these areas as evidenced by September volumes for crude and condensate gathered volumes that were approximately 12% higher than the average volumes for the quarter, even with the continued focus on crude directed drilling we have seen sound natural gas well result.
It's from which our systems will benefit as demonstrated by Anadarko natural gas gathered volumes for the month of September that were approximately 4% higher than the average volumes for the quarter.
In addition, enable recently conducted multi well pads in the scoop play with total volumes of over 180 million cubic feet per day, and multi well pads in the stack play with total volumes of over 90 million cubic feet per day.
In the Ark, La Tex basin as a result of significant producer activity and strong well results in the Haynesville volumes were nearly 90% of total NBC threshold levels. During the final contract year for the MVC portion of contracts expiring in the third quarter of 29 team.
These contracts represented approximately half of the gross margin recognized for minimum volume commitment contracts in the architects in 2018.
The other large haynesville contracts with Nbcs will remain in effect until the second quarter of 2020.
The acreage dedication on these contracts remains for five years following the completion of the Nbcs.
In the Williston basin enable saw record crude oil gathered volumes during the quarter driven by continued drilling activity by Exzeo.
Doug counts remain high as a result of natural gas infrastructure constraints that we expect to be alleviated in 2020.
The next slide covers some recent transportation and storage highlights as I mentioned in my opening remarks, we contracted or extended over 575000 Dekatherms per day during the third quarter, including EG T contracting with rock Cliff energy for 250000 Dekatherms per day, a firm transportation.
In service on Agee's line CP.
And MRT contracting with affiliates aspire for 150000 Dekatherms per day, a firm transportation service.
We also continued to evaluate our asset base for optimization opportunities and we recently agreed to sell enables undivided 112 ownership interest in the Bistodeau natural gas storage facility in Louisiana for approximately $19 million. We believe the sale of this facility will allow enabled to continue to meet our.
Contracted service levels, while improving our capital efficiency.
On the EG T. system BGT in Centerpoint Energy Resources Corporation Berserk have agreed to re contracting terms for substantial portion of EGD is capacity contracts that when executed will extend the contract life of enables largest pipeline asset EGD with its largest customer.
Circ for nine years for the majority of the renewed capacity beginning April Onest 2021.
BGT is targeting executing the applicable pipeline contracts by first quarter of 2020.
As mentioned earlier enable announced today the mass natural gas transportation project a project that Leverages enables is existing infrastructure to address natural gas takeaway limitations by connecting Anadarko production to delivery points with access to growing demand centers in the southeast and Gulf Coast.
It's this capital efficient project is the result of a successful open season on E. G and is underpinned by a five year 100000 Dekatherms per day precedent agreement.
MRT achieved a significant milestones. This week, we did file proposals with the FERC to settle rate cases with customers holding 97% of the firm's subscribe transportation capacity on the MRT system.
Addition to the proposed rate settlements most of these customers agreed to extend capacity commitments on MRT through 2024.
New rate case was filed last week that was driven by the need to establish new maximum recourse rates for the non settling parties, which are comprised of the remaining 3% of the firm subscribe to transportation capacity on the Marty. We are pleased that we have been able to reach agreement with so many.
Of our customers and we believe we have made significant progress towards fulfilling our objective of recovering our costs and earning a return on our historical investments in MRT.
Additionally, we continue to progress our golf run pipeline project, which is backed by cornerstone shipper Golden pass LNG. This project will provide Gulf coast access to some of the most prolific natural gas producing regions in the U.S. and we expect it to be placed into service by law.
820, 22 subject to FERC approval.
Enable remains on track to file a formal certificate application for the project in early 2020.
Enable is focused on contracting capacity to extend the average contract lives of our pipelines and all the new contracts and projects discussed today will add meaningful contract duration to our assets.
The next slide demonstrates the strength of our transportation and storage business.
We have a footprint that covers key production and demand markets and our diverse high quality customer base includes many investment grade customers.
With five major projects placed into service since 2015, and two additional projects underway enable has achieved 2.4 Bcf per day of market solutions for customers and built on the segments significant from fee based margins.
As I close my remarks, I, just want to reiterate how pleased I am with the direction of the company, including our continued commercial execution, even with the challenges of the current market environment. We expect 2020 to be another strong year of execution for enable and we remain committed to cost discipline and efficient capital deploy.
Element.
With that I will now I'll turn the call over to John to further discuss our third quarter operational and financial results and our 2020 outlook.
Thank you Rod and good morning, everyone.
I will now cover a few of our key operational and financial metrics for the quarter as always you can find a more detailed in comprehensive overview of our financial and operational results in our third quarter earnings release and in our 10-Q, both of which were issued earlier this morning.
Turning to the operational performance overview slide natural gas volumes were down 3% compared to the third quarter of 2018, which was primarily a result of lower gathered volumes in the arkoma in Anadarko basins.
Natural gas process volumes remained relatively flat compared to the third quarter of 2018, driven by lower processed volumes in the Anadarko basin, partially offset by higher processed volumes in the architects basin.
The substantial increase in our crude oil and condensate gathered volumes for the third quarter compared to the same period a year ago was primarily driven by our Anadarko basin crude and condensate gathering system acquisition as well as at 30% increase in oil gathered volumes in the Williston basin as a result.
I have continued drilling activity by Exzeo.
And our transportation storage segment of 11% increase in our transported volumes over the prior year was a result of new contracted capacity on EGD, including volumes from MGTS case project.
Moving to our financial results on the next slide.
Adjusted EBITDA decreased by 2% for the third quarter of 2019, when compared to 2018.
The lower adjusted EBITDA was driven by higher owing mdna, which more than offset the higher gross margin after adjusting for non cash items, which was driven by higher crude oil and condensate and produced water volumes increased natural gas gathering fees in an increase in realized gains on natural gas.
Let's say in NGL derivatives.
Distributable cash flow when compared to prior year decreased by 8% for the third quarter of 2019. The decrease was primarily driven by lower adjusted EBITDA and higher adjusted interest expense associated with higher outstanding debt balances in higher interest rates.
The decrease in our net income measures for the third quarter of 2019 compare to 2018 was primarily driven by higher when im expenses higher depreciation amortization expense and higher interest expense the higher depreciation and amortization expense was primarily driven by the velocity acquisition.
Additional assets placed in service.
And the results of 2019 depreciation study.
The decrease was partially offset by higher gross margin, which includes the effect of realized and unrealized gains and losses on our derivative activity.
Enables gross margin for the third quarter of 2019 included an $8 million gain on derivative activity compared to a $24 million losses on derivative activity for the third quarter of 2018.
After considering the distributions declared enable generated substantial distribution coverage of 1.4 times for the quarter, which funded nearly 90% of our third quarter expansion capital, while maintaining our strong balance sheet with significant liquidity in a debt to EBITDA.
Metric of less than four times.
In addition, I'd like to highlight the $550 million senior notes offering we completed during the third quarter. We Opportunistically issued the notes at a coupon of 4.15% and use the proceeds to Prefund, a first quarter 2020 debt maturity reduce the balance of our term loan.
In repay borrowings under our commercial paper program.
Before I move onto our 2020 outlook I would like to share our view for the remainder of the year.
We anticipate that we will achieve the upper half of our previously issued ranges for adjusted EBITDA and distributable cash flow.
And we expect that we will be at the lower end of our ranges for net income attributable to common units and expansion capital.
As I mentioned on our last call. We expect net income to be at the lower end of the range. As a result of gains on 2019 commodity hedges that were recognized in the fourth quarter 2018, because the partnership does not apply hedge accounting on these derivatives.
For previously issued 2019 guidance and associated non-GAAP reconciliations. Please refer to enables third quarter 2018 earnings press release and presentation.
Turning to 2020 as a result of our expectations for continued producer activity in the Scoop in Haynesville plays we expect our 2020 natural gas gathered volumes to be between 4.5, and 5.1 Tbtu per day and.
And we expect our 2020 natural gas processed volumes to be between 2.2 in 2.8 Tbtu per day.
With the continued focus on crude directed drilling in the Anadarko basin and with anticipated continued activity on our Williston basin crude gathering systems, we expect our crude oil and condensate throughput volumes to be between 140 and 170000 barrels per day in 2020.
We also expect our 2020 Interstate firm contracted capacity to be between 5.7, and 6.1 Bcf per day.
Regarding expansion capital for 2020, we estimate the capital expenditures in the gathering and processing segment to be between 120 in $180 million. The capital will primarily support natural gas gathering systems in the scoop stack in Haynesville plays and crude and condensate gathering.
Expansions in the Anadarko in Williston basins.
As a reminder, and as we have demonstrated in years past enable has the ability to optimize gathering and compression infrastructure expenditures in accordance with producer activity levels.
As it relates to the transportation and storage segment, we estimate 2020 expansion capital expenditures to be between 40 and $60 million related primarily to the mass in Gulf run projects.
We expect our net income attributable to common units to be between 385 and $445 million in 2020. Additionally, we expect our adjusted EBITDA to be between 1.05 in $1.15 billion, while we expect to generate between 720 and $800 million.
Total cash flow.
From a leverage standpoint, we continue to target a total debt to adjusted EBITDA multiple of approximately four times, while our coverage is expected to be approximately 1.3 times for the year. This coverage is expected to fund a significant portion of our expansion capital program.
Turning to our key takeaways on the next slide as we look to 2020 enable remains laser focused on aligning operating expenses and capital expenditures with the business environment and activity levels around our footprint.
Enables 2020 expansion capital outlook represents a significant reduction from 2019 levels and we continue to drive down our own mdna expenses as a percentage of gross margin.
Enable will continue to focus on operational excellence, including executing our announced growth projects go front in mass on time and within budget.
Our 2020 financial outlook is underpinned by gross margin profile that is expected to be approximately 91% fee based or hedged.
This concludes my remarks, and I will now open up the call for your questions.
Well now begin the question answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before passing the Keith to withdraw from the question can you. Please press Star then too.
The first question comes from Shneur Gershuni of yes. Please go ahead.
Hi, good morning, guys.
Sure.
I just wanted to start off a little bit here or just sort of on how we think about.
Returning capital to shareholders.
Kind of on a more holistic basis has there been any discussions with.
The general partner and ward around the fact that yield is that 12.5% at this point right now.
You are covering.
Your distribution urea funds I think you said, 90% of your expansion capital.
The typical targets is 50%.
There are a possibility to be able to use that towards.
Buying back some units that are outstanding and tell you get to a point, where you're not tagged as just being a pure play scoop and stack.
Just trying to understand if that discussion has happened and what can be done about it.
Well I think.
As you know.
Very focused on balance sheet screen, we're very focused on coverage as it relates to return of capital will be a buyback if we had some excess.
Excess cash flow arson free cash flow that would be up.
An item that.
We would would clearly be looking at as Where's the best place to spend that dollar I think at our current and anticipated leverage levels first and foremost we're working on trying to get our capital spending down to 11.
Level, where we can sustain that you are your coverage.
Would start looking at other better ways to.
To deploy that that capital.
What we sell the last call, we're very focused on our unit price lower yield we don't think it represents.
The performance of the business and are continuing to evaluate.
He is and.
Levers that we should be pulling to help improve.
Our our current unit price and yield.
Okay fair enough.
Switching gears, a little bit here I.
I was just wondering if you can share with us the sensitivity around yellow bar.
Obviously, you're you've clearly indicated and differentiate yourself being in the core core.
But if if in a draconian scenario if TLR it stopped drilling completely do you know what the average decline rate would be.
Kind of for for a year out or two years out.
Yes, that's not a number that that we've spent a lot of time talking about.
Absolutely it also depends on.
Yes.
We're that slowed down might might be whether its.
You know ski stack or elsewhere.
What I would say is we have a very good relationship with continental.
Continue to I think they are a premier operator in the scoop and stack plays have core acreage and.
As you probably heard on their call continued.
Two.
On a lot of capital in what they call the shelf divisional or into Oklahoma.
Okay Fair enough and then one final question can you talk about any counterparty risk that you have maybe in the haynesville or across your customer base is there anything that we should be keeping.
At this stage right now.
Yeah sure as John .
You know, we keep an eye on on on all of our customers certainly one.
We got a lot of questions about.
Last year was with Chesapeake and that expect some of those with respect to there.
Some of what's what's come out over the last year or so and in last year. They ran our top 10.
Over time, they've they've come out of that top 10 significantly as they sold some acreage that on us and we've had contracts.
On the transportation side either.
Role or are set to roll.
Here in here in the near future.
So our exposure there has been minimized.
Drastically and then I would also say that we don't have any particular.
Customer that.
We're aware of that is in a similar position to what's what's been talked about there or otherwise on.
Any other for precarious.
Quoting than that that but again, we're aware of it.
We look back too.
The last cycle that we went through I don't think that fact pattern.
For enable is that we did not suffer.
Any any real meaningful.
This is or have any meaningful exposures.
With that cycle, which we think wins.
Or harsh than what we're experiencing today.
Perfect. Thank you very much for the color I'll jump back into queue.
Thank you.
The next question is from Colton Bean of Tudor Pickering Holt. Please go ahead.
Good morning, So maybe just ask the first question with a slightly different angle and looking at the guide for next year. It looks like you expecting about a 175 million to retain cash.
And the capital programs coming in at 200 million, so with EBITDA moving modestly lower next year can you just speak to the levers that are available to you to manage leverage if upstream pressure continues beyond 2020.
Yes, no sure Ken I think we demonstrated.
He was in 17, we've got significant scale in the Anadarko, we have the ability to really move a lot of capital around.
Against some of it is dependent on where our producer customers are drilling in times like this they typically are stretching out.
Not too far from.
The core areas, where we have a lot of asset we we have historically been able to be very efficient with our capital deployment.
In times like this and so we have a lot of operating leverage built into our business we'd have a lot of.
Bill at the minimize capital spend.
And just kind of price environment.
I appreciate that and then just turning to the volume guidance architects trajectory looks fairly positive moving into 2020, just with two of your largest counterparties in the haynesville being private can you offer bit more context on how comfortable you feel with the outlook just considering what you know today about hedge positions and any impact to borrowing capacity there.
Yes, one of the issue since they are private we really can't talk about what what we're hearing.
From down per se.
But again.
We've we've spoken with.
Those customers recently and again, they they continue to point towards.
Drilling as Weve as we put in our forecast, although we always risk to drop risk adjust our producer of numbers.
But again.
I would say that we continued to be surprised to the upside on the development coming out of the Haynesville.
The operators on our system or are very good app operators are very efficient, but there with our capital and are typically are pretty aggressive with their their hedge levels.
Understood appreciate that.
The next question is from Jeremy Tonet of Jpmorgan. Please go ahead.
Good morning, guys. This is it all hold on for Jeremy.
I appreciate the color on the GNP business on the on the call I just wanted to touch base on the Capex side of the thanks I think on it.
Could you please that operate on like the driver behind the White Capex range I think it's mostly on the Dnbi side.
If it does the well connects thought is that any other itemize project, but you have in your plan and also just wanted to clarify if the math project business.
Our next contribution I think during endpoint btwenty on any portion of it. Thank you.
Yeah, you bet, so I'll address capex.
Questions here I think an inverse order so on our transportation and storage range. It you're right, it's fairly tight and yes capital for the mass project is included.
With respect to the GMP range.
It is wider and I think as you observed an edge as Rod mentioned here, we've got to a fair amount of ability to.
Adjust our capital to the activity levels that PC.
So there are certainly maybe opportunities for us to ratchet up or ratchet down that capital with activity and again, we try to accommodate a little bit of wide range was generally in it in any given year. We may have capital for the current year that would be in contemplation of.
Just one year volumes.
To the extent, we have some some things that what's going on out into the future into 21 that may require capital in 20.
Those are some of the things that we generally like to provide for when we think about a range.
It will not.
No not not to tighter or otherwise excluding things that we ought to be.
And I think you might have asked it is there any contribution from mass.
In 2020, and the answer to that is that will come on in that 21, yes, that's right, but all the capital that all the capital scandals into 20, yes.
Okay understood that's how the focus on desktop the follow up there on the Dnbi side can you provide some color on the sense that they would be between them gone under backend capex desperate fee like which one could be them what.
More valuable but in this range.
I think generally when when we think about it most of our capital over the last couple of years has been aimed at our biggest basin.
Which is it's been the Anadarko.
To be to be deferred although we're not going to the lot specific breakout by basin, but but generally.
Our our capital here in these activity driven.
Environments are going to be generally tied to guide mortgages largest basin first.
We will spend in woolston.
As well.
Certainly the Haynesville.
Understood. Thanks for the collect guys that's it from.
Thank you.
The next question is from Gabe Moreen of Mizuho. Please go ahead.
Hey, good morning, everyone. Just had a couple of questions around can you maybe speak to what rig count level is embedded within your guidance for 2020.
Increasing decreasing staying about the same.
Yes gave the thank thank you for the question I think as we as we think about rig count.
In general.
In light of the efficiencies that we've observed in in the Anadarko and as Rod mentioned with some of the operators we've seen in Haynesville.
It's not always the the best indicator sort of on a one for one basis.
As it as it once was say in 2017.
Or even 2018, when we were really were first rolling out are talking more and more about.
The number of rigs that were active on our system. So we've seen some enhancement.
In the in the efficiency I also think it's fair to say from from where we are today.
We've seen some.
Some pullback from the second quarter into the third quarter, and we would expect some level of increased rig activity relative to where we're at at this particular moment through the year to reached reached a metrics that we put out.
Can you maybe I could follow up on that and you mentioned I think some of the ducs in the Williston potentially kind of waiting on completion any other basins, where I think ducks and drawing down Ducs will influence your volume outlook.
Not necessarily although our DUC inventory has grown.
You know in the Anadarko as well.
There are.
Abilities are opportunities for.
Track and completion crews to be added that could enhance.
Volumes on our system without necessarily need new rigs.
Got it and then on sort of shifting gears to the transportation storage segment on the rate case settlement at this point in terms of the new rates are those reflected in your guidance is there any chance you might have to.
Update your guidance is that rate case gets finalized.
No I think what.
What we've contemplated.
In guidance is certainly our expectations for where we believe.
The rate case, well, we'll settle out as we mentioned we've we've got.
Settlement contracts for roughly 90, 97%.
The firm contract demand.
For the Thats on the system today.
So we're not not necessarily expecting a meaningful change.
To our guidance as result of where we would anticipate reaching a settlement.
Okay, and then last one if I could just around hedging clearly you are a lot more open in 2020 on commodity prices.
Just the strategy going forward on hedging or you just obviously your own viewpoint, the ngls or any trough from.
Only upside from here and how you go about hedging be open exposure for the rest of 20.
Yeah, I think our approach to hedging.
We'll be similar on a go forward basis.
It has been your observation is correct at this point in time this year looking forward we are.
Less hedged.
We were.
At this particular point in time.
Last year, I think part of that as we tend to and to see an observer.
Now for less liquid commodities that the forward curve tends to tend to not.
Show you the same type of.
A value, even given where we're where we are trading today at relatively low levels and so we're not really prognosticators on on the commodity and we don't think about.
Our hedging program in that way, but at the same time.
For the for the less liquid commodities.
We also typically don't go out and hedge.
Hedge those particular items that far out into the future when we're seeing heavily backwardated values.
That we think are just merely a reflection or more of a reflection on liquidity at the commodity as opposed to.
We're where it's trading today or words expect trade.
Got it thanks.
The next question.
The next question is from Michael the Pts of Goldman Sachs. Please go ahead.
Hey, guys easy question for yet.
The owner of Golden pass made a filing at the FERC, where they potentially pushed out the in service date could be on 2025, how does that impact.
Pipeline project, you're doing that would connect to Golden path.
Oh. Thanks. Thanks for the question a Golden pass is actually work to try to clarify that their schedule is the same the debt was more.
A regulatory filing to preserve some optionality that said.
We're still on track, we've said that we expect.
Gulf run to be in service in a late 22.
And.
Again, we start getting paid on the later Jan 120, 23, or our in service date, and so right now it really hasn't changed our thinking about that and and conversations with Golden pass.
Clarified that that really there they haven't changed anything and currently as they think about their construction.
Got it Okay, and then on the the amount of capacity well I want to come that somebody asked the question about the rate case, and I'll ask as well.
Do you see that's on kind of a weighted average cents per in NBP ornaments CF.
As kind of leaving a flat.
Overall within transportation and storage business or likely a decline given the rate case settlement.
Well actually we anticipate earning.
Higher revenue on.
Assembled numbers ultimately to the numbers to be so again as John mentioned, we've got we've got that proposed settlement contracts in front of the work now and those should be finalized tier.
Shortly we really can't comment much on that but we're very very happy with where we came out.
On our marquee rate, Jason as Weve said, I believe and my transcript and also in our earnings release our goal was.
To recover our costs, even though we were experiencing turned back recover our costs and earn a return on our investment there and we.
We had and we'll accomplish that.
Got it and then one last one and this just knutsen both in the quarter at the transportation and storage segment I want him.
$57 million was a pretty big step up sequentially and year over year do anything unusual in that or should we assume that kind of has out going forward run rate.
Yes, we had we had some onetime charges that yet.
Hit us in the third quarter, there and and we wouldn't for $4 million, we wouldn't anticipate seeing that going forward.
Got it okay. Thanks, guys.
You bet.
The next question is from Ross Payne of Wells Fargo Securities. Please go ahead.
How you doing guys, you've kind of alluded to this a little bit earlier, but.
With rig counts coming down rather, notably Q2 to Q3 can you give us some guidance on on where you where you expect rig counts on your acreage to look.
Like for 2020.
Yes, I think as John mentioned, we think that we may see.
Our anticipating slight uptick in rig count.
In 2020 again, it kind of depends on exactly where our producers what areas they are targeting.
We're pretty confident around the well count that we anticipate seeing as we sit here today clearly producers are still going through their 2020 budgeting.
Program. So we're always a little cautious about what we say as it relates to that and frankly, what we put into guidance.
But again.
We think we feel good about the guidance that we put out in 2020 and that will see the activity that is necessary to achieve that.
So basically the sequential decrease that we just saw as more natural gas focused rigs and we're kind of starting to get into the heart of the oil base rigs to to show stability as I said is that three yet now that that's a good reduce especially as it relates to the Anadarko, where we've said your we.
Dissipated a move out of the stack targeting more oil your areas.
And the Scoop and that's exactly what what we're seeing if there's any any upside to our guidance in 20 years with what we see more activity in the stat from maybe some higher gas prices.
Again, I am so thats that would be some upside to what we've we've we've put out but really what we're seeing is producers targeting to more oilier areas consistently.
It is I think we said in the.
In our earnings transcript.
90% of wells were sitting in the Anadarko, we're gathering fruit off those so.
You're absolutely correct, we're seeing a transition into more weather areas and we're we're able now to accomplish that arc to capture that yeah and Ross just so we believe it excuse me unsaid, but implicit in Rons comments in yours is.
As we see additional focus on the oil directed areas of the Scoop. It's also pad driven development. So burgundies. These larger units are generally more efficient in that way.
It relates directly to reducing rig count and it can also lead to lower low capital spending on our side.
Okay, Alright, excellent and last for me.
Natural gas prices are on the rise here as is the forward strip at what level do you think natural gas producers start to add rigs from current levels. If you foresee that at all.
Yes again.
Hard for us to say exactly on that we do know that many of our producers, especially on private side it very aggressive around.
We see spikes in that gas they try to hedge hedged some of that in but.
I can't speak to what level, we would expect to see.
Increased activity frankly, there's a lot of up and down depending on where they decide to allocate capital depending on their footprint.
Excellent okay. Thanks, guys.
Thank you.
The next question is from Alex can I have Wolfe research. Please go ahead.
Hey, good morning, I just couple of questions.
First is just thinking kind of high level about guidance relative to overall volumes just trying to think about the kind of primary drivers that kind of decent tick up in volumes overall, but I'm kind of.
Slight decline in EBITDA is that a function of kind of commodity prices is there kind of an assumption of some NBC revenue rolling off in the in the back half of 2020.
Yes, Alex This is John Yes, you will see a little bit of both of those both of those things impacting.
Where we're at on the GMP side I think.
Also on the.
Truck transportation and storage side.
On some of the Interstate pipelines, primarily on CP, we've got some.
Contracts that that will roll.
In 2020 as well so I think as you look at total EBITDA, it's going to be a mix of of each of those each of those three items.
While I have a little bit of reduced commodity all else being equal we look at.
Our guidance for 20 relative to the to the realized prices to date in 2019 and what's expected for the.
The fourth quarter that will impact some of our commodity exposed volumes.
And as we mentioned, while we did have one of the two large haynesville MVC contracts.
Expire the MVC portion expire this year, we'll have another one.
Second piece of that expire next year.
That said, we're about 97% of the.
For the shortfall now.
When it rolled in the third quarter. So we're in a very good position there, but as we're expecting into 2020 as you can see we've got higher volume. There. So we don't necessarily expect a big drop off from from the MVC differences in.
2020 in the Haynesville and.
And then lastly, as I mentioned the.
Transportation storage contract rolls would be the third.
Okay, great. Thanks, that's helpful and then just.
Turning back to Gulf run.
I didn't think about what the decision process here is about kind of finalize I guess scope is if you're kind of waiting for maybe a little more clarity on either of some other projects down on the coast in terms of demand either LNG or something else.
How does that kind of play into.
When you have to make a filing with FERC to kind of get they get the process underway Im just wondering if how how easy it is to kind of update it based on scope, if you're able to find.
Sizable increase in volumes there ultimately.
We'd have some flexibility to update scope on that but.
Primarily there is continuing to be a lot of development around that area and as to why we are targeting kind of the first quarter of 2020.
The nail down the scope.
As really because we continue to.
Be pretty active out there talking to folks about ways to increase the size of that pipeline.
Great. Thank you.
The next question is from Christopher Tourette of Barclays. Please go ahead.
Hi, good morning, guys.
Just just wondering if maybe you could provide any insight on.
In looking at your guidance for next year provide any insight on the extent to which you have sort of de risk or risk adjusted.
What producers are telling you I guess.
We're still pretty early in kind of the guidance cycle here and so just wondering as results come in you know maybe worse or better than than what we expect how we should think about the flow through to you all.
Yes, no Oh, I'll start and John was that something.
You can jump in we get we get producer.
We get produce forecast, we look at them.
When we feel it's necessary, we arrests real risk adjust those down sometimes even risk adjusted those up I think one thing that again, we kind of with caution on right now is when you're in this kind of price environment.
Yes.
When you're in this kind of price environment.
Good producers haven't yet made their final decisions around capital in 2020, and so I think we had to give that serious consideration before we put out our 2020 guidance.
Historically, we've always done guidance at this time.
We discussed whether it would make sense the.
Maybe wait, but we felt that would be consistent.
Because we do have confidence and as we've seen some of the smaller producers lay down rigs and we're more focused on the better capitalized players.
Again, they are more certain with their 2020 plans in that.
That we factored all of that and when we put our guidance with our guidance forward group, we've got a range there and as we sit here today, we feel like it will come somewhere within that range, both volumetrically and financially.
Okay. That's helpful. Thank you thought for me.
The next question is from Ned Bam off of Wells Fargo. Please go ahead.
Good morning, Thanks for taking the questions you mentioned a definitive agreement to sell an ownership interest in a gas storage facility, so thinking about future potential asset optimization initiatives. What is the approximate range of EBITDA generated by non core assets that could be monetized.
Over time.
Yeah, I would say.
Probably not going to guide any kind of EBITDA around that but we are always looking at assets that we think you know don't do not make sense for us as to own sometimes they're very small, but I would say annually. There is some amount of assets that we make some decisions on another this to know storage was one where.
Again, we can serve our customers more efficiently.
And not have not own that asset in the and again, we can redeploy that.
That capital, but we'll always look at ways to optimize around our assets and in times like this when we're under cost.
Pressures because of reduced activity, we're even more aggressively with how we think about rationalization.
Of assets.
Got it that's helpful and then on on your on your Haynesville Nbcs now that one part of the contract has expired and I presume. It's strictly a volumetric at this point is there a change in the gathering fee that the customer spending relative to the fee paid under the MBC cost.
Tracked no those contracts extend for another five years attached.
A pass the automobile haynesville contracts they extend another five years past.
The time Dnbi sees.
Are no longer valve.
Got it and then last one for me.
On the new mass project could you maybe talk about the expected return and then it seems that leverages existing infrastructure, yet being service days, a year and a half away. So maybe can you walk through some of the longer dated items that need to get done before the project is commissioned.
Yeah, I would say, it's it's probably less than 18 months, we would expect it to be in service.
Back half of next next year it you're absolutely correct. It does we're able to leverage significant pipeline infrastructure that we have.
In Oklahoma.
Arkansas and Louisiana.
It is a it is it has a higher return that we would normally see on the transportation contract in.
Again, we think that transports going to be very valuable.
As producers continue our when we see some uptick in gas prices and producers start to further develop the stack.
Thank you that's all I had.
The next question is from Danilo Giovanni of BMO capital markets. Please go ahead.
Thanks, and good morning, most of my questions I've been asked can answer but it did have a couple of follow up firstly on Gulf run realizing so trying to get the Oh project scope down, but any updates on what the ultimate capex could that could be there.
Nothing that we had its still within the range that we put out originally.
Got it and.
To be precise that ranges around 500 million.
That's correct.
And secondly, I think in your prepared remarks made mention of.
Natural gas takeaway out of the Wilson can you. Please expand on that potential project can be.
Yes, I think they commentary there was really more around that delay.
In bringing on new natural gas infrastructure. This is a comment that we've we've had in the past around why the rate of growth for us we got to just crude there. We don't we don't and linear and natural gas infrastructure for our customers what rate improved growth has slowed.
Relative to what we had initially guided to in 2019 and so we've seen we've seen.
The slow down or the.
The lack of natural gas infrastructure impede the rate of growth for us on our systems.
Ultimately expect that to abate with some of those third parties.
Bringing on additional processing facilities and other other infrastructure, but that was that was really more the commentary there now not not around a particular project for us.
Got it appreciate the color those those are my question. Thank you.
Great.
This concludes our question and answer session I would like to turn the conference back over to Mr. Taylor for closing remarks.
Well. Thank you very much in closing I want to recognize all of our employees for their hard work and dedication and I'd like to thank everybody on the call for your interest and enable and I would ask everybody that haven't say okay. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.