Q3 2019 Earnings Call
Program. Please press Star then zero on your touched on telephone I will now turn the call Jamie Parker Investor Relations Officer, you May begin your conference.
Thank you welcome to the third quarter earnings conference call for Shell Midstream partners with me today or Kevin nickel CEO .
John Carsten CFO and Steve led better.
BP commercial and business development.
Slide two contains our safe Harbor statement.
We will be making forward looking statements related to future events and expectations during the presentation and Q and a session.
Actual results may differ materially from such statements and factors that could cause actual results to be different are included here as well.
Sales in the yesterday's press release and under risk factors in our filings with the SEC.
Today's call also contain certain non-GAAP financial measures.
Please refer to the earnings press release in Appendix one of this presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.
We will take place.
Questions at the end of the presentation with that I'll turn the call over to Kevin Nichols.
Thanks, Jamie Good morning, everyone and thank you for joining me for the shell Midstream partners third quarter webcast on todays call I'll discuss a few of the highlights for the quarter and as always I'll turn it over to Sean to walk you through our financials.
Im pleased with our third quarter performance as shell midstream partners generated $141 million, a net income up from 115 million in the second quarter.
Total cash available for distribution was $153 million down $9 million from the prior quarter, primarily due to the onetime impact.
Act of Hurricane Barrett.
Our assets continue to demonstrate resilience and we continue to meet our commitments to unit holders as evidenced by our distribution for the third quarter.
This puts us well on our way to delivering our mid teen distribution growth guidance for 2019.
At.
Our portfolio demand remained strong in and around our major onshore and offshore systems.
As I look at the onshore systems quarter over quarter volumes increased and were largely driven by the zydeco system. As this was the first full quarter with the new contracts in place.
The remaining onshore pipelines and terminals continued.
Deliver inline with the prior quarter.
By switch to look at the offshore we continue to see strong activity in and around our footprint.
Across our major corridors, we continued to deliver value.
Volumes were roughly even with the prior quarter. Despite the previously mentioned impact from.
Hurricane Baird.
As you can see on the slide we increased on Proteus and in Demyan as the Aframax fields continue to ramp up.
Volumes were in line with the prior quarter on Amberjack and in the Eastern corridor, while we saw slightly lower volumes on Mars and auger mainly related to hurricane.
Barry.
It is important to note. However that we did not experience material damage to any of our assets as a result of the hurricane.
And volumes ramp backup to normal as soon as the Proterra producers restart and all impacts were within the guidance that we provided you last quarter.
Looking longer term I remain bullish on the Gulf of Mexico.
Let me pause and focus for a moment on the Mars corridor.
We continue to see high utilization rates with the quarter running at an average of over 90% of capacity this past year.
And with the anticipated new volumes from.
Fields, such as veto power nap and other nearby prospects, we expect Mars to be reaching capacity.
To meet this increase expected demand and other opportunities that we see we recently announced a solicitation of interest for an expansion.
Offering priority service on the new incremental.
Capacity from ours.
This demonstrates yet again that our core to our strategy is working providing the partnership with cost effective organic growth opportunities and we remain well position to capture the growth in the Gulf of Mexico.
And finally before I turn it.
Over to Sean let me touch on ideas.
I understand this is an important topic to you our investors and what I can offer is that our sponsors aware of the market sentiment around IDR and discussions are ongoing.
As a reminder of the IDR waiver that we put in place three quarters ago continues to provide benefits to the.
The partnership through this quarter.
And as soon as I have more guidance I will let you know.
So let me finish with this we continue to have strong sponsor support and shell believes in the partnership and the value that it provides.
So with that let me turn the call over to Sean to walk you through the financial performance for the quarter Sean.
Thanks, Kevin.
As I reflect on the full quarter results I'm encouraged that our diversified portfolio has delivered expected returns for our partnership.
So let me cover a few of our key financial metrics for the quarter.
Our total revenue was 125 million up about 4 million from the prior quarter. Now this is primarily related to higher.
Resided go transportation revenue due to the new contracts being in place for a full quarter, along with higher allowance oil sales, which compared when compared to the second quarter.
Our operating expenses were 76 million, an increase of 3 million from the prior quarter.
As expected this increase is related to seasonal project spend in our terminals.
As well as higher cost of goods sold for the allowance oil.
Income from equity investments was $115 million up 35 million from the second quarter. This is mostly driven by a full quarters income related to the additional interest we acquired in colonial and explore.
And other income was 8 million down about.
In line for the quarter, primarily related to the final auger business interruption insurance payment that we received in the second quarter.
In total adjusted EBITDA attributable to the partnership was 186 million down about $1 billion from the prior quarter.
And after interest expense maintenance capital another adjustments totaled.
Cash available for distribution was 153 million.
Our partnership declared a distribution of 44.5 cents per LP unit. This represented a 3.5% increase over the prior quarter and all this resulting in a coverage ratio for the quarter of 1.1 times.
So now let me move onto a few updates first let me remind you of the previously guided producer turnaround impacts in the Gulf.
We expect an impact of around 5 million in the fourth quarter and some turnarounds previously planned for Q3 were delayed to Q4.
Also in the fourth quarter, we expect to receive approximately 9 million from.
Ill pipeline company and this is related to the agreement entered into when we acquired an additional interest and Mars in 2016.
At the time at that transaction the assets were experiencing it we're experiencing historic highs on storage revenues.
So we the partnership negotiate the ability to recoup certain amounts from shell pipeline and storage.
Fees did not meet certain financial thresholds.
Now, let's go to the transaction storage revenues did revert to long term trends integrating the settlement with our sponsor.
And finally, the Capex space, we incurred 11 million in third quarter of which $6 million was related to growth capital.
And our growth capital is primarily.
In the continued expansion of the Permian gas gathering system.
And now to the partnership's balance sheet and liquidity as of September Thirtyth. The partnership had total debt outstanding of 2.7 billion, which equates to a debt to EBITDA ratio of 3.6 times based on an annualized Q3 adjusted EBITDA.
We're comfortable with our balance sheet, which will allow us flexibility to continue to grow our business.
So with all that we will now take your questions operator.
Ladies and gentlemen, if you have a question or comment at this time. Please press the star than the one key on your touched on telephone. If your question has been answered wished to move yourself from the Q. Please press the pound key.
Our first question comes from.
In a good shiny would you be us.
Hi, good morning, guys.
Maybe we can sort of touch on the IDR is another you sort of talked about in your prepared remarks.
You know.
It's obviously taken longer than what's been a typical practice within the industry.
I really kind of have too.
Two questions with respect to the audience before getting into gross.
The first is can you concrete concretely confirmed that there'll be some sort of resolution in one form or another before the next declaration.
Yes. Thank you appreciate the question I understand everyone's desire to have some direction on this.
At this time I'm not going to provide a timeline or date.
Certainly the I'd ours and the approached I'd ours is a sponsor a decision a broader than that.
The management team looks at the strategy of the business and other forward guidance that we'll be looking to provide and when we put that holistic strategy together.
I will come back and provide that when ready.
Okay, so well.
Absent that when you when you think about the auction this that you're putting together for a holistic strategy.
What options are you considering and scenarios that you're running in evaluating.
Are you considering as C Corp conversion.
Or you just thinking more about an IDR conversion versus an extension of wafers.
Yes. So you have a couple of things mixed in there with regards to the approach to the IDR is I'm not going to comment on the various different things that are ongoing and discussions or that the us.
Sponsors considering with regards to the forward guidance in the.
For the strategy of the company I think you can look for similar type guidance that we provided in the past and that would include things like distribution growth rates funding strategy.
Update on the runway.
Base business growth and those those.
So sets of guidance.
Okay.
Maybe transitioning a little bit here.
You mentioned in prior calls about.
The fact that shall axis of growth oriented MLP and that you have a line of sight to the growth.
Can you walk us through.
Now that will materialize with respect to shall acts.
Kind of given that the line of sight that you have and I know that you mentioned Marsh for example by what kind of EBITDA uplift are you kind of thinking that this line of sight actually does for EBITDA as I think on a two to three year basis versus now.
Is it up 30% 40%.
How do we define this line of sight correct.
And I appreciate that I think you're looking for clarity with regards to the go forward strategy 2020 and beyond.
We're not going to provide specific forward guidance at this time with regards to the types of growth opportunities I.
I mean, the one of them as is another example of it today is the margin expansion, we've seen organic growth opportunities in the offshore with new fields connecting into our existing systems and we have said all along that shell continues to invest in the United States. It's the single largest.
Investment place for.
For Royal Dutch shell, and with that Theres infrastructure opportunities and needs that will come with that.
Similar to Maddox that we recently commissioned the Falcon pipeline that we are building and other opportunities. So those are the kinds of things that will have and will feature but giving specific guidance at this time.
Well just refer you back to when.
We are ready, we'll give you that holistic strategy.
Okay. So I guess, we're waiting for a lot at this point okay.
That's that's all of my question. Thank you very much.
Thank you.
Our next question comes from Theresa Chen with Barclays.
Hey trade morning.
Good morning, Kevin.
Thank you for taking my questions. So.
I'd like to dig a little deeper into at the margin expansion and do you see this has kind of like add first inning.
Many expansions to your assistance and given that continues to be a bright spot fundamentally looking past the hurricane volatility oriented.
Just more of like a one off thing to service.
The needs of the producers there.
Yes. Thanks today I'll have Steve led better here who's our VP of commercial so maybe Steve you can kind of talk to the goal.
Yes sure. So thanks for the Theresa that the question treats again this is Steve let better Vice President commercial and I'm happy to be here with you. This morning.
The question was really around a one time element this being the expansion I think the way I characterize this as we continue to be very bullish about the Gulf and our core to our strategy is working in this is one example, where we look to provide sustainable solutions for producer.
Needs as we continue to see growth opportunities.
Out there so while I won't characterize it will be others. We continue to look at these opportunities in both we'll announce to the market at the present time, our at the time that that we have good confidence about them.
Thank you and for this one in particular do you have any sort of ranges in mind in terms of coffee economics.
Yes.
I can I can appreciate the.
Desire to understand kind of the structure in the financial outcome of the expansion, but what I'd say is.
You know, we're happy with where we are in the solicitation of interest, but that is going to somewhat influence.
Not only the approach we take the expansion, but also likely.
The outcomes and at this point, we're not we prefer not to give a.
Give guidance around that what I will also say is given our quarter strategy and the way we construct our commercial contracts, we were able to de risk the investment that ensures the opportunities that we take on our ultimately accretive to the.
Partnership.
Thank you very much.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press the star than the one key on your touched on telephone.
Next question comes from Jeremy Tonet with JP Morgan.
Jeremy.
Hi, good morning.
I appreciate that maybe not in a position.
Right now to provide too much forward guidance, but just wanted to.
Ill touch on the philosophy for our distribution growth in general it seems like which sounds like having almost a 9% yield here. It seems like distribution growth really only benefit the IDR set the stage just wondering what you can say as far as philosophically.
It's about.
Returning capital.
Yeah. Thank you and again I appreciate the desire for folks to have.
Forward looking guidance.
Growth rate being one of those I'm not going to be able to provide that today or even give an indication of where will head with that I think it's better answers when we come back.
At the holistic strategy, which will take into consideration current market sentiment curtain current market conditions and the base business and what we see going forward, we have a really diversified set of assets in the partnership already today.
Healthy base business, we have a strong Gulf of Mexico business that is capturing.
Organic growth for little to no capital investment.
And we have flexibility in our balance sheet.
To do different things going forward, so I'm confident that.
What I will say as we we are going to be confident in delivering our promise the marketplace in our distribution growth through 2019, and I'll just ask that should be patient just a little bit longer until we can give you that.
Holistic strategy.
And Jeremy I might add this is Sean just that weight as always the management team is committed to.
To reach the the guidance, we provided the markets and fast, but the long term gain for this this MLP is around creating a long term sustainable into deeper, but overall were unit holders and we.
I want to make sure that we have.
It could cohesive holistic strategy that allow that wheel to turnaround.
That's all for me thanks for taking my questions. Thanks.
Our next question comes from Derek Walker with Bank of America.
Hey, there right.
Good morning, guys.
Just a quick one on Mars.
Steve I know you gave us a little bit of color there, but can you maybe the probably little bit scope is it just pumps and dairies I think.
Before you said wasn't necessarily need it for national and a new pipe around there, but just.
Any sort of thoughts around.
First thing you think that expansion could be.
Yes. Thanks, Thanks for the question.
What we're looking to do right now capacity wise is we're offering priority service around 65000 barrels a day and you're correct. This is the scope of this does include some.
Some some pumps as well as some piping modifications, both top side and subsea does not.
Building, a large trunk line from the beach to the to the platform, which.
The outcome of that gives kind of win win solutions for both the producers as well as the the partnerships as well.
Got it and then on slide six.
Just to.
Really just the the forecast there that really just coming from Vito.
On power Nap is there any other sort of.
Elements, there that we should be thinking about that's driving that growth.
Thanks.
I'm sorry.
Sorry can you can you go ahead repeat the question not sure I fully understood with the EPS. Yeah. There was on slide six there is an estimated throughput.
And just wanted to see.
You know, what's driving that that forecast is it just coming from from veto power nap or is there anything else that we should be thinking about yes. So these are these are with the currently sanction projects that will flow into our core door.
Okay, great as we continue to look across the landscape, we're in active conversations and.
Evaluate opportunities as we as we grow in our position in the Gulf.
Okay great.
And then maybe just one quick one on zydeco, Kevin and now they have one quarter under your belt with the new contracts can just kind of.
Talk little bit around higher.
Feeling as articles competitive.
Dynamics and give.
For the recent trends here that we're saying.
Let me start and then I'll turn it over to Steve who manages the commercial aspect of it and the asset management. So I think the contract and the business that we envisioned when we renegotiated those contracts are signed up customers are unfolding exactly how we expected so the volumes are flowing.
The system is full and of course part of that is building an export highway that connects into a loop as well as connected to the other refining centers, but maybe if there's any more detail Alaska, Steve No I don't think there's too much more color, Kevin, but I, but I just say that we're pleased with.
The outcome of that strategy and we are in.
In active discussions right now about how we ensured we optimize what we can deliver and that is about being competitive efficient competent in a in flexibility through that route. So a pretty pleased with where we are today.
Got it. Thank you that's it for me.
Thanks, Jim.
Our next question comes from some innocuous before.
Yes. Thank you good morning.
And I appreciate.
Your comments in terms of delivering on the guidance that you laid out in terms distribution growth for this year.
And you're going to hit that I think previously Hadnt. You also said that you wanted to your.
Distribution growth for to be in the top core tile.
For growth going forward and I'm, just wondering is there any.
Changes to that sort of longer term outlook.
Yeah, first and foremost you're right delivery in the mid teens distribution growth for 2019, I stand or we stand behind that.
With regards to top.
Core pile of where we want to position that distribution growth going forward, we're going to factor in all of the current market conditions peers, what our growth opportunities are going forward and we'll build that into our holistic strategy. So I won't update that guidance at this time.
Okay. Thank you.
Our.
Next question comes from Ryan Levine with Citi.
Good morning, and understanding you want to optimize the IDR decision are there any additional dropdown candidates that have become readying to drop in the last quarter to help on that process and as that is a key consideration and the timing of any decision making.
Yeah. So.
Again, I'm not going to give forward guidance, the drops or what what will be a component of that strategy going forward as far as readiness of asset that is a strength, where we are uniquely positioned with our sponsor shell.
As you've seen in the past the high quality assets that we've been able to acquire they underpin significant integrated value for shell.
Now, they're mainstream midstream assets of a really high caliber and we've talked to our runway before and these types of assets on the runway has not changed so we have a quality set of assets my team and organization continues to prepare a suite of assets that we could have available for us.
Execute on.
Any strategy that we put in place and longer term Ryan as Sean I'd also highlight that that just as has been discussed that shells management day. There is about $10 billion going into the us roughly 40% of the groups capital investments going into the U.S. So as new investment comes in new infrastructure goes along with that so our runway continues to grow.
So for longer term, we were very comfortable we have lots of assets to talk about well I would add one more component to that is that we have flexibility has been demonstrated in the past that we have multiple different ways that we can access that runway.
So am I appreciate the color I guess, one follow up so you mentioned that your teams working.
Turning to ready those assets are there any challenges in in that readying process.
Whether its accounting or elsewhere that could complicate.
Any future drops.
Nothing out of the a a out of the ordinary it's what we've always been facing in some cases you have to.
Carve out and put some financials behind them, but.
Nothing has changed from our ability to prepare assets.
Okay appreciate that thank you.
Thank you we have no further questions I would now like turn the call back to JV Parker.
Thank you very much for your interest in shell midstream.
Partners. If you have any additional questions on todays presentation. Please feel free to give me a call directly my contact information can be found on the presentation materials is on our website shell midstream partners Dot com.
Ladies and gentlemen, just conclude today's presentation. You may now disconnect have a wonderful there.
Good morning, My name is Kevin and I'll be your conference operator today at this time I'd like to welcome everyone to the third quarter.
For 2019 Shell Midstream partners earnings call at this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if you require operator systems. During the program. Please press Star then zero on your touched on telephone I will now turn the call Jamie Parker Investor Relations Officer, you May begin your conference.
Thank you.
Welcome to the third quarter earnings conference call for Shell Midstream partners with me today, or Kevin Nickel, CEO , Sean Carsten, CFO , and Steve led better BP commercial and business development.
Slide two contains our safe Harbor statement.
We will be making forward looking statements related to future events and.
Citations during the presentation and Q and a session.
Actual results may differ materially from such statements and factors that could cause actual results to be different are included here.
As long as in the yesterday's press release and under risk factors in our filings with the SEC.
Today's call also contain certain non-GAAP financial measures.
Please refer.
To the earnings press release, and appendix one of this presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.
We'll take questions at the end of the presentation with that I'll turn the call over to Kevin Nichols.
Hey, Thanks, Jamie Good morning, everyone and thank you for joining me for the shell midstream.
I mean partners third quarter webcast.
On today's call I'll discuss a few of the highlights for the quarter and as always I'll turn it over to Sean to walk you through our financials.
I'm pleased with our third quarter performance as shell midstream partners generated $141 million, a net income up from 115 million in.
The second quarter.
Total cash available for distribution was $153 million down 9 million from the prior quarter, primarily due to the onetime impact of Hurricane Barrett.
Our assets continue to demonstrate resilience and we continue to meet our commitments to unit holders.
As evidenced by our distribution for the third quarter.
This puts us well on our way to delivering our mid teens distribution growth guidance for 2019.
Across our portfolio demand remained strong in and around our major onshore and offshore systems.
As I look at the onshore systems quarter over quarter.
Volumes increased and were largely driven by the Zydeco system. As this was the first full quarter with the new contracts in place.
The remaining onshore pipelines and terminals continued to deliver inline with the prior quarter.
But switch to look at the offshore we continue to see strong activity in and around our.
Correct.
Across our major corridors, we continued to deliver value.
Volumes were roughly even with prior quarter. Despite the previously mentioned impact from Hurricane Baird.
As you can see on the slide we increased on Proteus and then demyan as the Aframax fields continue to ramp up.
We volumes were in line with the prior quarter on Amberjack.
And in the Eastern corridor, while we saw slightly lower volumes on Mars and auger, mainly related to hurricane Barry.
It is important to note. However that we did not experience material damage to any of our assets as a result of the hurricane.
And volumes ramp back up to normal as soon as the power producers restart and all impacts were within the guidance that we provided you last quarter.
Looking longer term I remain bullish on the Gulf of Mexico.
Let me pause and focus for a moment on the Mars corridor.
We continue to.
See high utilization rates with the quarter running at an average of over 90% of capacity this past year.
And with the anticipated new volumes from fields, such as veto power nap and other nearby prospects, we expect Mars to be reaching capacity.
To meet this.
Priest expected demand and other opportunities that we see we recently announced a solicitation of interest for an expansion.
Offering priority service on the new incremental capacity from ours.
This demonstrates yet again that our core to our strategy is working providing the partnership with cost effective.
Organic growth opportunities and we remain well positioned to capture the growth in the Gulf of Mexico.
And finally before I turn it over to Sean Let me touch on I'd ours.
I understand this is an important topic to you our investors and what I can offer is that our sponsors.
Where the market sentiment around IDR and discussions are ongoing.
As a reminder of the IDR waiver that we put in place three quarters ago continues to provide benefits to the partnership through this quarter.
And as soon as I have more guidance I will let you know.
So let me finish with this we continue to have strong.
Sponsor support and shell believes in the partnership and the value that it provides so with that let me turn the call over to Sean to walk you through the financial performance for the quarter Sean.
It's Kevin.
Reflect on the full quarter results I'm encouraged that our diversified portfolio has delivered expected returns for our partnership.
So let me cover a few of our key financial metrics for the quarter.
Our total revenue was 125 million up about 4 million from the prior quarter. Now this is primarily related to higher zydeco transportation revenue due to the new contracts being in place for a full quarter, along with higher allowance oil sales, which compared when compared to the second quarter.
Our operating expenses were 76 million, an increase of 3 million from the prior quarter.
As expected this increases related to seasonal project spend in our terminals as well as higher cost of goods sold for the allowance oil.
Income from equity investments was 115 million up 35 million from the second quarter.
This is mostly driven by a full quarters income related to the additional interest we acquired in colonial and explore.
And other income was 8 million down about 4 million for the quarter, primarily related to the final auger business interruption insurance payment that we received in the second.
In total adjusted EBITDA attributable to the par.
Ownership was 186 million down about 1 billion from the prior quarter.
And after interest expense maintenance capital and other adjustments total cash available for distribution was 153 million.
Our partnership declared a distribution of 44.5 cents per LP unit. This represented a three.
And a half percent increase over the prior quarter.
And all this resulting in a coverage ratio for the quarter of 1.1 times.
So now let me move onto a few updates first let me remind you of the previously guided producer turnaround impacts in the Gulf.
We expect an impact of around 5 million in the fourth quarter.
And some turnarounds previously planned for Q3 were delayed to Q4.
Also in the fourth quarter, we expect to receive approximately 9 million from shell pipeline company. This is related to the agreement entered into when we acquired an additional interest and Mars in 2016.
At the time at that transaction the assets were experience.
I think we're experiencing historic highs on storage revenues.
So we the partnership negotiate the ability to recoup certain amounts from shell pipeline storage fees did not meet certain financial thresholds.
Now, let's go to the transaction storage revenues did revert to long term trends is creating the settlement with our sponsor.
And finally in the Capex space, we incurred 11 million in the third quarter of which $6 million was related to growth capital.
And our growth capital is primarily in the continued expansion of the Permian gas gathering system.
And now for the partnership's balance sheet and liquidity as of September Thirtyth. The partnership had total.
Scanning of 2.7 billion, which equates to a debt to EBITDA ratio of 3.6 times based on annualized Q3 adjusted EBITDA.
A comfortable with our balance sheet, which allows flexibility to continued to grow our business.
So with all that we will now take your questions operator.
Ladies and gentlemen, if you have a question or comment.
And at this time, please press the star than the one key on your Touchtone telephone. If your question has been answered wished to move yourself from the Q. Please press the pound.
Our first question comes from Cerner, Good shiny would you be us.
Hi, good morning, guys.
Yes, maybe we can sort of touch on the IDR is I know that you sort of talked about in your prepared remarks.
Thanks.
It's obviously taken longer than what's been a typical practice within the industry.
It really kind of have two questions with respect to the IDR before getting into gross.
The first is can you concrete concretely confirmed that there'll be some sort of resolution in one form or another before the next.
Duration.
Yes. Thank you appreciate the question I understand everyone's desire to have some direction on this up at this time I'm not going to provide a timeline or date.
Certainly the IB ours and the approached I'd ours is a sponsor a decision.
Other than that.
<unk> management team looks at the strategy of the business and other forward guidance that we'll be looking to provide and when we put that holistic strategy together I will come back and provide that when ready.
Okay, so well.
Absent that when you when you think about the auction this.
That you're putting together for a holistic strategy.
What options are you considering and scenarios that you're running in evaluating.
Are you considering a C Corp conversion.
Or you just thinking more about an IDR conversion versus an extension of wafers.
So you have a couple of things mixed in there with regards to the approach to the IDR is I'm not going to comment on the various different things that are ongoing and discussions or that the sponsors considering with regards to the forward guidance in the.
For the strategy of the company I think you can look for similar type guidance that we provided in the past and that would.
Good things like distribution growth rates funding strategy.
Update on the runway.
Base business growth and those those types of sets of guidance.
Okay.
Maybe transitioning a little bit here.
You mentioned in prior calls about.
The fact that shall axis of growth oriented MLP and that you have a line of sight to the gross.
Can you walk us through how that will materialize with respect to shall acts.
Kind of given that the line of sight that you have and I know that you mentioned Marsh for example bite.
What kind of EBITDA.
Uplift are you kind of thinking that this line of sight actually does for EBITDA as I think on a two to three year basis versus now.
Is it up 30% 40%.
How do we define this line of sight of correct.
Yeah, and I appreciate that I think you're looking for clarity with.
So let go forward strategy 2020 and beyond.
We're not going to provide the specific forward guidance at this time with regards to the types of growth opportunities I mean, the one of them is is this example, but today is the margin expansion, we've seen organic growth opportunities in the offshore.
With new fields connecting into our.
Listing systems, and we've said all along that shell continues to invest in the United States. It's the single largest.
Investment place for Royal Dutch shell, and with that Theres infrastructure opportunities and needs that will come with that.
Similar to Maddox that we recently commissioned Falcon pipeline.
We are building and other opportunities. So those are the kinds of things that will have and will feature but giving specific guidance. At this time I will just refer you back to when we're ready we'll give you that holistic strategy.
Okay. So I guess, we're waiting for a lot at this point okay.
That does Thats all my questions. Thank.
You very much.
Thank you.
Our next question comes from Theresa Chen with Barclays.
Hey trade morning.
Good morning, Kevin. Thank you for taking my questions. So.
I'd like to dig a little deeper into at the margin expansion do you see this as kind of like that first inning.
As many expansions to your assistance and gone given that it continues to be a bright spot fundamentally it looking past that hurricane volatility or is it just more of like a one off thing to service.
The needs of the producers there.
Yes, thanks today I have Steve let better here who's our VP of commercial so maybe Steve you can.
Talk to the goal.
Yes, sure so thanks for the Theresa.
Question treats again this is Steve let better vice president commercial and on that you'd be here with you. This morning at a question was really around a one time element being the expansion I think the way I characterize this as we continue to be very bullish about the Gulf and our core to our.
He is working in this is one example, where we look to provide sustainable solutions for producer.
Needs as we continue to see growth opportunities out there so while I won't characterize it will be others. We continue to look at these opportunities in both we'll announce to the market at the present time or the time that that we have good.
But it's about them.
Thank you and for this one in particular do you have any sort of ranges in mind in terms of coffin economics.
Yes, I can I can appreciate the.
Desire to understand kind of the structure in the financial outcome of the expansion, but what I'd say is.
You know, we're happy with where we are in the solicitation of interest, but that is going to somewhat influenced.
Not only the approach we take the expansion, but also likely the outcomes and at this point, we're not we prefer not to give.
Give guidance around that what I will also say is given our core to our strategy and the.
Okay, we construct our commercial contracts.
We were able to de risk the investment that ensures the opportunities that we take on our ultimately accretive to the partnership.
Thank you very much.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press the star than the one key on your touched on.
The phone.
Our next question comes from Jeremy Tonet with JP Morgan.
Hey, Chairman.
Hi, good morning.
Appreciate that maybe not in a position right now to provide too much forward guidance, but just wanted to.
Don't touch on the philosophy for distribution growth in general it seems like which reflects having almost.
Just a 9% yield here seems like distribution growth really only benefits. The IDR set the stage just wondering what you can say as far as philosophically thoughts about returning capital.
Yeah. Thank you and again I appreciate the desire for folks to have.
Forward look.
And guidance.
Growth rate being one of those I'm not going to be able to provide that today or even give an indication of where will head with that I think it's better answered when we come back with a holistic strategy, which will take into consideration current market sentiment curtain current market conditions and the base business and what we see going forward.
We.
Really diversified set of assets in the partnership already today healthy base business, we have a strong Gulf of Mexico business that is capturing organic growth for little to no capital investment and.
And we have flexibility in our balance sheet.
To do different things going forward, so I'm confident that.
What I will.
As we we are going to be confident in delivering our promise to the marketplace in our distribution growth through 2019, and I'll just ask that should be patient just a little bit longer until we can give you that holistic strategy.
And Jeremy I might add this is Sean just that.
As always the management team is committed to.
To reach the.
The guidance, we provided the markets and fast, but the long term gains for this this MLP is around creating a long term sustainable entity group overall were unit holders and we want to make sure that we have.
Hey, good cohesive holistic strategy that allow that we're able to turn around.
That's all for me thanks for taking my.
Thanks.
Our next question comes from Derek Walker with Bank of America.
Hey, there.
Hey, good morning, guys.
Just a quick one on Mars.
Steve I know you gave us a little bit of color there, but can you maybe the probably little bit scope is it just pumps and areas I think.
Before you said wasn't necessarily need it for especially in a new pipe around there, but just to.
You sort of thoughts around operationally and what do you think that expansion could be.
Yes. Thanks, Thanks for the question.
What we're looking to do right now capacity wise is we're offering priority service around 65000.
Good day and you're correct. This is the scope of this does include.
Some pumps as well as some piping modifications both top side and subsea does not building a large trunk line from the beach to the to the platform, which.
The outcome of that gives kind of win win solutions for both the producers as well as.
The partnership as well.
Got it and then on slide six.
Just a.
That's really just the the forecast there that really just coming from Vito and power Nap is there any other sort of.
Elements, there that we should be thinking about that's driving that growth.
Thanks.
I'm sorry.
Sorry can you can you go ahead repeat the question not sure fully understood.
Yeah. There is on slide six there is a estimated throughput.
And just wanted to see.
What's driving that that forecast is it just coming from from veto power nap.
Is there anything else that we should be thinking about yes. So these are these are with the.
At least sanction projects that will flow into our core door.
Okay, great as we continue to look across the landscape. We're in active conversations and continue to evaluate opportunities as we as we grow in our position in the Gulf.
Okay great.
Then maybe just one quick one on zydeco.
Now they have one quarter under your belt with the new contracts can just kind of.
Yes talk little bit around how you're feeling.
Feeling as articles competitive.
Dynamics.
Given sort of the recent trends here that we're seeing.
Yes, let me start and then I'll turn it over to Steve who manages its commercial aspect of it and the asset management. So I think the.
The contract and the business that we envisioned when we renegotiated those contracts and signed up customers are unfolding exactly how we expected so the volumes are flowing.
The system is full and of course part of that is building an export highway that connects into loop as well as connective too.
The other refining centers, but maybe if there's any more detail asked Steve no I don't think there's too much more color, Kevin, but I, but I just say that we're pleased with.
The outcome of that strategy and we're in active discussions right now about how we ensured we optimize what we can deliver and that is about being competitive efficient and confident in the.
Flexibility through that route so pretty pleased with where we are today.
Got it. Thank you that's it for me.
Thanks, Jim.
Our next question comes from some innocuous Stifel.
Yes. Thank you good morning.
And I appreciate.
Your comments.
In terms of delivering on the guidance that you laid out in terms distribution growth for this year.
And you're going to hit that I think previously cadence. You also said that you wanted to your distribution growth wanted to be in the top core tile.
For growth going forward and I'm, just wondering is there any.
Changes to that sort of longer term outlook.
Yeah.
First and foremost youre right delivery in the mid teens distribution growth for 2019, I stand or we stand behind that.
With regards to top core pile of where we want to physician that distribution growth going forward, we're going to factor in all of the current market conditions peers, what our growth opportunities are going forward.
And we'll build that into our holistic strategy. So I will update that guidance at this time.
Okay. Thank you.
Our next question comes from Ryan Levine with Citi.
Good morning.
Understanding you want to optimize the IDR decision are there any additional dropdown candidates that have become.
I'm ready to drop in the last quarter to help in that process and as added key consideration and the timing of any decision making.
Yes, so again I'm not going to give forward guidance the drops or what what will be a component is of that strategy going forward as far as readiness of asset that is a strength.
We are uniquely positioned with our sponsor shell.
As you've seen in the past the high quality assets that we've been able to acquire they underpin significant integrated value for shell their main stream midstream assets of a really high caliber and we've talked to our runway before and these types of assets on the runway has not changed so we have.
Quality set of assets my team and organization continues to prepare a suite of assets that we could have available for us.
Execute on any strategy that we put in place and longer term Ryan as Sean I'd also highlight that just as has been discussed that shells management day, there's about 10 billion.
In dollars going into the us roughly 40% of the groups capital investments going into the U.S.. So as new investment comes in new infrastructure goes along with that so our runway continues to grow.
So for longer term, we were very comfortable we have lots of assets to talk about well I would add one more component to that is that we have flexibility has been demonstrated in the past.
That we have multiple different ways that we can access that runway.
Hi, I appreciate the color I guess, one follow up so you mentioned that your teams working to ready those assets are there any challenges in in that readying process.
Whether its accounting or elsewhere that could.
Okay.
Any future drops.
Nothing out of the.
After the ordinary it's what we've always been facing in some cases, you have to carve out and put some financials behind them, but.
Nothing has changed from our ability to prepare assets.
Okay appreciate that thank you.
Thank you we have no further questions I would now like turn the call back to JV Parker.
Thank you very much for your interest in shell Midstream partners. If you have any additional questions. Following today's presentation. Please feel free to give me a call directly my contact information can be found on the presentation materials is on our website shell midstream partners dotcom.
Ladies and gentlemen, does conclude todays presentation you may now disconnect and have a wonderful there.