Q3 2019 Earnings Call
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We'd like to Joe for Western gas partners.
Okay you name please.
First name David last name wrong.
And your company.
Our euro.
Okay, you will be in listen only mode. The call is being recorded one moment.
Thank you.
On the call with me today, our Mike Pearl, Our Chief Financial Officer Credit Collins, our Chief operating Officer, and Jaime Casas, our former Chief Financial Officer.
Since becoming CEO in August I've had the pleasure of meeting many of the talented individuals at Wes in both our field and corporate offices I truly a motivated by the passion. They have further work and their desire to see the company's thrive.
These individuals are the reason why Wes has grown adjusted EBITDA from less than $100 million at IPO to current your midpoint guidance of $1.7 billion I.
Im privileged to be a part of this team and look forward to working alongside such committed and dedicated workforce.
Since early August of Premier management team has been assembled at Wes. This includes Mike and Craig joining me on the call today as well as Chuck Griffey, Our senior Vice President of operations and Engineering, Bob born our Chief Commercial Officer, and Catherine Green, Our Chief Accounting Officer.
Each of these individuals has decades of experience in the oil and gas sector and within their respective areas of expertise.
Mike and Craig previously served on the West management team, Mike as the CFO at the time of Western gas partners, IPO and Craig as COO as recently as 2018.
Chuck has over 18 years of operations and engineering experience. The majority of which has been spent with Anadarko Bob brings more than 30 years of midstream corporate business development experience to us and Catherine has served in a variety of leadership roles within Anadarko accounting over the past 18 years.
We've also appointed additional vice presidents to provide leadership in key areas. All of these individuals bring decades of experience to west in their respective fields with many of these appointments coming from legacy Anadarko, and Wes, which ensures the preservation of institutional knowledge and the streamline transition of west into its next phase.
Please visit our web site for further details on these key leaders I truly I'm excited about the assembled team and look forward to continued success. The west has enjoyed since its IPO.
West as expansive asset portfolio is focused in the Delaware and DJ basins, which are in my opinion, the premier onshore basins in the us.
In the Delaware alone, we have dedications for approximately 150000 acres. Additionally, more than 92% of our natural gas volumes and 100% of our crude and water throughput are supported by fee based contracts that are insulated from direct commodity price exposure.
More impressive as our average contract life of approximately 10 years with cost of service contracts and minimum volume commitments.
Strongly believe that west is positioned for long term growth and success with the amazing individual talent and an experienced leadership team in place I have no doubt that west will continue to excel.
We're excited about the completion of the acquisition of Anadarko by Oxy Oxy is a world class oil and gas company with a best in class US onshore portfolio that is complemented by Oxys proven operational and technical excellence, we look forward to continuing a long term meaningful relationship with oxy relation.
In ship that is mutually beneficial to both companies.
There are three focus areas for Wes.
First we must optimize our existing assets in place today, while maintaining the health and safety of our employees contractors and the communities in which we operate.
This means maximizing the operability of our assets and realizing cost and capital savings.
We are working to improve efficiencies between our commercial engineering and operations groups to provide our customers with best in class service.
To realize the as efficiencies, we're taking significant steps to reorganize west as a business unit within oxy.
We believe this reorganization will enhance employee focus which in turn will empower employees to generate ideas for providing improved customer service established better accountability and allow us to better align as compensation incentives with its own performance.
We've been working through the reorganization process for the last few months and we're excited with the results we've seen in the feedback that we have received.
Second we're confident that we can continue to grow wess business with the support of employees and our sponsor oxy.
We look forward to building on existing relationships and will remain well positioned to support Oxys development plans in the Delaware and DJ basins.
Oxy recognized as the tremendous value that west provides and has expressed its support to drive long term value for both companies.
Finally, we're focused on growing our third party business since our appointments, Craig and I have met with multiple customers to share our vision for Wes and to convey the importance of their existing and prospective new business.
Our efforts to grow the third party business are supported by our renewed emphasis on ensuring that we have the necessary capabilities to serve all our customers across the basins in which we operate through our expertise innovative designs and efficient capital deployment, we're focused on delivering improved service to all our customers.
I'd now like to turn the call over to my Pearl our CFO to discuss our third quarter financial results.
Thanks, Michael Yesterday afternoon, we reported quarterly results with adjusted EBITDA of $410 million and distributable cash flow of $304 million, where the coverage ratio of 1.08.
These results were impacted adversely by approximately $15 million related to since resolve downstream constraints that temporarily impacted our rockies assets.
Our operation and maintenance expense for the quarter increased by approximately $28 million sequential quarter basis. This increase primarily relates to higher seasonal electricity costs in the Delaware basin additional field level compensation true ups and additional surface use fees in west, Texas related to our expanding water business.
While this expense is greater than prior quarters. It Nevertheless is inline with our expectations and indicative of our expected I want him run rate for the fourth quarter of 2019, I will now turn the call over to Craig to discuss third quarter operations.
Thanks, Mike operationally gas throughput decreased by approximately 80 million cubic feet per day quarter on quarter. This decrease primarily was driven by lower throughput from our DJ Basin complex as a result of downstream constraints that were resolved mid quarter and that should not impact future operations.
We saw quarter on quarter increase throughput at our West, Texas complex, where we benefited from additional compression leading to third party and affiliate volume growth.
The ended the year, we expect to add over 140 million cubic feet per day of compression capacity.
I will ramp up throughput at our West, Texas gas processing complex turning to liquids our quarter on quarter throughput increased by approximately 85000 barrels per day. This growth was driven by 13% increase from our DBM water assets, where we brought three additional salt water disposal facilities online and a 14% increase.
From our DJ basin crude assets.
As expected our per barrel liquids gross margin returned to a normalized level of $1.81 as our water business continues to grow we expect our overall liquid margin to track lower however, compared to crude the water business generates higher returns notwithstanding the associated lower per barrel margins.
Also during the quarter cactus to commenced operations and is expected to ramp up heading into early 2020.
This investment is a great example of our continued focus on our portfolio of equity investments, which complement our in basin gathering and processing assets, providing cash flow diversification and economic upside further down the value chain. We will continue to find strategic equity investments that complement our existing asset portfolio as these opportunities arise.
Either through our sponsor oxy or through our own organic business development efforts.
I also would like to comment on our late them gas processing plant in the DJ Basin.
Plant dry out operations will begin within the next week and we expect to process gas in the next two weeks, we expect to see improved margins as we transition from bypassing to processing. These volumes. Additionally, we expect a second life Im trying to come online early next year I'll now hand, the call back over to Michael for concluding remarks.
Thanks, Craig I'd like to spend a few minutes discussing our current guidance next year's outlook as it relates to 2019, we expect capital to be near the low end of our guided range with respect to 2020, we will release our official guidance. Early next year. However, there are few items that were comfortable sharing today by way of a preliminary outlook.
First we expect significant year over year, adjusted EBITDA growth of approximately 10%.
This is the result of our continued focus on our Delaware operations, including six additional saltwater disposal facilities and additional 30000 barrels per day train at the North loving wrote US further gathering system build out related to Oxford development plans in the Delaware and DJ basins, and a full year of distributions from our cactus to equity investors.
And we also expect continued economic benefit from increased throughput in the DJ basin. Once lays on one end to ramp up during 2019 and 2020.
For 2020, we expect the decrease in total capital between 20% to 30% compared to the 1.35 billion dollar midpoint of our 2019 guidance.
Also maintenance capital as a percentage of adjusted EBITDA is expected to be proportionally in line with 2019.
Finally, the extensive buildout of our Delaware basin infrastructure over the past three years yields 2020 capital forecast benefits, resulting from economies of scale that are available as a result of our prior investments.
And the associated efficiency of this infrastructure build out.
For the past 27 quarters West has increased its distribution, we intend and expect to continue quarterly distribution growth taking into account our goals of lowering leverage and increasing distribution coverage.
Before I conclude my prepared remarks, I would like to thank employees and contractors for their continued focus on safety dedicated service and contributions to the overall success of Wes I also would like to thank our investors for their continued interest in Wes.
I look forward to working with all of you into the promising future that we will build together with that I would like to open up the line for questions.
Thank you well, we'll now begin the question and answer session.
Ask a question the Riverstone isn't one under Touchtone phone.
If you're using the speakerphone, please pick up your handset for pressing the keys.
So John a question. Please first start with them too.
At this time, we will pause momentarily to assemble our roster.
And today's first question comes from Shneur Gershuni, our view of yes. Please go ahead.
Hi, good afternoon.
I was wondering if you can if we can start with the capex outlook for 2020.
When I think about the total dollar like the big dollar amount itself I was hoping you can sort of reconcile something for me.
Message from Western gas and I I recognize it's now oxy is the GP versus Anadarko, but the message was high 2017 high 2018 Capex.
Spend to oversized system for this surge of Anadarko volumes.
And then when I sort of think about.
Where your 2020 guidance is today, it's not that different from where you where.
The expectation was for 2019 was originally when it was presented late last year, so kind of feels like the volumes have been effectively pushed out a year and so when I sort of square all that together I kind of I think that the capex should be down.
Significantly more than it is and I was just wondering if you can sort of reconcile that for us.
And where the spend is actually coming from.
Hey, Shneur. Thank you for the question. This is Michael as referenced in the prepared remarks, we're still in the midst of an important reorganization effort. We're excited about the talent that we've been able to assemble we think that this initiative is going to yield some significant results related to capital efficiency and return.
Burns.
The preliminary 2020 outlook I would say does not provide for to fully capture all of those benefits of net reorganization and therefore, we think that.
The estimates that we put out there both achievable and conservative some of the.
The difference is a little bit related to the work that we've been doing with oxy and their development plans and some of the locational differences in terms of that full scale development relative to what was expected at the time of of Anadarko's ownership.
Yes, I guess that that makes some sense.
Just following on.
The strategy you've presented about having dedicated employees can you walk us through how thats going to work with the omnibus agreement on a go forward basis.
As you add an employee de reduce the agreement.
Just some color on how that's actually going to workout.
Yes, so is it.
Also a good question as it relates to how it's going to function as we sit today. All this is just a reorganization that is still under the umbrella of oxy. What we've engaged in however is a more fully focused more focused.
Employee base, so that they can.
Focus on Wes more exclusively than was the case before and so it isn't necessarily about increasing the the percentage of employees, who spend time on Wes It is more increasing the focus of each of those individual employees.
And the organization with which they are established.
Okay and one final question.
There were a lot of headlines coming out of the oxy call earlier today about.
Potentially selling western gas.
Can you talk to Oxys commitment to western gas.
Are we putting dedicated employees in so that it can be sold.
What what really is oxys commitment at this stage right now and how should we think about it.
So we can't speak to Oxys plans as it relates to west we'd refer those questions to oxy. However, I would make the comment that the reorganization effort that weve undertaken.
Is intended to yield benefits, regardless of whatever the organizational or the ownership structure is from an oxy perspective.
We think that by buying through this reorganization by the.
Increased focus of the employee base, it will yield better accountability better results.
And drive efficiencies through the system.
Okay perfect. Thank you very much I'll yield to call too.
And our next question comes from Jeremy.
If you Morgan. Please go ahead.
Hi, good afternoon.
Just wanted to start off with the 2020 preliminary EBITDA guidance as you guys laid out there I was wondering if you could share kind of any building blocks or drivers that go into that as we try to model without ourselves.
Is it fair to think kind of growth rates, the oxy lays out in the DJ and the Delaware could be good proxy for what you guys could see or what adjustments.
Should we make there any help you could give us.
So as it relates to the EBITDA.
Again, most of the growth is being driven in the Delaware. These forecasts have been worked.
Together with oxy, incorporating the forecast than expected development plans that oxy hasn't both the DJ on the Delaware Basin. So they are I would think of them as you know lock step up to a large extend obviously oxys our largest customer not only in customer.
But as it relates to those.
Forecasted throughput volumes.
Has been worked in lockstep with oxy and their plan development in the DJ and the Delaware.
Okay, maybe I guess flipping to the cost of service side.
Given how much capital that you guys have spent historically.
In these areas should we be expecting kind of an uptick in the in the tariff.
If not in 2020 or 2021 could you just kind of refresh us and how.
We should think about Truing up your investment there.
Yeah, Jeremy this is Craig.
We we review those cost of service rates annually and we've baked into our.
Early numbers for 2020, what we expect those rates will look like based on our capital assumptions as well as the volume profiles.
That go into those models.
Okay, just last one for me I guess.
Given kind of the.
The strain in the balance sheet right now, we're running with higher leverage than you had before and also coverage being it did a bit tighter.
Wondering how you think about distribution growth at this point, obviously with the units yielding in double digits doesn't seem like there is a big reward for current distribution or even growing it. So at what point would you guys kind of.
Bringing that distribution growth the kind of bolster the balance sheet a bit more here.
Yes, so we have provided guidance as it relates to 2019 distribution growth, we still expect to be in the 5% to 6% range on a year on year basis.
Post 2019, we expect to continue to have sequential growth in the distribution, but we do not have a current target.
Growth rate.
Trying to also take into consideration.
A goal around higher coverage as well as to reduce leverage.
Great Thats it from me thank you.
Our next question today comes from Gabriel Mizuho. Please go ahead.
Hi, Good afternoon I was wondering you can talk a little bit more about the third party efforts that you're pursuing which basins see the most opportunity obviously, you've had a little bit of success in the DJ So far.
But as far as also whether those third party efforts are also meant to be additive to let's say oxys commitments.
From let's say a minimum volume commitments side are you also looking to.
For other deals like you had in the DJ where maybe you get some third party business too.
I guess plant some of Oxys commitments to Wes.
Thanks for the question Gabe.
Yes, I think Thats, that's something that we're very focused on is growing our third party platform.
And frankly, all of our assets, but with that particular focus in the DJ and Delaware, where we see the most upstream activity going on.
In the near future and so as we look at the DJ for example.
Got a significant amount of third party volumes.
That we've we've had under contract for some time and we continue to grow that.
I think if you look at operationally the the way we operate our assets up there and the lower system pressures that we are able to demonstrate relative to our peers.
It puts us in a very good position to attract that incremental third party business.
I think would take that same approach down in the Delaware, where.
We've got an extensive asset footprint across some of the very best rock in the basin, we think and and.
As we look at opportunities to bring incremental volumes on both from the gas gathering and processing side as well as into the water gathering and disposal assets, we see a number of opportunities and we've taken steps over the last few months to to strengthen and add additional resources to our commercial development team.
And and as Michael noted in opening remarks, we we spent a lot of time with our customers. Since we came onboard in August and and are very committed to that platform going forward.
Great and then maybe I can follow up on the DJ to what extent Cheyenne connector has proven to constraints are not anyone's volumes out there maybe the outlook over the next couple of quarters until that comes online.
Yes, I think.
If we go back to win giant connector was originally sanctioned I think the overall volume growth at the DJ has not increased at the at the pace that everyone. My thought and so we see the residue constraints out of the DJ is being limited to to not particularly a factor over the next several quarters and the timing of that process.
Jaktwo will think up very well with incremental processing capacity, that's going to come online.
Okay, and then just one last one or just overall just wanted to confirm there is no.
Plans at this point in time for equity issuance as far as funding Capex for this year next.
Hi, Thanks, Dan This is Mike at this time, there's there's no plans to issue equity.
Great. Thanks, everyone.
Okay.
Our next question today comes from Sharon.
Wells Fargo. Please go ahead.
Hi, good afternoon.
And Oxy call management had indicated I guess some efforts to improve west has operations, mainly reducing some downtime.
Can you maybe talk about that and maybe quantify the potential benefit.
Thanks, Aaron for the question.
I would say that historically our downtime.
Each of our assets has been comparable with our peers, but if we look at the DJ for example, where we've had an established position.
Our downtime has been very very low and it's really an exemplary asset within our portfolio and and that's what we strive for across the board.
We monitor on a weekly basis monitor and track our downtime.
We continue to drive towards differential performance.
Our operations through asset optimization and enhance reliability.
This will be an area of focus for us going forward, both in the Delaware basins, as well and and all of our assets.
Because we feel like.
As we were able to differentially performed relative to our peers.
It will.
Resulting in incremental business for us both with our sponsor as well as with with third parties.
We're also very energized by the joint effort in this regard in as much as downtime as were reduced across the board, regardless of where that might come from obviously that results in incremental throughput through the system. So.
Beneficial to all parties were actually really excited about the joint effort to try and minimize any operational challenges that there may be throughout the system.
Great.
Just to clarify I guess the outlook for 2020 in terms of throughput.
Expectation that west volume installing mirror that similar to oxy, meaning like a 5%.
Gross I guess certain volumes.
Yes, I would.
Just make a couple comments that I would.
We refer you back to oxy for any other specifics, but a corporate volume profile for oxy does not necessarily translate into a throughput profile for Wes.
Obviously, it is relevant where that capital is concentrated and therefore, whether or not it impacts was on a go forward basis. The EBITDA projections there the preliminary outlook that that we provided.
Yesterday afternoon are inclusive of the expectations of the development plans of oxy in both the Delaware in the DJ basins.
Okay, and I guess in terms of you are correct Capex for 2020, if there are rough split between the different lesions that you can provide.
We're not yet. So this is just a preliminary outlook has spent we have brief the board with regards to this but it is not board approved we have provided the outlook.
Really the request a lot of our investors to get an update on operations post the transaction with with Anadarko and oxy.
So we're not at yet at Liberty to be able to give specific comments as it relates to that capital forecast.
But obviously once it becomes board approved then we'll be providing additional detail.
Okay.
I guess the last question I think in your Q.
You provided some disclosures on your exposure to Sanchez.
I think it looks like 10% of your gas volumes, if they're away that you would be able to quantify I guess.
The the dollar now.
Not specifically, we can't quantify that dollar amount, we doubt at all believe it to be to be material.
Even in a worst case scenario as we sit today the volumes are still flowing.
For the gathering agreements Sanchez prepays those fees, there's been no issue with respect to receiving those prepayments at this point, we don't have a reasonable estimate as to something that would be material from an downside.
Type scenario perspective.
Okay, great. Thank you.
Our next question today comes from OVARA Scotto.
However markets. Please go ahead.
Hey, good afternoon can you.
Going back to.
Third party business can you maybe provide a little more detail on.
What you're doing specifically to attract wanted this business.
I know, it's early but I think you said you maybe talk to some potential customers what's been the feedback and then in terms of your 2020 guidance is it correct to assume that this preliminary EBITDA guidance does not include any incremental third party.
Okay and that if you do side, there would be upside to that.
Yes, I'll start with your second question first.
In our 2020.
Outlook, we don't have any uncontracted business incorporated into our numbers and so we see.
A significant amount of opportunities both in the DJ and Delaware.
Primarily.
Where we have bolt on opportunities for incremental third party business.
Our strategy around that.
It's really twofold first we're working closely with our existing customers.
And looking at ways, we can either extend.
Or increase the dedications and commitments from them.
We're also looking at.
Customers for example that we're providing gas gathering and processing services to add we're talking to them about handling their produced water.
So we're working with our existing portfolio of customers, which includes some of the top names in the Delaware Basin and then we're also.
Approaching other parties that we have not done business with in the Delaware and those range from small independence, all the way up to some of the larger names that people are very familiar with.
I think that just based on discussions and again I know, it's early but do you think that you could secure some additional third party business that could drive upside to your 2020 numbers.
Yes, I mean, I think we have.
Best in class assets in the Delaware in the DJ and that that cover a large.
Acreage positions and alongside those assets are several producers and we're working with many of them today.
To look at ways to enhance their.
Their growth targets in 2020 by providing them near term midstream services and so we do see incremental opportunity in 2020 from those opportunities that frankly would be very capital efficient given the extensive.
Incumbent position that we have from an infrastructure standpoint.
Great. Thanks, and then in the past.
Western midstream used to collapse the powder River basin is sort of the third leg of the store when thinking about growth I mean, if PRB still.
A longer term growth opportunity for west.
We do view it as a longer term growth opportunity if you listen to the oxy call. It was referenced that.
Within two to three years, they expect the powder River basin.
Basin to be competitive from a capital standpoint, and so we absolutely have it on our radar and we and we look and are actively looking at ways in which we can participate in.
The development that may occur out there.
Got it and then just the last one for me.
Just to remind me did anadarko or Wes has an option to buy into the Cheyenne connector.
Yes.
Yes had an option to to buy into that project and and it really.
Fit into the to the historical strategy that Anadarko in west employed which was to make a downstream commitment and to get an equity and option to participate from an equity standpoint, and I think.
Was that project has materialized we've.
We've come to the conclusion that that it didn't.
It was neither strategic for us nor did it meet the investment criteria that we.
Wanted it to meet in order for us to participate in that so we declined to participate.
Got it. Thanks, that's all I got that's all I have.
And our next question today comes from Derek Walker of Bank of America. Please go ahead.
Hi, good afternoon guys.
Most my questions have been answered, but maybe just a follow up in a third.
Two questions from gave in Elvira.
And just talk a little bit about how you're seeing some of those.
How those margins are coming to fruition, whether it's on the cost of service nvcs or maybe just traditional.
Contracts how that compares.
To legacy Anadarko contracts, just given the current bed environment.
Yes. This is Craig again, and I'll I'll speak to that.
I would say.
The the legacy Anadarko contracts were contracted in a in a different market.
And were contracted with a mine towards.
Following a development program that that was intended to delineate a large acreage position and so that was really the genesis behind the those contracts in the structure is behind them.
What we're seeing today and in the market.
Particularly with third parties is is focused.
Average positions that that need takeaway capacity either on the gas side or on the produced water side and and we're positioning ourselves to be able to provide those services.
I think as everyone understands the basins that we operate in or.
Fairly competitive basins.
And.
We feel like.
Given our asset.
Brent we can compete very favorably.
Based on incremental capital required to two when this business and so we're very focused on on leveraging our existing investments in order to.
Pickup of.
Accretive.
Contracts relative to what we have today.
Okay, great. Thanks, that's it for me.
Our next question comes from Daniel along Loengo of Bank of America. Please go ahead.
Hey, guys. Thanks for taking my question on just real quick on back to the balance sheet.
On the 2020, Capex and EBITDA numbers, it looks like you're going to be is a touch above that four and a half times leverage targets that are the agencies layout for.
Jay for gathering and processing names.
Obviously, it's likely the agencies don't make a move until there's more clarity with oxy, but could you just kind of talk to how your conversations I mean going with agencies around the rating.
Yes. Thanks for the question this is Mike.
The conversations have been very consistent with what with what you've laid out in terms of of kind of goalpost for what they're looking for in terms of investment grade I think first and foremost I mean western is absolutely committed to maintaining its investment grade.
Status and we will work.
To defend to defend that rating.
In any way that we can I think the conversations with the agencies as not surprisingly have focused more on how organically. We can work to reduce that that leverage ratio earlier on the call we discussed that.
Third party assumptions in our 2020 plan are based on currently contracted third party volumes and so any incremental third party business that we're able to bring into the portfolio would be incremental to what to what we've.
Preliminarily guided to.
Yesterday in addition to that I think standing western up.
As an independent business unit within Occidental will provide us plenty of opportunity to realize operational efficiencies that again will help us.
Bolster the EBITDA such that organically, we're bringing down that leverage ratio overtime EBITDA on capital ideally so that we can get some drive some efficiencies through both of those.
Preliminary outlook estimates and finally, we are looking at portfolio optimization as we as we move forward to the next chapter of Wes So to speak and so I think we have several levers to pull from to get that ratio back in line with what.
The rating agencies expect and quite frankly, what we expect of ourselves.
Great Thats really helpful and then.
Next question may not be able to answer but.
Then what's on your thought process around terming out that roughly 3 billion of pre payable debt.
Outstanding obviously.
Sensitive so just whatever you can say on the subject, yes, no problem.
We have roughly call it 15 months.
To opportunistically access to debt capital markets to get some favorable pricing and around.
Refinancing the term loan I think.
The months sort of progress here and there's more clarity with respect to Occidental and Occidental sponsorship of western.
I think that will start to see improvements in terms of some of the spreads that we can.
Avail ourselves of in the debt capital markets as we move forward and so we're keenly looking at our opportunities to refinance term alone and we will strike so to speak one when we deem it opportunistic.
Great that's really helpful. Thanks, a lot.
Our next question today comes from Sunil Sibal of Seaport Global Securities. Please go ahead.
Hi, Good afternoon, guys and thanks for all the clarity on the call.
Most of my questions have been hit but I just wanted to go back to one point, which was based on the oxy call.
Seems like you know oxy indicated that they were looking at ways to Deconsolidate divested.
Was wondering if you have any views on that especially now when you talked at the rating agencies. If there's any sense you at that point.
Thanks for the question I'll go ahead and respond first then turn it to Mike Piazza additional comments on the rating agencies.
Again, we can't speak to Oxys plans as it relates to Wes that said.
We expect to have a very meaningful and long term relationship with oxy, we expect oxy to have an economic interest in alignment with west for the foreseeable foreseeable future and so from a west standpoint, as we look at it regardless of whatever the ownership structure is we're going to be partners with.
Oxy related to their development plans for the foreseeable future theres going to be alignment. There we're going to continue to have strong interaction with them and and so we feel very positively with regards to that relationship regardless of whatever the the ownership structure might be.
Mike any comment as it relates to or anything to add on the rating agency side, Yeah. I think we've run we've run the company.
From a rating agency perspective on a standalone basis from the beginning of Todd.
I think any of that is going to change I think Occidental stated on its call today that it plans to maintaining significant ownership interest in west for the foreseeable future, which we believe to be important.
Thats going to help us both in terms of what the rating agencies or are willing to ascribe in terms of value to sponsor support we think it's very helpful. At the same time, we'd like the idea of Occidental, maintaining a significant equity interest.
Such that.
As a as a very large unitholder they are aligned with us in terms of supporting us such that we maintain our investment grade rating because we think that rating is critical to execution of our underlying.
Business, which obviously is very important to occidental as it paces its own onshore growth.
Coming years.
Okay got it and then just last clarification for me I think in the past.
The leverage ratios that have been talked about within three to Fourx range. So obviously.
20 me a little bit above that I was wondering is there any change to that talk process and if not so when do you think you could get to the middle of that range.
Well in terms of in terms of 2020, obviously the goal is to get as close to four as as we can and then below that as we move.
Moving into 2021 and hopefully back to.
Well I'll call pre.
Simplification type ratios bye bye exit exiting 2021.
Okay got it thanks, guys. That's all ahead.
And our next question today comes from David loss of Heikkinen Energy. Please go ahead.
Hey, good good afternoon guys.
Just wanted to see if you could provide a little bit more color on your portfolio optimization comment.
Maybe just the criteria.
When you look at your portfolio.
Would make something core non core going forward.
Yeah. Unfortunately, as you probably would.
I would guess I can't provide a lot lot of clarity in terms of of what we're thinking at this point in time, it's an ongoing and continuous analysis that we will continue to undertake.
It is absolutely something that we will we will look at as we move forward.
As we move forward and look to reduce the the leverage ratio going forward.
Okay. Just a quick follow up and you may not be able to answer that either but.
We've always viewed the Delaware in the DJ is too.
Very core assets, you has that changed at all or could that change would you look at potentially filling one of the.
Those are absolutely very core to us definitely has not changed.
Thank you.
Our next question is a follow up from Germany today of Jpmorgan. Please go ahead.
Hi, Thanks for let me back on.
Not to beat the dead horse here, but just with regards to maintaining the investment grade rating in the different levers you have at your disposal. Just wondering if you could talk a bit more about the appetite issue hybrid securities to minimize dilution at this point with how the equity is yielding or any thoughts on the distribution.
Whether it would ever make sense to pick or reduce or anything else I guess as far as the different levers you have how you would rank those.
Yeah, I guess at this point in time, any any and all options around the table, but to get to specific at this point in time.
We would be probably premature, but we're familiar with absolutely everything that you cited and we are analyzing all the options available to us, but again I think first and foremost will look we'll look organically to see what we can achieve both in terms of attracting additional third party business and the operational improvements, but without a doubt should come as.
We.
Contagious sync up with us, though and stand was up as an independent business unit with Inox, though.
I'll stop there thanks for taking my question.
And ladies and gentlemen. This concludes your question answer session.
The conference back over to Michael your CEO for any closing remarks. Thank.
Thank you everyone for joining the call. We're very pleased I really appreciate your attention. Thanks again to all the dedicated employees for their hard work both in the past it in the future.
And everyone. Please stay safe. Thank you all.
And thank you Sir todays conference has now concluded we thank you all for attending today's presentation you may now disconnect.