Q4 2019 Earnings Call

[music].

Good day, everyone welcome to the P.A.N.P.G.P. fourth quarter and full 2019 earnings call. Today's conference is being recorded at this time I, Let's turn the conference over to Roy Lamoreaux Bye Bye.

<unk> President of Investor Relations. Please go ahead Sir.

Thank you Kelly and good afternoon, and welcome to Plains, All American fourth quarter and full year 2019. During this conference call. Today's slide presentation is posted Investor Relations news events section of our website.

Single American Dot com.

Why to contains important disclosures regarding forward looking statements.

Non-GAAP financial measures. The appendix includes condensed consolidated balance sheet information for PGP.

Today's call, we hosted by Willie Chiang Chairman and Chief Executive Officer, and Al Swanson, Executive Vice President and Chief Financial Officer. Additionally, Harry Pefanis, President and Chief Commercial Officer, Jeremy Global Executive Vice President commercial and Christian or Executive Vice President and Chief operating officer, along with other members of our senior management team are available for the huge portions days.

Call.

With that I will now turn the call over the Willy.

ROI good afternoon, everyone. Thanks for joining us today.

This afternoon, we reported fourth quarter results that exceeded our expectations and we first financial and operating guidance for 2020 and is consistent with the preliminary guidance going from one reason November.

I'll provide a quick review of her 2019 performance in overview of our 2020 guidance implants, the future, including our 2020 and 2021 capital program and asset sales as well as a recap of our portfolio optimization initiatives.

Our adjusted EBITDA results in 2019 were 3.24 billion with inline performance in our fee based segment and significant market captured in our SNL or supply logistics segment.

2019 was a year focused on executing during favorable SNL market conditions and positioning the partnership for more competitive environment 2020.

Throughout the year, we maintain high levels of reliability and commenced operation on T. projects.

This allowed us to capture meaningful ethanol profitability highlighted by strong pipeline utilization with our us Gulf coast long haul lines running at capacity.

We also advanced and sanctioned a number of strategic projects that strengthen our competitive positioning in legacy areas, while aligning ourselves with long term industry partners.

In addition to continuing to improve our safety and operating performance. We also advanced multiple initiatives to strengthen our operational commercial and financial positioning as we enter 2020.

As highlighted on slide three in further detailed on slide four in 2019, we achieved in certain cases materially exceeded each of the goals that we outlined for the year.

We generated fee based results that represented growth of 9% compared to 2018, which was in line with our guidance and we also exceeded expected capture of market opportunities through our SNL segment.

As a result, we meaningfully exceeded our beginning in the expectations and generated stronger per unit results as well as substantial distribution coverage and leverage reduction helping fund the equity portion of our capital program without issuing equity.

From an operational perspective, our transportation segment volumes grew a million barrels a day or 17% over 2018, while we made steady improvements in operating excellence towards our goal zero objective by exceeding our 20% improvement goals for both employee safety as measured by total recordable injury rates in our environmental performed.

Once as measured by federally reportable releases.

Notably the safety and environmental metrics are approximately 50% better than three years ago, demonstrating a significantly strengthened safety and performance culture over that time period.

Our 2020, adjusted EBITDA guidance is plus or minus 2.575 billion in is that we as as we've shared and for some time, we expect our SNL segment earnings to revert to a lower level as additional industry infrastructure comes into service.

As shown on slide five for our fee based segments, our 2020, adjusted EBITDA guidance or plus or minus 2.5 billion reflects approximately a net 75 million year over year increase with 100 million increase in our transportation segment, partially offset by a $25 million decrease in our facilities segments.

Primarily due to expected asset sales.

Our 2020 guidance for our SNL segment is 75 million.

With respect to our capital program for 2020, and 2021 combined we expect total expansion capital investment to be approximately 2.3 billion excluding project financing.

We currently estimate investing about $1.4 billion in 2020, followed by a meaningful reduction in 2021, approximately 900 million.

I would note that there could be some shifts between 2020 and 2021, depending on the timing of project investment in joint venture capital calls.

Importantly, we intend to fund the equity portion of our 2020 and 2021 expansion capital without issuing equity.

Looking forward, we do not have any material organic growth capital commitments beyond 2021, and we expect our capital program to be further reduced in 2022.

With respect to progress on our capital program, we continue to advance each of our key projects generally consistent with expectations described in our November earnings call, a recap which is provided in the appendix.

Importantly, we expect a step change in free cash flow improvement as we reduce our organic growth capital investments and the EBITDA benefit of these projects begin ramping up in 2021.

With respect to the Red Oak pipelines, we sanctioned the project in mid 2019 supported by long term volume commitments and expect to generate returns consistent with our targeted hurdle rate of 300 500 basis points above a weighted average cost of capital.

We expect red oak to begin its cash flow ramp in mid 2021, and similar to other projects. We continue to work to enhance the overall return profile.

As summarized on slide six portfolio optimization remains a key part of our strategy, including noncore asset sales.

Forming strategic joint ventures, with long term industry partners to secure commitments and enhance returns as well as making strategic and opportunistic bolt on acquisitions.

Over the past three years, we've generated more than 3 billion selling non core assets in forming expanding strategic joint ventures, we continue to optimize our base business in high grade our asset portfolio, while funding strategic investments in 2019, we completed 200 million an asset sales with approximately 70.

1 million in the fourth quarter 2019, we also materially advanced several other divestiture opportunities and for 2020, we've established a 600 million dollar asset sales target.

Included in this target is our recently closed sale of a 10% interest and Saddlehorn.

Our Los Angeles crude terminal assets for which definitive agreements have been signed in closing is expected in the second half 2020 and other transitions.

Other transactions in advanced stages of negotiation.

We also continue to pursue additional potential strategic jvs and asset sale opportunities beyond our 2020 asset sales target.

Also in line with our portfolio optimization strategy as shown on slide seven we recently completed a 300 million dollar transaction with Felix energy, which involve a long term extension in modification of an existing dedication in gathering agreement and a bolt on acquisition of Felix's crude oil gathering system.

Connects into our Alpha crude connector in week South systems, we are well positioned optimizes gathering system, realizing pull through benefits on our system and generating a mid teens unlevered return.

The system is located in a core area and backed by a high quality producer with an active program on the acreage.

Our 2020 guidance includes the operating cash flow benefit from this acquisition, which we expect will be roughly offset the projected cash flow impact of our targeted 600 million of asset sales in 21.

With that let me turn the call over now.

Thanks, Willy during my portion of the call I'll recap, our fourth quarter and full year results review, our current capitalization liquidity and leverage metric and share additional comments related to our 2020 financial positioning I will also address one noncash accounting related items, our fourth quarter adjusted EBITDA of eight.

Hundred 60 million exceeded our expectations and was driven by a continuation of strong performance in our SNL segment and includes the seasonal benefit of our NGL business.

I would note that $25 million to $30 million of this overperformance was an acceleration of earnings originally expected to be generated in 2020.

And this timing shift has been taken into account in our 2000 20-F, no guidance, a plus or minus $75 million.

Fee based adjusted EBITDA for the quarter of $627 million with site slightly ahead of expectations due to strong performance on our cactus two pipeline and increased activity and lower costs in our facility segment as shown on slide eight and consistent with our expectations Transportation segment results were down from the prior.

Quarter. This was primarily due to long haul movements on our basin lower long haul movements on our basin Bridgetex and Red River pipeline systems, partially offset by a full quarter benefit of cactus to being in service and volume growth on our broader permanent Permian area systems.

On a full year basis as willing noted we reported 2019 adjusted EBITDA of $3.24 billion.

CF per common unit of $2.99.

Diluted adjusted net income per common unit of $2.51.

Which exceeded our beginning of year guidance by 18%, 16% and 24%, respectively. Our 2019 DCF in DCF per unit.

Included maintenance capital investment of approximately $290 million, which was higher than expected in our guidance and consisted of several onetime projects that totaled approximately $40 million.

Our 2020 maintenance capital forecast is $250 million as shown on slide nine at year end 2019, we reported significant improvement in our targeted financial metrics relative to prior years and committed liquidity of approximately $2.5 billion as we look to our 2020.

And despite growth in our fee based business, we expect our financial metrics to compress and leverage ratios to increase as our SNL earnings normalized and we completed our multiyear expansion capital program.

Consistent with our targeted financing structure, we expect to fund 2020 capital through a combination of excess distributable cash flow asset sales proceeds and long term debt.

Our 2020, Capex is $50 million higher than a preliminary capital program guidance. We shared in November as a result of incremental capital associated with the Felix acquisition, coupled with a minor tiny timing shift from 2019.

As Willie indicated our expansion capital investments currently underway, primarily benefit 2021 and beyond during which we expect meaningful reductions in our growth capital investment lower capital investment combined with cash flow benefit from completing our multiyear capital program should positively impact our free cash flow.

And further improve our leverage metrics overtime.

Consistent with past practice, we do not intend to provide preliminary 2021, adjusted EBITDA guidance. Intel later in the year, but we will continue to monitor drilling and completion activity production trends in service timing of our projects and competitive dynamics as new pilot pipeline.

And capacity enter service and we will incorporate that information into our forecast when we provide preliminary 2021 guidance in November.

Before turning the call back over to Willy I would mention that in the first quarter of 2020, we expect to reclassify, our la terminals as a held for sale asset.

And recognize a noncash charge of approximately $160 million, which will be treated as a selected item in our adjusted results with that I will turn the call back over to Willy.

Thanks, Al So 2019 marked strong year of execution performance.

We progressed operating commercial and financial initiatives, and we feel position us for a more competitive environment.

And we advanced our multiyear strategic capital program, which we expect to substantially complete over the next two years.

We also continue to progress additional potential asset sales beyond those in our 2020 target.

Which is completed will provide us additional financial flexibility for leverage reduction and after achieving our target a leverage metrics support incremental return to shareholders.

I'd like to publicly acknowledge the hard work and dedication of all of our employees on our 2019 results.

Our collective efforts remain focused on achieving our 2020 goals as shown on slide 10, and continuing to optimize our portfolio in gaining additional efficiencies across our organization.

A summary of key takeaways from today's call as outlined on slide 11.

We look forward to providing an update on our progress during our conference call in May with that I'll turn the call over to ROI.

Thanks Lily.

As we enter the Kunaev session. Please limit yourself to one question one follow up question and returned to the Q. If you have additional follow ups. This will allow us to address the top question from as many participants is back on our available time. This afternoon.

Additionally, Brett Mcgill and I plan to be available this evening and tomorrow to address additional questions.

Kellyanne, we're now ready to open the call for questions.

Thank you at this time, if you do have a question that will be one again saw one for questions. We'll hear first today from Jeremy Tonet with JP Morgan.

Hi, Jeremy.

Hi, I.

I wanted to start off with the Felix acquisition here and just wanted to see if you could provide a little bit more color. If this was banned auction process or not and when you're talking about hitting those economics are you stated there.

It is there additional synergies needed or what type of EBITDA that will have on a standalone basis now just any color you can provide around that would be helpful.

Sure.

As an asset thats been tied to us we know the field guys for quite some time.

Originally auction, but it came back around us and we looked at the opportunity and felt like the synergy that provides its an integration through the system. So we're now having with substantial near term cash so high PDP component, we're able to take that at a constant rig activity profile and pull through the system and meet the.

Level returns, we don't need anything extra beyond that the rest of its upside we have.

Hi, good model that fits us with the activity level. That's on the program with on the system today to meet the return thresholds. We have it's not a hockey stick profile like most of the one that you see and once again, we passed originally when we saw the deal and it came back to us and that's.

Opportunity we're excited about.

That's very how is our Jeremy that was our Jeremy Jeremy.

The first time project with larger package included what other asset size or it.

The primary driver for passing on.

That's helpful. Thank you.

If I could just follow up with regard to guidance good to see staying with the numbers. They provided previously just wondering if you could provide any color about your conversations with producers right now and I guess your expectations for the basin as a whole hasn't changed that much from when you first put out the guidance or any kind of color you can provide they're seeing kind of some weakness with.

Oil prices here just wanted to get a feeling for what you guys are seen.

Sure we stayed constant dialogue with producers and obviously the last two weeks Wasnt and.

Everybody forecasts, but.

In November Theres lot of the same sentiment that there is today with kind of round trip that went back up because of the global tensions and then most recently come down.

But in November the sentiment was very similar to what it is today and our discussions with producers led to the Permian production growth that we talked about I think largely in the last month 25 additional horizontal rigs have been added to the Permian into our forecast as consistent to slightly higher than it was but it's still moderated from expectations.

During the year, so close to 400000 barrels a day growth there is substantial opportunities I think what we're seeing it a concentration of activity in the core blocks. So those with core acreage dedications will continue to see it with while capitalize producers so they'll be haves and have not throughout this I think.

More broadly in the U.S., we see flat sum up some down the Permian will have close to 400000 barrels a day growth. So we see that coring of activity now of flat prices fall. The 40 that can be a different things at all along we expected producer budgeting between 50 and $55 barrel.

That's very helpful. That's it for me thanks.

Thanks for your next from Shneur Gershuni with can you be yes.

Good afternoon, everyone.

Just one follow up on.

Hi, I'd just a follow up on the on the last question just for for a little bit of clarification. If I remember correctly, you had a pretty low expectations versus industry experts on three to 400000.

For Q4 Q exit.

Did you just see that.

It was tracking better than that.

Kevin I, just wanted to clarify that I heard that correctly franchise as much as much.

What I said that it's tracking towards the higher end to simply on a constant activity basis right. So you had 375 horizontal rig then you have 390 horizontal rigs now so it would be towards the higher end, but it's not materially different expectations than we had before just simply on a constant activity basis.

Okay. That's that totally makes sense I'm just two quick questions here over the first to guidance clarification here.

During the last call you talked about an $85 million sensitivity to the competitive environment.

Has that changed at all have you been able to reduce that risk at all through some contracting activity.

And also can you clarify.

Whether the asset sales that you're budgeting for our included or excluded from guidance.

Sure. There. This is now you know as you as you could see we did not adjust the 2.5 billion fee based and so we did not materially change our view on the 85 million for this year. So you see a flat number the asset sales are included the 600 million in.

Our estimates.

The Felix acquisition, roughly offset set on a cash flow basis.

At the early in the year some of the sales will be in the second half so that roughly offset thats why I see no change.

Okay, and one final follow up question.

When we're thinking about the facility segment.

In sort of thinking about the high natural gas storage levels that were seeing.

Are there opportunities to see continue rate improvement for Europe, the old PNG business.

Is there opportunity for more volumes there as you said a business that can potentially outperform given the unfortunate hi storage levels of natural gas these days.

So we've been saying.

I forgot towards rates.

Increase overtime, a lot of was due to the activity and.

Ideology activity at our facilities.

David wrapping up when you look at 20 820 were highly contracted.

No.

You know the target fee component of it.

Probably isn't going to change carefully and Tony Tony Tony.

The activity level sort of haven't flow, but.

That would be the only sort of outside activity in PNG assets.

Alright, perfect. Thank you very much really appreciate the color say.

Thanks.

Well move next to Christine Cho with place.

Hi, everyone I'm only think about your commentary for asphalt sales.

What do you know exactly consider noncore and then that the strategic JV I was thinking for projects that are not gotten service or existing assets that are currently generating cash line I open from other partner I might have.

Christine this is willing.

Clearly you've seen the playbook as far as strategic Jvs. So we think about additional asset sales it absolutely includes.

Potentially additional partners on some of the projects we've got another noncore asset sales some of it is around making sure. We are sufficient we can in some of our ownership positions up in Canada.

And I think I'll just leave it at that.

Okay.

And then just moving over to on your turn on trying to guide.

The volume now obviously up year on year.

EBITDA for bow continues to come down so I'm just wondering if we could get more color on infrastructure a function of more lower my phone short haul intra basin gathering volumes or did a lowering I'll pass on existing long haul pipeline AOL.

Not wanting to take that yes, Christine I would say, it's really kind of a combination of several different things most of its just the business mix and and growing volumes on on pipes that have lower tariff I mean, we have we have certain types of tariffs in the 20 to 37 range in some that are $4 pluses.

So the business mixes the is a big part of it clearly growing Permian intravase and movements, there generally lower lower tariff right. So that's what's driving up a part of it also when you look back at that at the prior year, we had some sales of some higher higher EBITDA pipes like Bridgetex and one of our Rockies.

Pipes, and then also there's some noise around the involving cap line, where we had a consolidated and undivided joint interest early this year. It became a equity investment and that created some noise. So it's a little bit of combination of all three of them.

Okay helpful. Thank you.

That from credit Suisse, we'll hear from Spiro Dounis.

Hey, good afternoon, everyone I'm picking up on on some of the contracting rates I had one of your peers last week provide some data points around Permian long haul contracting market just curious Charles assuming rates in that kind of dollar to dollar 50 per barrel range. If there's any appetite on your side. So you have heard shippers about me blunden, you get blending and extending some of those costs.

Tracks.

Let me Jeremy pure once you take that as this is Jeremy as we're constantly looking at our contract profile. What I'd first say is that any of the recently sanctioned projects have materially contracted for extended periods of time, but if there is available space, we'll constantly look to optimize.

If I can't speak to ours Pierre for that market, but is that a reasonable estimates sure depends on the turn into volume and it depends on.

Where that barrel originates from we'll have the ability to to move those barrels from further back in the basin. So the origin and destination will also matter when you consider that but we're constantly looking to optimize our position in contract profile, we're not going to have meaningful roll off for the next several years, but when they do we'll look at the wedding and program.

And we would actively look to manage that overtime.

Got it that that's helpful. And then just on Capex coming down over the next few years, certainly encouraging to see that from a capital discipline perspective.

Should we think about minimum capex levels you guys. Thank you need to spend in order to maybe offset some of that re contracting pressure over those next few years and maybe more broadly are are you even looking at it that way or is the goal to really grow free cash flow not strictly growth EBITDA.

[noise]. This is al I I don't think we have a and absolute mandate to just invest capital to try to to try to offset declines or or contracts. Another spot. We don't have a significant amount of contracts.

That have short tenders to them.

As we had commented on on the last call clearly were subject to some of the competitive pressures volume growth et cetera.

But no we don't have a kind of a minimum investment target. We do target returns Unlevered returns three to 500 over our our cost of capital. We just think that the opportunity set.

And the infrastructure being being deployed right now will create result in a situation where theres less requirement for us to build some of the larger long haul types and at that our capex will migrate meaningfully below that kind of the 900, we're expecting in 2021, we put that bar on the one chart that kind of show.

A step down we think we will always have opportunities around our assets to continue to set to add the bottleneck.

Add extend to give more production et cetera, and sparrow. This is Willy I would also add we've got a conscious effort to increase our capital discipline and target target projects at the higher end of the difference between the higher return range of our of our costs account versus cost of capital. So we've been we've been pushing.

Pretty hard.

Understood. Thank you gentlemen.

Well here now from kids Stanley with Wolfe Research.

Hi, I'm I wanted to ask on the dividends I think maybe a year ago might it might have been more you had talked to targeting potentially plus or minus 5% growth. After the step up last year.

Yes, that's still the plan looking forward for for this year and beyond or to be determined.

Yeah, Keith we haven't changed any public guidance on our distribution policy is consistent talked about last time and it'd be every jumping ahead of ourselves if we try to.

To discuss what we might do here in April.

April may.

Al you have anything okay, Yeah, I know our [noise].

Our public guidance hadn't changed from that plus or minus 5% that clearly.

We have the decision will be for a few more months.

Okay.

And then.

For Felix you said, it's not a hockey stick profile to get to the returns apologies. If I missed this did you say, there's an expected capital needs for that system and then this somewhat related somewhat separate werent, which the asset sales are planning now and the acquisition when would you expect to get to your leverage target cannot be achieved by.

By next year or is it more likely 2022.

This is Jerry I'll take the first part of that and turn it over to al.

That Felix asset has substantial PDP home Theres, a lot of public about the upstream component to that that the five rig program. That's on the system now as ratable growth. He has a lot of it inventory of drilled and uncompleted wells that will come off for the year. So a lot of the ramp will occur by April this year and then there's only modest growth was net.

Couple of years, and basically assumed flat so based on the acquisition that was just out of the upstream were very consistent with what that looks like a lot of that ramp for through through April. This year. In addition to more of the contracting was thanks to the first purchase or both and barrels are now dedicated to our pipe for over 10 years. So it's a pretty ratable cash flow.

Oh profile and by ensuring those barrels to add our system and making sure that connectivity stays with planes. We've now basically extended the contract term for all of those our system and it gives us the first shot of things, we didnt put into the acquisition economics like further downstream tariffs and things like that.

With regard to the second part on fund leverage.

We do not expect we will be inside of our target range by the end of 2020, nor did we expected we would be when we announced.

The financial kind of policy in April of last year.

As you recall, we lowered our targeted leverage range by half a turn and made it to be without without access SNL. So to speak now granted we're entering a period of much lower ethanol result, so when we announce study you know a call it Levin month or 12 12 months ago, we didnt.

Expect to we don't expect to now we expect to see leverage or increased slightly this year.

And then it'll take several years for us to actually work it back down into that that leverage clearly there's transactions are things outside of that that can accelerate that but just under our base plan. We do not expect to achieve that this year, nor did we like I say a year ago. It didnt, Jeremy yet I didn't address one part of your question regard to cap.

Capital, there's some upfront capital, we'll get it to the PPA standards into further integrate into our system, but after that modest capital requirements because the backbone for the system has the capacity is needed to meet the the long term production profile at their with minimal maintenance capital for that the asset going forward and keep the.

The increase is incorporated in the 1.4 billion that we had we target for 2020, and so thats, what raise that up a little bit versus what we had four.

Got a great. Thank you. Thank you very much.

[laughter] Richardson with Suntrust has our next question.

Yes. Good afternoon appreciate all the background on the gathering transaction and the contracting or you talked about in this environment using your capabilities on gathering and in essence out that compete for share.

It seems like this one was opportunistic but is there a concerted effort to grow the footprint in basin to keep the long haul utilize or was this just came to you.

And it was more of a reactive.

<unk>.

This is Jeremy this was more of an opportunistic we don't necessarily have a thanks and we brought in by additional gathering systems. This is one that fit us extremely well from a food quality standpoint from a location standpoint from a contractual standpoint and from a in alignment with a producer standpoint. So I think this asset sits in the deepest most.

Higher pressure.

Finally, as part of the Delaware Basin. So there's some long term attributes of the asset that we feel like will be developed our footprint largely fits everything that we need at this point and we're enhancing connectivity at visit in other places to make sure we have that liquidity and a lot of those can be done in low cost at someone else's capital not ours, so we're going to optimize any.

The way this home was really more opportunistic than anything and Christian we actually had volumes with I think you probably.

No this already but the existing contract. We had this was an opportunity to extend the contract and just provide a more secure long term fee based.

Sort of our business.

Helpful. And then just quick follow up.

Appreciate the commentary on the bad earlier question about the 85 million of impact that you guys talked about previously I guess, we think of that is there's there's a multiyear aspect to that it is there is there a figure or a notion higher or lower about that sort of impact and further years 2021 or otherwise.

No. This is out no what we plan to provide 2021 guidance for preliminary guidance in November. So you know clearly there's a number of things we'll monitor as I've mentioned in the prepared remarks between now and then and provide that update a later this year.

You know, they're not really again, if you think about where we are right now, there's probably more variables than ever as far as trying to forecast what might happen not only in what we control, but in regulatory elections as well as global demand. So I think they'll be a lot more resolution as we let some wants to ask fly.

But really just to reiterate this as Jeremy one aspect that al and I. Both brought up earlier, there's not meaningful contract roll off until 2025 in the vast majority of our systems. So out of the headwinds we get there since having some next year, but they're smaller in nature. So we do have a period of high contracted capacity margins have shrunk.

Obviously, so spot capacity will be impacted but some of that in 2020. So it's not like we expect every year to have that roll off but there will be as contracts roll off but we have material contract protection on a lot of our assets.

Very helpful. Thank you guys.

Well hear next from Michael let Peter with Goldman Sachs.

Hey, guys just curious I should think about the Permian in general and kind of what looks like it's going to be a surplus of pipeline or take away capacity.

How do you think about across the industries, where your position your assets your pipeline to position the volume wise versus some of your competitive strength relative to kind of market participants may be that don't quite happy or competitive positioning.

Well I'll I'll start and others can jump in we spent a lot of time talking about our Permian position.

So if your question was really related to the Permian and it also sets the tone for the other regions that we operate in but we built our assets over decades, and so we think about our business it's an integrated.

Asset mix, we've got gathering.

We've got intra base in long haul, we've got a lot of flexibility what storage tanks. So we think about our calling parts flow assurance quality segregation access to multiple markets. So we do think it's a differentiator for us in the Permian and that's why you see us a building on a all the projects that we've got these strategic projects really.

To help us further enhance that position and if you think about the other reasons that we operate in its a very similar business model trying to get aggregation connectivity and access to multiple points.

Got it can you also talk about the contract status in terms of what percentage is contracted for both red Oak can lead to Webster.

This is Jeremy we don't disclose publicly what our contracted status are but we can say both of those are.

Jack that we expect to hit the rate of return thresholds, obviously targeting the higher end and anything thats under the unusual utilized we're going to look to optimize through strategic partnerships or whatever linked to Webster has five partners in it. So you can understand we brought a lot of parties and who brought barrels and we expect that to be full for a long time red oak.

At our return thresholds and we're going to continue to look to optimize to bring additional barrels bringing in additional partner. So so we're not finished by any stretch to improve upon would already hits our base that threshold.

Got it thanks has much appreciated.

Well go next to Pearce Hammond with Simmons energy.

Good afternoon. Thank for taking my question. So my question is just a clarification from some earlier questions. Jeremy would you were talking about 400000 barrels a day if oil growth from the Permian where are you talking piece 20 over DCE 19 are you made in calendar year 20 over calendar year 19.

It was exit to exit peers.

Okay. Thank you and then my follow up question the $600 million the divestitures, how do you see the market out there for divestitures are you seeing it kind of a disconnect between private valuations versus where public companies trade as far as multiples and how strong. The you do you think it is.

So here's this is Jeremy its asset dependent right I think a lot of the assets, we have or our cash flowing assets and assets that their strategic value that to different parties and we're good at identifying ones that have natural counterparties and we look to do that a lot of these do you might end up.

And trains you might end up an outright sales were going to optimize our footprint by the end of this and you've seen that $3 billion that Willie sold when we haven't missed a beat necessarily we basically assets that don't fit our marketing pipeline facilities and pipeline business all in one and not necessarily cord, that's what we.

We look to do and we're going to look to be opportunistic and sell to counter parties, who have a need. So I think part of this is selecting we don't was activity without accomplishment. So we're going to work towards selling deals that have counter natural talent Marty.

Great. Thank you Jeremy.

Yep.

And that's a follow up with U.S. capital Advisors has our next question.

My questions have been asked and answered.

Thanks.

Yes.

Well move next to China, Salisbury with Bernstein.

Hi, I just a follow up again, there is really a question about the bring an extent if there isn't deprecation of Janney. Your answer I think you're basically saying that you're happy with your existing take or pay level at the Permian and don't feel a lot of pressure kept fired up about capacity at what shoppers are willing to pay right now.

Dan This is Jeremy yes.

Right at this point, we're happy with what we have but we'll always continue to look to optimize our portfolio. If we can extend term and do something that's a win win for our shippers I think what cactus to cactus, one or separate done really well what they are there opportunities and they'd like to work with us and so we're going to continue to look and if there's a need on their end at west.

For us, we'll do it well, we don't feel any pressure from work compelled to do anything differently than we're doing today.

And that and paint in Jeremy and his team have been very very active in trying to increase the amount of term versus spot that we have so things like additional acreage dedications some of the blend and extend so we've made a lot of progress and being able to increase the amount of term.

Barrels that we move in the Permian.

Hi, I'm, Okay, and then at Kid, it's very quick ones, if I, if any and were there any update that you can share in the western card or open season.

Jim that we haven't provided a formal update we'll talk with our partners and do so we're looking to wrap all that up here shortly and will provide an update pro them next fall.

Perfect and then just a quick one I'm not I feel like acquisition I just want to clarify if oil flows on your long haul what the uplift from that part D captured and SNL I don't think I thought then taking out at a contract all year long haul and their list.

As we look a bit more as a a pipeline and that transportation deal. If there's additional benefit to the SNL that would be outside of this I think we don't need any benefit from SNL to make this acquisition work.

Okay. Thank you.

[noise] teaching at Bank of America will hear next from <unk>.

Good evening, everyone. My first question is on buybacks you had previously stated you could implement a a buyback quickly if the units to present, a compelling value into last call.

Can you update us on your thoughts on buyback the given where the unit prices are and if anything the leverage target a hurdle before considering a buyback.

Yeah. This is al I'll take a shot.

With respect to kind of how we approach there are thinking of capital allocation clearly we have a capital program that we've committed to.

Building strategic assets that we think over the long run will create a meaningful value to our shareholders. So that's that's we've got to do that lets priority one and leverage is our second focus and so implementing the share buyback really doesn't have the play today with where our share prices.

As versus our prioritization of those two two first the objective.

We did comment that you we've had dialogue with our with our board we do feel like if we were in a position in one of the implement a program that we could move pretty quickly to do so but the reality of it is as we would want to do so in a way that didn't.

Was leveraged friendly again as I mentioned on one of the earlier questions. We're expecting to see our leverage increased this year as we fund capital and so therefore that'll be a priority to make sure leverages and in line before we try to implement a repurchase program.

Thank you.

And for the second question 10, 2020 are you able to share your fee based EBITDA sensitivity to per barrel changes in Dover Jack crisis.

Per barrel prices on what I'm sorry.

Dublin, <unk> or pricing.

I can take a shot at it and to me. This is al we don't have meaningful direct commodity price exposure is more of an indirect.

Commodity price exposure. So obviously I think earlier you heard one of US if oil prices fall fell dramatically and rigs drop off we would potentially see less volumes after a delay.

Flowing through our systems, we do we do have vote, you know some de la and that type of thing, but we're a big consumer diesel for our truck fleet. So.

What we would leave you with is not a a significant direct exposure, but more of an indirect exposure. So what we would say is is that if oil prices fell from 55 to 50, you wouldn't see us say in a meaningful change in our company a cash flow at all it's more of a binary binary decision on whether or not producers.

Continue to drill or not.

Got it thank you.

Okay Marine with Mizuho Securities has our next question.

Hi, good afternoon, everyone.

Just wanted to follow up on questions on Capex. The initial look at 2021, I guess I'm, just wondering how about plus or minus 900 million how much about might be VMT in Trump basin complimentary Permian projects, maybe if you can speak to just kind of what's your view sort of a baseline level.

Oh, that's sort of maybe gathering capex that you need to spend in year on year out that's in your growth cutbacks.

Chris you want to take this surety I gave this is a Chris Chandler, we're certainly investing in some large projects in 2020 2021 things like linked to Webster Red Oak Hill Diamond cap line.

Do you think about the next 18 months those projects will be in construction in start up and when those roll off we do see our capital investment evolving over time toys less large long haul pies sand really more you know a well hook ups and gathering type projects.

We've not a forecasted or shared a base capital level around.

Gathering business it really depends on the strategy or produces take do they utilize existing infrastructure that already connected to an entirely new wells into that are they drilling in new areas that require new connections.

But as others have shared today, we certainly expect a meaningfully lower capital and 2021 into 2022 and I think our our slide package is a a rough illustration of that.

Thanks, Chris I'm Kinda as my follow up pipe.

Appreciate that there's a terminal so in California, I think youve to attempt to those terminals sell California before it ran with some regulatory issues can you talk about your level of confidence in closing I sell this time around [noise].

Okay. Thanks for the question. This is Jeremy we don't foresee the same issues. We had last time with respect to regulatory concerns we still have CPC approvals HSR, but we won't see the HSR concerns we had in park debenture.

Thank you Sir.

And to know about your money with the has our next question.

Thanks, and good afternoon, a couple of quick ones for me on the accelerated SNL earnings. This year I'm curious as to why guidance remains effectively unchanged from your preliminary outlook.

Everyone take Oh.

Just one only looking at the first quarter are.

Our our strategies have been more successful in the first quarter than we'd anticipated a few months ago. So.

Well, we accelerated some of the earnings and created additional capacity and this year.

Got it and my follow up as well can you comment on any potential impact from a FERC ruling this year on liquid side, that's allowing for the fourth.

The guide for the year any risks there that you may see.

But if your question was on for indexing and just any anticipated I think.

I mean, the whatever FERC decides to do if they decided to change anything on it won't go into effect till mid 2021, right. So it would have no impact on 2020 guidance.

There's really no update from what we've we've said before clearly you know us than industry, who will work with FERC comment with them to try to make sure. It's a logical implementation of what they plan to do with changing that that index method that there would be no impact on 2020.

[noise] Great doesn't my question. Thank you.

Hey, Kelly and I think we'll we'll take one.

One more question and then.

One more participant and then we'll close up call.

Okay that will be from Harry Mateer with Barclays.

Hi, Good afternoon, guys. You know al you you previously indicated that the preferred market could be one part of your funding took it for the year is that still the case or given the asset sales are you guys are planning to do you think it's more like you'll you'll focus on just the straight debt market.

Yeah, We had said that and we do think it's a tool it was not kind of the primary to live we're thinking about we do we do look at asset sales as being a pretty good.

Tool in the meantime, because we do get some business streamlining and and and that we think we ultimately that works as well, but clearly it's a tool to where if we feel like we need to.

To to manage our cap structure, we've got a baskets left.

We think the market is pretty attractive so it's something we'll monitor but it's not the first stuff on our on our tool that.

Tool kit Harry this is really when you think about what we're trying to deal with the assets.

Rent that we have.

A lot of what we're trying to do is do a transaction with brings another partner in adds volume ready to add synergies and so we think about forget lose out opportunity in many cases to do that so we're all trying to do do more with a strategic sand, we usually are on financials over that helps.

Got it yep. Thank you.

Okay. We thank you very much for joining us today. We appreciate you taking the time and look forward to updating you on our call in May.

Thank you.

So that will conclude today's conference again, thank you for joining us.