Q4 2019 Earnings Call
[music].
At this time all participants are in a wish bone.
The speakers presentations are with your question answer session.
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Thank you. Please go ahead Sir.
Good morning, everyone and thank you for joining us on the call with me today, or Tom Carroll, Chairman and CEO, Diana Charlotte, President and Chief operating Officer.
Kirk Oliver Senior Vice President and Chief Financial Officer.
And just in Bakken Senior Vice President I guess, the Sims planning an engineer.
A replay of this call will be available for 14 days beginning this evening.
Number for the replay is 8558 Fivenine to 056 and the conference I'd is five to.
80796.
Today's call may contain forward looking statements related to future events and expectations.
Factors that could cause the actual results to differ materially from these forward looking statements.
Our listed in today's news releases and under risk factors.
You Trn and eat you EMS form 10-K is for the year ended December 31st 2018.
The which are filed with the FCC.
And updated by any subsequent form 10-Q's.
Also the form 10-K is for the year ended December 31st 2019 will be filed with the FCC later today.
Today's call May also contain certain non-GAAP financial measures. Please refer to this morning's news releases.
And our investor presentation for important disclosures regarding such measures.
Including reconciliations to the most comparable GAAP financial measure.
This morning, we reported fourth quarter and year end 2019 results that were in line with her guidance.
Given today's transformative announcements our prepared remarks are focused primarily on these actions. However, we're happy to answer any questions on the earnings release during Q in it.
After the prepared remarks, we will open the call for questions.
I'll turn it over to Tom.
Actually.
Good morning, everyone.
But you may have seen we have a lots to talk about today.
We're excited about the actions we've taken.
Strengthened our balance sheet upgrade our contractual relationship what do you tea and accelerate our transformation to a C Corp.
Each action is designed to make us a stronger company able to succeed in any environment and as of today, well be cute C and D train our stronger entities.
You train will emerge a strong C corp, what's transparent governance.
Over 70% take or pay revenue beginning in 2021.
30% capital efficiency benefits from our actions.
Rapidly de levering.
And importantly, with a stronger technology, driven customer poised to capitalize on their leading position in the basin.
So let's start right Im on slide two.
We're taking four distinct actions.
The first action is the execution of what we call a blend broadened and extend 15 year gas gathering agreement with each new tea.
Active immediately.
Second is the purchase of 25.3 million you train shares from acuity.
Or $52 million in cash and $196 million present value regularly.
Third.
D train will acquire it Q EM and all star transaction.
Each unit of BQM will receive 2.44 shares or the train stock.
And fourth we will establish a new financial policy.
Resetting our annual you train dividend.
60 cents per share.
Establishing a clear plan to exit 2021.
At four times leverage or below with positive repaint free cash flow.
Second as a whole these actions immediately strengthened our balance sheet.
I have credit profile.
Strengthened our largest customer.
And move us toward being a C corp entity with transparent governance striving to become an industry leader, yes Ci initiatives.
We've been consistent in stating our objective is to become a C corp within industrial strength balance sheet.
Able to focus on mission capital allocation to deliver value to our shareholders.
This new creative blend broad and then extend agreement with <unk> G.
Provides long term security and our cash flows.
As I said, 70% take or pay revenue beginning in 2021.
And long term growth locked in through a significant additional acreage dedication.
The agreement also ensures complete alignment with our largest customer with both companies healthier and position to execute on the most capital efficient development plans.
The deal a lousy cute T to execute on their state of the yard combo development drilling plans.
And for US this translates to an estimated 30% reduction in capital as we benefit from building fewer miles of gathering lines.
Clear win win.
Another key objective is to revise our dividend and capital allocation policy.
The dividend level was an output of our financial policy objectives, and we had the benefit of being able to listen to many shareholders as we fully developed our revised business plan.
A rapid de levering coupled with substantial free cash flow provides the opportunity and the flexibility in the future.
A return value to shareholders.
Buyback programs or appropriate dividend increases for further de lever.
On slide four we highlight the key points of this new agreement.
Phase one begins immediately and provides us a 15 year contract.
Base minimum volume commitments of three Bcf per day.
And they courage dedication in excess of 100000 acres in the West Virginia core.
And the significant capital protections I spoke of.
Rick you T phase one brings the ability to execute efficient development without constraints.
The single MPC eliminates the legacy deficiency payment issue caused by multiple MVC contracts.
And lastly, immediate liquidity of approximately $250 million through lower credit thresholds on posting required.
Slide five is where we outlined phase two.
It becomes effective on the in service date of Mountain Valley pipeline.
In phase two we get an M.B.C. that ultimately steps up to four Bcf per day for a stretch of nine years.
A five year agreement on water, providing for an MPC of $60 million per year.
Yeah, and hopefully as gas prices recover we have the potential to earn up to $60 million per year for three years in bonus payments.
In phase two you T gets base rate relief of $300 billion over three years.
Again.
This blend broaden and extend agreements is the value treat each of our company's desire to achieve.
Resulting into stronger companies.
Low cost rates Freak U T.
Hi, take or pay revenue free train.
And then extended partnership covering substantial new acreage.
Slide six shows the previous Mbcs, Woody Qt versus the new NBC profile.
To me this graph speaks for itself and I think this is a great page.
Two things really jump out.
First.
The all contracts you see the M.B.C. falling to below one Bcf per day by the end of 2025 as the existing current contracts expire.
And second.
With phase two we will have that nine years stretch of four Bcf per day of minimum volume commitments.
The PV 10 of the revenue generated solely from the Mbcs.
Jumps from a current $2.8 billion.
To a phase two number of $4.9 billion.
Moving volume uncertainty and locking in the M.B.C. for the next 15 years is precisely the outcome, we have been describing to the marketplace.
On slide seven.
We showed a forecasted annual and cumulative net cash flow impact.
This new commercial agreement provides.
Part of the value trade.
We're gathering fee relief.
Five year water NBC.
Which is about $20 million.
Your per year than our previous estimates.
And we have the potential to earn up to 180 million additional dollars as Henry hub pricing recovers.
In addition to water and Henry hub upside.
Incremental volume growth provides even further potential upside.
Gathering agreement Incentivizes volume growth through a 30 cents per dekatherm rate on volumes above the NBC.
And with that.
I'll turn it over to Diana to discuss some of the operational aspects of the deal.
Thanks, Tom deploying capital efficiently as at the core of what we do every day disagreement with each new T. provides multiple benefits that will advance our ability to control capital and ensure efficient fill that.
We believe the newly dedicated West Virginia acreage will be a key development area for each you team over the next five years, an estimate the invest it supports the development of this acreage is worth about $500 million of net present value.
The gathering agreement also provides knowledge limitations on our obligation itself, having from consistent and concentrated drilling plans leads the innovative system design limits expenses winter construction and also reduces land acquisition cost.
Each of these improvements contribute to whatever capital costs over time.
Now onto Fivenine.
Moving to a single NBC allows EG T to design and execute their condo development strategy without the previous constraints caused by multiple contracts.
Condo development drilling has the overall benefit of reducing our required pipelines.
Result is an estimated 30% reduction in midstream capital, which is about $250 million of capital savings from 2021 through 2023.
A longer term benefit and one that could be a real step change in our capital program is returned to pad drilling.
The condo development example, on slide nine just 15 lateral all drilled to the northwest in many cases. This is just the first step in the development program.
Second step is returned to pad to drill 15 lateral that reach and the opposite direction to the southeast.
Return to pad drilling requires minimal incremental midstream capital because the infrastructure built for stuff. One can also be utilized for step to.
We think it's going to take about four or five years before we really start to realize the benefits of returned to pad, but we're very excited about the impacts it will have in our future capital.
Now, let's shift or gross Capex forecast on slide 10.
We forecast approximately $1.6 billion of gross Capex from 2021 through 2023.
That about $400 million is driven by the man whole projects, including Southgate, our plant connection APC upgrade and the NBP expansion.
About 1.1 billion were $365 million a year is gathering capex. It supports those EG tea and other producers.
The gathering capital supports the projected mid single digit volume growth CAGR over the time period.
As you can see our Capex is expected step down in 2023 as a transmission projects are largely complete in 2021, and 22 and we benefit from the gathering efficiencies we've discussed.
Before turning the call to Kirk I do want to switch gears and provide a quick update on MVP.
At year end, the total project work on MVP with over 90% complete we've been working with our partners to resolve the outstanding permit issues and we continue to make good progress with these efforts.
We expect the biological opinion and nationwide 12 permit will be resolved in the spring, allowing construction to reason.
We also remain hopeful that the Supreme Court overturned the fourth circuit courts original decision on AC piece case related to its Appalachian Trail crossing resolving similar challenges for NBP.
Oral arguments were held earlier this week and we expect a decision from the court budget, we continue to target a hole in service date for the pipeline of late 2020, and an overall project cost estimate of $5.3 billion to $5.5 billion now I'll turn it over to Kirk.
Thank you Diana and I'm now on slide 11.
Today, We also announced the purchase of 25.3 million shares will be train stock from you Qt at $9.54 per share.
We will pay for the shares with a $52 million, an upfront cash and 196 million of present value rate relief deferred until face to.
The future consideration will be paid through gathering fee relief of $235 million over two years.
We expect all 25.3 million shares will be retired in March of this year.
Share purchase from East Q T. represents half of the train shares issued he owns.
The remaining shares that he Qt owns will represent about 6%.
Pro forma D train shares outstanding.
Significantly reducing the equity overhang and he train.
Slide 12 addresses revenue recognition considerations there will be important as you model the company going forward.
It's changed for US is due to the rate structure in the new gathering agreement and how we expect revenue from the gathering agreement with the acute P.
Ultimately be recognized under gap.
The new 15 year contract with each new T. as a gathering rate profile to gradually reduces over the first nine years before plateau waiting for the remaining term.
This is the darker line labeled cash received on the graph.
Under GAAP, we expect to recognize revenue using an average gathering rate on the NBC over the 15 years represented by the lighter line on the graph labeled revenue recognition.
This results in significantly more cash received and the revenue that is expected to be recognized in the early years and then reverses in the later years as the revenue recognized is expected to exceed the cash received.
The balance sheet will reflect a related contract liability that grows in the early years, it's more revenue was deferred and declines in the later years.
You can also see the impact at the bottom of the graph in the first year.
First year deferral is particularly large due to the shares that are being repurchase in exchange for future rate relief.
The shares repurchased account for approximately 190 million of the 450 million of expected revenue deferred and 2020.
And finally, this accounting not only impacts revenue, but also impacts all measures of income including adjusted EBITDA.
On slide 13.
Detailed the expected impact to adjusted EBITDA as it relates to the anticipated revenue recognition under the new gathering agreement.
The first column shows our previous 2020 forecast.
Deferred revenue forecast and the pro forma Ie train adjusted EBITDA forecast.
The only change to our 2020 guidance for adjusted EBITDA is the revenue recognition under the new gathering agreement and a couple of million dollars of Gionee expenses included that the train level.
We're also providing for the first time and eat train adjusted EBITDA forecast for 2021.
2023 and have included the deferred revenue forecasts. So you have the information to do an apples to apples comparison with your models.
On slide 14, we summarize the terms of a roll up transaction.
Each unit of BQM receive 2.44 shares of Retrained star.
The acquisition is expected to close in mid 2020, following approval of retrain shareholders and he UQM unit holders, we see value being a single C Corp security.
Simplified governance, a broader investor base and improved trading liquidity.
In terms of cash taxes, we forecast near zero through 2023, and minimal cash taxes for several years after that.
Slide 15 for flights you train forecasted measures that are pro forma for the commercial agreements with the acuity.
The share repurchases the acquisition of EQM and the financing plan.
The DCF on the upper right, which is increasing 13% CAGR.
Reflects a cash associated with the deferred revenue in each period.
Provides a good picture of the improving Cashel profile of the company.
The DCF coverage starts at about two times in 2020 is expected to grow to over five times by 2023.
Finally, the lower left shows a free cash flow, which is after we cover all capex.
From 2021 through 2023, we are forecasting 1.8 billion of cumulative free cash flow.
With that I'll now turn the call back to Tom.
Thanks Kirk.
So to conclude let's take a look at slide 16, which I think some things up pretty nicely.
Putting everything together.
Clearly see a business with a rapidly strengthening financial profile.
To be able contract structure.
And the ability to generate substantial free cash flow.
And then layer on top of that the near term edition of the substantial MVP project, which will further upgrade our business mix.
We believe all these things together position he train in the best possible place to create value for our stakeholders.
We're very appreciative to the constructive relationship we've established with the new week U P management through these negotiations and we're excited and look forward.
Opportunity to build on it.
With that we're happy to answer your questions.
That's just timing it was like to remind everyone in order to ask a question press star is on the number one when your telephone keypad.
First question comes from journey, Jeremy Tonet of JP Morgan Your line is open.
Hi, good morning.
A lot of information to unpack here and I was just hoping if you could kind of break down some of the pieces a bit here if I'm looking at the guidance maybe I'm on slide 13 in the previous 1.3 billion for 2020, the adjusted <unk> EBITDA, there just kind of the moving pieces to get to the 1.4 billion in 2021.
As it relates to projects coming online and you know the various forms of rate relief. If you could just kind of help walk us through a bit here are things that might be helpful.
Yeah. Jeremy This is Nate you we've assumed here a year end MVP and service. So in 21, we've got a full year of MVP hammerhead and the Equitrans expansion project.
With.
MVP and service also start phase two of the deal with the Qt So the rate relief.
Also comes in and 21, so when you net all that out and then also with the deferred revenue there you get to the 1.4 and again the accounting change is on the deferred revenue.
Which is the 0.11 on slide 13.
There's some other growth in there I mean, we're doing some other projects for some other producers, but the big movements or MVP and service and the EBITDA that contribute.
And then the rate relief kicking in.
Great. Thanks for that and maybe just diving into the dividend a bit more I think you said it was kind of now put up with the business can deliver at this point, maybe you could just provide a little bit more detail on how you sell it settled in on this rate versus something higher or lower.
Yeah. Jeremy this is Tom thanks, Thanks for that question.
It's not necessarily with the business can deliver that the dividend.
Level.
60 cents that Weve <unk> said.
Was derived does an output from what our new going forward financial policy is and there are two main pillars to that the first pillar is our commitment to exit 2021.
At four times leverage or below.
And exit 2021 with positive retained free cash flow and we define retained free cash flow as cash after paying for capex and dividends.
We think that those two pillars.
Our key to delivering the balance sheet strength that we think is warranted in this environment and then also warranted moving forward as investors think about putting putting money into the midstream space because.
I think we've said this several times before.
We've got to be very industrial looking moving forward to attract generalist investors and people willing to put money into our space and we think that the the actions. We're taking today are key to moving us very long a very far along that route.
Thank you that's it for me thanks for taking my question.
Thanks, Jeremy.
Your next question comes from Spiro teams of Credit Suisse. Your line is.
Hey, more number one appreciate all the color today.
For the and I just wonder if you could walk us through this transaction from an IR return perspective, you're spending less obviously the rates coming down over time.
Incentive so.
Maybe just help us think about how your returns on incremental investment dollars from here compared to maybe some of your legacy portfolio or or any new deal you would have signed today, otherwise and maybe in framing that out to get also just help us think about the free cash flow here, obviously 200 million dollar cumulative impact I guess, my worst case scenario, yet none of the natural.
Yes benefit, but how do we think about the resulting capex offset there as well.
Yes, good questions and I'm going to let Justin help me out a little bit with.
Some of this capital savings question, but from an IR perspective.
Look at this as.
At this point forward.
The same IR are there about the same as the deals that were signing now we're using a market rate right now and those rates of returns or something that we're very comfortable with going forward as the condo drilling really starts to pick up.
Less and less capital that we have to contribute so we feel like actually in the long term the IRS or better.
And just and maybe you can talk a little bit about what the system capital does over the next couple of years sure. Hi. This is just im just a little color like I said on the capital.
We're viewing this is really just an important next up and the strategy the Diana and Tom has been laying out over the last year about number one integrating the various gathering systems that we have it allows us to provide our customers with a an important postage stamp type rate.
And helps us manage our capital efficiently, especially on the compression side as we're able to balance the volumes across these various systems and not build for for peaks.
The the new contracts that we've now entered into with each U T really allows them to execute on their combo drilling program and they have spoken extensively about how that helps them achieve their cost targets, but it's equally important for us on the midstream side and achieving our capital efficiencies Diana spoke about the slow.
Slide demonstrates how we can reduce the pipeline mileage and certainly pushed down the capital requirements for hooking up new pads going forward.
And then as we look at the medium to long term.
The capital protections that are in the the new agreements and the return to pad drilling that Diana spoke about make us very comfortable in model able to sustain this capex run rate, but actually driving it down in the long term.
Thanks, Okay.
So that's helpful. Just switching gears a bed just thinking about long term growth opportunities you've got a lot of visibility now the 15 year deal.
On this contract that the Tom you've also talked about in the past about maybe heading into a no or slow growth environment here for the next few years. When you get past 2023, how you think about each rent growth prospects from there how much of that is coming from gathering first maybe building out your transmission business with some expansions.
So my Crystal ball is kind of foggy when you get to beyond 2023, I think clearly we're going to continue to serve a it UTI and our other producer customers in the basin and we'll be there to continue to add volumes on the gathering side.
We do believe that as we put Mon valley pipeline in service at the end of the year.
And we continue to look to the southeast off of the in service of that pipe that there could very well be additional transmission and expansion opportunities I think we've talked about a mainline expansion there.
So.
Putting together the position we have in the basin and the transmission project a that we're going to put into service. The ended this year.
We think there we're gonna be positioned to take advantage of any growth opportunity that makes economic sense to us.
Whether it's beyond 2023 or sooner.
So it's understood.
Got a hard to be specific to answer the question, but we're in the business of midstream infrastructure.
Yep.
I appreciate that that's for me thanks, guys.
Experts.
Your next question comes from Chris sick animals.
Jefferies. Your line is.
Everybody I appreciate the time this morning and early this morning I just have a couple of follow up questions. Kirk I think for you I'm just trying to make sure I'm understanding.
Components of slide 18 correctly, and and really I guess when I'm seeking to do is built into.
[noise] and enterprise value you you have leverage ratio quoted there.
And its it looks like is defined as just consolidated debt and then it's I guess, what I would use the phrase maybe a cash EBITDA you know the adjusted EBITDA pro forma plus the deferred revenue.
I'm just wondering does that it is that inclusive of any pref treatment I know you're going out of residual prep.
On that you're planning I'm, just curious any other.
Items that we should make sure we pay attention.
No that's excluding the crown.
Yeah, the leverage ratio. It doesn't include the 600.
Probably not split into two pieces, there 600 million over that was refinanced and that was <unk>. That's refund <unk>, that's going to be refinanced I'm, sorry, and that's gonna be 600 million at EQM. So that would be included 600 million of it is moving upstairs to eat train which is not included.
Okay, Yeah, you're refinancing part of it would that and then part of that we remain a pref. Okay Yep and have you I guess have you had clarity from.
Agencies about how they'll treat that rough physician is that going to be something you think gets partial equity credit were.
Uh Huh we.
So S&P treats it a 100% as debt.
Fitch is up more 50, 50, but they'll have to look at it again, because we changed the terms over the little bit so they'll be looking at that again, we've talked to them about it and Ah Moody's we'll be looking at it again and one of the features that.
We did change on that is there's a there's a step up in the coupon that happens in 2024 and a beginning in January of 2024 will have the ability to call the security, which the rating agencies make that they view that is making it look more like a debt security so.
Okay.
Like that.
And the leverage ratio that you're quoting here is the assumption just that the the excess retained free cash flow is just used to reduce the debt load.
Okay. So we could actually thinking about that as it doesn't that that number.
And do you I guess do final question for me through do you have a I know I can wait for your K, but do you have a year and net debt balance that you're you can offer.
You're in net debt you give me a minute I'm working.
We had a 2.4 available under the revolver.
Yeah, I can get either.
Oh, seven it's about $7.6 billion.
We plan on filing the K today, Chris So you'll have that information the CEO. Okay. Perfect. Thanks, So up to the time and I appreciate it. Thank you.
Your next question comes from Becca Followill of U.S. capital Advisors. Your line is open.
Hi, guys I'm with Chris I'm also on page 18. So can you help me with the assumptions in the gross and EBITDA from 2020 to 2023 does that assume that qt picks up drilling activity and add some rigs and and.
Just how you put together your forecast is that in conjunction with a drilling plans for HCT.
Hi. Good. This is this is Tom I'll answer in part then I'm going to let need answer the rest, but part of part of that upward move is simply the way that weve tailored into two pieces of rate relief, but the base rate relief and then the consideration for the shares.
It's predominantly.
Aggregated in 21, and 22, and there's a big step down in the rate relief as a result of this transaction in 2022. So that's that's part of the uplift you. Another another big component and Diana talked in her prepared remarks about the 400 million we're spending.
Jack to spend on demand pool projects. One of those is an expansion of MDP, which would be incremental compression to add about a half a bcf a day to NBP that adds about 700 million of EBITDA and 23 relative to 22.
700.
R&D, sorry, so [laughter], that's a great project, Okay. So Dan I assume that kinda answers my question on Capex for 20 to 22 I assume there some capex in there for that project.
Then going into 2023 to 420 million a capex I assume that's a 365 that you talked about grew mid single digits, plus about 60 million maintenance. So you get that frac. Okay perfect. Thank you.
Your next question comes from Derek Walker of Bank of America.
The line is open.
Hi, good morning, guys.
<unk>.
I appreciate all the color I guess.
Maybe just one question on just the contracts you had the 15 year NBC.
And then the phase two seems to be just sort of a drops off and.
Got it early 2000, thirtys and any of the five year with the on the water side. So I guess or was there any conversations just to extend those out to match. The 15 years sort of what's sort of driving just the five year yeah. The and then the shorter term for the phase two portion just wonder.
Get your thoughts there.
So the water NBC is not really connected to the 15 your gas gathering agreements that that was as a separate conversation that we had with with each new T. management trying to create some certainty around.
Their need for services in our need to to have predictable revenues that were more like midstream gathering revenues then water revenues, but it's also quite frankly, providing us an opportunity to get together with with the two T. management team. After everybody's had a chance to get a couple of nice sleep.
And and to try to address a global solution for water for Pennsylvania, and West Virginia. So that we can maximize the efficiencies and minimize the infrastructure we need to build so.
So yeah. The <unk> the five year deal is there yeah, we're very happy to have it it's consistent with the direction that you T. wants to go up but you should expect probably in the next three to six months or hopefully, we'll be able to put our collective.
Heads together and come up with a more long term per permanent water solution.
Got it and then maybe it's a quick one on.
On MVP, you're forecasting 650 700 this year I.
I think a biological opinion, there's still time until March ish. So I guess, how should we think about the cadence of that Capex spend.
Yes is it a kind of most of that's in kind of Q3 timeframe, assuming everything kind of happened. There then maybe just an update on where you stand on the fill in a change proposal.
Yes so.
We are planning to get back to construction.
End of April.
When we get biologic opinion nationwide 12, so construction I'll start wrapped ramping up I think your cadences accurate.
And what I'm sorry, what was your last your last question was Oh man.
Just Atlanta she has yet.
So we've kind of put that on hold right now letting the resources work on everything else that we need as far as biological opinion nationwide 12, and really focusing on that hoping that then the court decision comes out in June and then we don't even need the land exchange, but is there for us.
And we can continue to go on that path, if we need to.
We've been doing some work in the background as far as.
Acquiring acreage and things like that the things that we really need to do from our side, but weve been letting the agencies kinda hold off on it right now.
Got it thank you.
Your next question comes from some new somebody of Seaport Global Securities. Your line is.
Yeah, Hi, good morning, guys and thanks for the clarity.
Just going back to slide 18, and once again.
Do you see if a company to show that you could do it for Twentytwenty I presume that's based on three quarters of new distribution.
And one which we paid out in January.
Yeah, that's correct.
Okay, and then you don't want to think about the balance sheet. So seems like net net.
Pro forma level, you're adding 600 million to the debt balance based on the fact that you're taking all the preference.
And and obviously you know the term loan B is Ah was off is that the consolidated level on the audit is that is that fair.
Yes that is there.
Okay could you remind us you know well how does your goodrow covenants kind of we're going to treat this new treatment of EBITDA.
Oh, Gosh, Oh, <unk> I know, if you know accounting for it now.
Yeah, So we've talked to the banks or what we talked to the lead bank.
On both our.
A revolving credit facility in the term loan a and both have indicated that the you know getting covenant change for how we treat the revenue the deferred revenue.
I will not be a problem it seemed that before.
And what is the maximum leverage limits on the covenants.
<unk>.
Covenants in the debt facility work, a little different than the covenants you see here, but the maximum and the debt facility is five times.
But it's a different calculation than what we show here.
Okay, So that give us your credit for MVP and all that I presume right.
That's correct, yeah, we have substantial room under the revolver covenant.
That were not plus thing.
Okay.
Thanks for that and then.
Have you viewed this new engagement with the rating agencies are you know what kind of expectation there in terms of their opinions.
Well I know that opinion.
Yeah, I don't want to comment on what the rating agencies might or might not do but we've reviewed it with the rating. It we've been reviewing it with them for some period of time and had calls with all three of them just a yesterday I think the attention for the rating agencies as they really like the.
On the action on the dividend.
And are there wrestling with how they treat you know some of the changes around the the preferred.
Convertible preferred.
So we'll wait to see where they get too, but I don't expect any kind of big change from the rating agencies.
Okay and more importantly, the food the new financial policy that we've we've just discussed here today, we've we've got a high degree of confidence that that's the best policies. The policy for us moving forward notwithstanding what what the agencies do or don't do.
And we're going to remain committed to that policy.
Okay.
And then one last clarification, if the M. B P is delayed beyond you know what you're assuming here.
I assume that.
Oh the timeline for.
Gathering contracts get shifted by the same alone to how does that work.
Yeah. So no that's exactly right the way I would describe it is that all of the benefits of the phase two of the gathering agreement our tethered to the in service date of M. B P and will slide or not slide depending on the in service date of NBP.
Okay.
Thanks, guys.
Thank you.
Again, if you would like to ask a question Press Star then one number one when your telephone keypad.
Next question comes from Warren Bear a private investor.
I just don't.
Thank you.
My questions relate to the impairments, there's been quite a few impairments.
Fairly sizable amount over the last five maybe six quarters.
The questions and I have religious that is one wanted to see if you could provide some clarification on the timing of those why you chose to clean them. When you claim them Oh, so what this quarter's impairments.
Consisted of and then if you can give some guidance on what you expect the impairments over the next few quarters to be my main reasons because of the impacted that has on the reported EPS as opposed to the numbers and I'm seeing which looked to be very good in comparison to the reported numbers.
And this is Tom thanks, Thanks for the question it's up a.
Very good question in the we'd so that surpasses my ability to answer it. So we're fortunate to have Brian a tree Andrea sitting in the room here with us Who's our Chief Accounting Officer, Brian you want to take a pass at warrants question, Sean Thanks, Tom.
Warrant a good question you think about the apparel lines for this quarter.
You know, it's really been following the fact pattern in the basin over the last year.
You know so with the phone the producers activities.
Well that's impacted our cash flows as we project out in the future. So that was the driver and Oh excuse me that was primarily obviously in our Ohio and P.A.
Gathering assets.
And the time, because if you can read my hi, our auditors that we had to take the write down at that point.
It's part of our annual assessment that we do and then.
Yeah, Paul can you give some future guidance on what you expect the upcoming impairments if any to be.
War and you know.
We're going to be reassessing, our reporting units, but at this point, we have no guidance.
Okay.
All right. Thank you werent.
There are no further questions at this time I will not return the call to a person.
Thank you operator, and thanks to everyone for joining us today I know that its a.
A pretty pretty difficult tape out there and kind of a difficult day to announce a complicated set of transactions like we did today, but we appreciate everyone's interest we will make ourselves available to answer any additional questions you have.
But.
But we hope that first we get through today.
Without any other major just disruption.
And that everybody continues to to pay attention to to up to.
To the space.
So with that I'll say, thank you and have a great day.
This concludes todays conference call. Thank you for participants you may now disconnect.
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