Q1 2020 Earnings Call
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Welcome to first quarter 2000.
Washington with true Partners earnings Conference call.
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Dempsey Investor Relations. Please go ahead.
Thank you I'm glad you can join us today for Western Midstreams first quarter 2020 conference call.
I'd like to remind you that today's call. He accompanying slide deck and last nights earnings release contain important disclosures regarding forward looking statements and non-GAAP reconciliations.
Please reference western Midstreams form 10-Q, and other public filings for a description of risk factors that could cause actual results to differ materially from what we discussed today.
Was it reference materials are posted on our website <unk>.
With me today or Michael your our Chief Executive Officer card Collins, our Chief operating Officer, and my Pearl Our Chief Financial Officer, I now would like to turn the call over to my lawyer.
Thank you Bobby and good afternoon, everyone I Hope this call fines, you and your family safe and healthy during these unprecedented times.
I'd like to begin this call by thanking our employees for their continued focus diligence and adaptability all of which directly contributed to our truly outstanding first quarter results. Our first quarter results are indicative of the operational and financial outperformance that our employees and assets are capable of delivering in a normalized <unk>.
Harman, our first quarter results not only show the capabilities that exist within our best in class assets that we expect will deliver repeatable future successes when we reach the other side of this ongoing pandemic, but these results also improve our debt metrics and demonstrate our ability to generate meaningful positive free cash flow.
In light of the Pandemics effect on commodity prices and producer activity, We recently announced capital and other planned cost reductions that we fully expect to realize in 2020, accompanied by a 50% reduction to our quarterly distribution. We believe these announced measures ensure our near term financial health and allow us to.
Emerge from the currently dislocated market opportunistically positioned with financial flexibility.
The current market environment has forced us to re examine every aspect of our operations to identify incremental cost saving opportunities and pursue efficiencies that will improve our profitability as the sector and overall economy improves in short, we're focused and committed to delivering improved results with fewer resources.
By adopting an entrepreneurial mentality that emphasizes broadening employee skill sets and areas of responsibility as anticipated establishing west as a standalone midstream company has further to cost efficiency realizations and we have embraced the current environment to challenge our legacy corporate organizational structure and.
Functions.
The realizable value attributable to past activities investments and the overall reliance on the talent and creativity of our focus employee base to continue identifying efficiencies and cost savings. The current environment is far from ideal, but opportunistic for west in the sense that allows and forces us to focus on improving every aspect of.
Our operations and related corporate functions. This is elicited actionable plans that are imminently capable of delivering incremental cost efficiencies for years to come.
Notwithstanding our unbridled enthusiasm for our first quarter results and anticipated cost savings initiatives, we recognize the pandemics adverse effect on worldwide economic activity and the related disruption to the energy sector. We were in early proactive and constructive contact with all of our customers most of which communicated.
Deferrals and cancellations of expected drilling campaigns, our customers continued to revise drilling and completion activities entertainment plans, which is prompting us to take steps to protect and strengthen our financial wherewithal.
We recently announced a 45% or more than a 400 million dollar reduction to our current your capital guidance.
75 million dollar reduction to current your gionee and operating and maintenance cost and a 50% reduction to our quarterly per unit distribution.
As a result of these actions and up to date producer Communications, We anticipate 2020 adjusted EBITDA between 1.7 to five to $1.8 billion to $5 billion, which we expect to result in meaningful 2020 free cash flow after distributions.
This guidance reflects the best in current information we have at this time, we will continue monitoring producer activity levels and may adjust our 2020 guidance and future distribution levels based on incremental information that may be communicated to us by our customers in the upcoming months today, we believe the strength of our first quarter results.
And the most recent customer provided activity level information support our revised 2020 guidance, our revised guidance announced cost savings initiatives and reduce quarterly distributions position us to generate free cash flow. After distributions. So that we can prioritize leverage reduction and assume a financially offensive stay.
Dance once the current market dislocation debates with that I'll turn the call over to Craig who will discuss our first quarter operations and forecasted 2020 in basin activity and capital plans.
Thanks, Michael first I would like to congratulate our team for its recognition by the G.P.J. Midstream Association for outstanding safety performance in 2019.
Well, we were awarded first place in the Division one category for companies with greater than 1 million reported man hours.
A sincere. Thank you do our employees for continued dedication to safety.
Operationally gas throughput increased by approximately 150 million cubic feet per day on a sequential quarter basis, representing a 3% increase.
This increase was primarily driven by higher throughput from our DJ Basin complex in West, Texas complex also the second life him train commenced operations during the first quarter and as a result of modifications that we made during construction and falling performance testing, we expanded the processing capacity by 50 million cubic feet per day for a tone.
Oh processing capacity of 250 million cubic feet per day.
As you may have noticed our recently issued financials, we now disclose metrics attributable to water separately from crude and natural gas liquids for added transparency into our business as a result of the water business, becoming an increasingly significant portion of our portfolio our water throughput increased by approximately 105000 barrels per day represent.
During an 18% sequential quarter increase our per barrel water disposal gross margin of 97 cents is consistent with the prior quarter, our crude oil and natural gas liquids operated assets experienced a sequential quarter throughput increase of approximately 14000 barrels per day, primarily as result of increase throughput in west.
Taxes annual cost to service rate Redeterminations and increased Delaware basin throughput supported an increase in our per barrel margin related to crude oil and natural gas liquids throughput from the prior quarter by 16 cents to $2.43 per barrel.
Additionally, the front range and Texas Express pipeline expansions were placed into service at the beginning of April.
Many of our customers already have taken steps to reduce drilling activity in the basins in which we operate accordingly much of the originally forecasted growth for this year will not materialize.
Notwithstanding our capital asset and spending profile is scalable relative to and in response to fluctuations and producer activity.
Our capital plan allows us to reduce well connect compression in gathering capital rapidly Insignificantly in response to reduced in basin activity. This demonstrates the versatility and flexibility offered by our asset portfolio and Furthermore, underscores the ongoing value attributable to our prior period investments into scalable backbone infrastructure at.
That's located in Premier U.S. onshore basins.
Should end basin activity ramp up in 2021 and beyond we likewise are poised to capture meaningful incremental value by leveraging our existing backbone infrastructure to capitalize on intended economy of scale opportunities that are uniquely inherent to our asset portfolio.
We continue to build out the force North loving wrote of train with completion expected in fourth quarter 2020. This project is reflected in our most recent capital guidance I.
Ill now turn the call over to Mike to discuss our first quarter financial results in our financial focus for 2020 and beyond.
Thanks, Craig yesterday, we reported and unequivocally outperforming core with adjusted EBITDA of $514 million and free cash flow of $215 million, the 15% sequential quarter increase and adjusted EBITDA resulted from increased throughput across all products in the Delaware.
Our basin and natural gas throughput in the DJ Basin, we believe that current broad based market dynamics dictate that all companies energy sector and beyond prioritize balance sheet strict so that they are positioned to manage through cyclical downturns, including the existing and unpredictable pandemic fueled market dislocation that has turned all of our lives upside.
Yeah.
And lot of evolving macroeconomic conditions in the current state of the sector, we have pivoted to focusing on free cash flow as a financial performance indicator as opposed to the conventional MLP standard metrics of distributable cash flow and distribution coverage.
Legacy sector and metrics continue to carry comparability value for a distribution focused enterprise the loose significance as compared to a market standard free cash flow metric that his board germane to a total return focused enterprise likewise that is positioned to withstand economic downturns and poised to be opportunistic at any stage.
The business cycle.
Our recent distribution reduction was undertaken with a view toward becoming a sustainable free cash flow after distributions enterprise. Moreover, the recently announced distribution got positions west to generate free cash flow after distributions as early as this year, notably.
The currently applicable per unit distribution was in effect for first quarter 2020, West would have been free cash flow positive after distribution to date capital investments have enabled our immediate shift to a free cash flow after distribution enterprise, which allows us to repay debt expeditiously. So that we are able to capture future value.
From deploying financial resources to execute on highly accretive opportunities, whether acquisitive or corporate financing nature, returning to first quarter results low commodity prices and reduced producer activity triggered the recognition of approximately $156 million of asset impairment primarily related to Jupiter and.
$441 million goodwill impairment these noncash charges do not affect adjusted EBITDA or free cash flow as we look past first quarter 2020, and expanding on Michael's earlier commentary regarding the cobot 19 inspired west retrospect, our 75 million dollar reduction to current your DNA and.
Operating and maintenance costs are absolutely realizable, we have altogether stopped discretionary spending travel in the like suspended salary increases for all personnel for the remainder of this year and continued discovering ways to operate in a more cost efficient manner through the identification and elimination of non value added and nonproductive expense.
Pitchers as we continue executing on lowering our input costs, we recognize the importance strength and sanctity of our current gathering and processing contract. The contractual protections provided to us through the operative provisions of these contracts are a key component to our free cash flow equation and we have no current expectation of.
Renegotiating or amending these contracts in any manner that materially prejudices, our ability to generate free cash flow after distributions over the long term are highly successful bond offering earlier this year, largely undrawn 2 billion dollar revolver lack of near term debt maturities and our recent actions that reduced 2020 cash outflows.
By approximately $1 billion all contribute to our currently advantage liquidity position as we began generating positive free cash flow. After distributions, we will deploy excess cash to strengthen our balance sheet by reducing leverage we continue to target leverage below four and a half times by year end 2020, and below four times by year end too.
Many 21 these targets are necessarily aspirationally as they are subject to the uncertain duration and severity of the ongoing economic downturn and related energy demand shot finally, restoring our investment grade credit ratings remains a priority for us and meaningfully reducing leverage AIDS in this endeavor.
Now I'll turn the call back over to Michael for concluding remarks.
We recognize the difficult times in our industry and in our communities I. Nevertheless, we remain encouraged by our first quarter outperformance, which again, we consider indicative of our capabilities in a normalized economic environment.
I remain confident that Wes and the industry as a whole will emerge from this downturn stronger than before and for Wes that dictates a more efficient and cost effective business model. The achieve ability of which currently is being demonstrated by real time empirical evidence of cost savings and continued efforts by west employees to improve overall efficiencies.
In closing I'd like to thank our employees for their continued dedication and the frontline individuals in our communities that are working tirelessly to keep us in our family safe and healthy during this health crisis with that I would like to open the line for questions.
Thank you we will now begin the question answer session.
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Today's first question cultural Schneeberger Shirley.
Oh, Yes. Please go ahead.
Hi, good afternoon, everyone glad to hear everyone safe.
Maybe to start off a little bit.
And your guidance isn't really down that much and I was you know from where it was when you last updated thoughts I was just wondering if you can you remind us what percentage of the EBITDA is protected by nbcs or take or pay contracts.
Yes, one or this is Craig.
We've got 65% of our gas volumes are supported by Mbcs and cost service agreements, 78% of our liquids volumes are supported by by cost service and and minimum volume commitment obligations.
So we feel.
Quite secure given those contracts in the Voracity those contracts.
And we continue to.
Look forward to working through this this downturn, we're in and saying volumes rebounded with with new development wants that begins.
Okay, perfect and maybe as a follow up on the guidance, but that's another one after that.
You know.
Regarding kind of surprised frankly to the upside.
When I sort of put it into context in sort of listening to your one of your biggest or customers being oxy, where it sounds like they have euro two very few rigs running right now and when it can get better wells, having a decline rate by nature.
Is there a scenario where 2020, while it's being.
Clearly a tough environment, but could that actually be the come before the storm and 2021.
It is there a huge DUC inventory that oxy sitting on that they can offset the decline rate later this year I'm just trying to figure out how they catch up in 21 to offset the decline rates if oil prices go up if there are no rigs running in so I'm trying to understand you know sequentially, where we should be thinking about the balance of this.
Here and it's 21 is a material risk to 2020.
Yes sure thanks for the.
For the question.
Actually I appreciate the commentary around the positive surprise on the upside as it relates to to our guidance we.
Also feel great about the first quarter and and feel confident that we'll be able to adapt to the current environment.
It's difficult to tell what 2021 is going to look like for or we don't actually have guidance out into 2021.
Slide of the current environment as we sit today.
And so I would hesitate to provide any specific guidance as it relates to the impact on the 2021.
Well I mean, if you're not able to provide guidance 21, and I do appreciate that but I'm, saying you know the conditions for 21 to be flat down or up it's going to be somewhat dependent on the inventory of drilled uncompleted wells that your key customers would have I mean, if they're not drilling obviously, they're not adding to that balance so trying to understand what is the.
We drilled uncompleted inventory today that should at least be used for us to be thinking about directional were 21 could go.
This this is Mike.
Inventories is today is contributing to what you I think you characterized as somewhat of a lighter decline in terms of guidance, but if we don't see activity levels in the market improve throughout the balance of 2020 I think it is safe to say that you will see a more pronounced decline in 2021.
Okay Fair enough and then one last follow up this Sanchez bankruptcy and is there an impact on western gas and is that our western midstream rather and is that baked into your guidance at this stage right now.
So.
Sanchez is a 25% working interest owner.
Springfield of which we own 50.1% of.
Springfield has individual contracts with all of the working interest owners.
We're connected at the wellhead. So obviously that's important as you ought to continue to flow volumes there.
We feel very strongly them taken steps to preserve our rights related to that and so we have not actually forecasted any negative impact overall because of the the dynamics that I just referenced.
Alright, perfect that's more questions, but I'll step back into the Q.
Thank you Sir.
Our next question comes close to zero doing Lewis with credit Suisse. Please go.
Hey afternoon, everyone.
Wonder if you walked through the the cadence for the rest of year, just thinking about volumes here and what customer that communicate you met in threeq you'd be among the worst head.
But I guess, what's being communicator model, so far about the ramp up into Fourq, you and you any differences between our Delaware or did you ever recover.
Yes, so as it relates to the cadence.
We have incorporated all of the feedback we've received up to this point into the guidance provided as it relates to any curtailments and activity levels.
You if you would expect there to be and we do expect there to be an impact on.
EBITDA as you go through the year as a result of that limited activity and those curtailments on the capital side.
We would expect the capital into second quarter to be relatively flat with the first quarter and the and the dynamic there is.
As you may recall, it seems like forever ago, but at the beginning of the year. There was a very different perspective with regards to activity levels. We get ahead of our producing customers as it relates to that and so at the time of cover 19 in the.
On the Opex plus meetings, a significant amount the majority in fact of our current capital budget. It already been spoken for at that point and so you would expect or we do expect second quarter capital the relatively similar to first quarter, but it trailing off meaningfully.
Through the remainder of the year as we go into 2021, obviously, we have greater flexibility in being able to modify that total capex spend.
The continued conditions.
Or the conditions continue so we do.
Expect.
And have received feedback with regards to curtailments that will.
Impact Q2 in Q3.
The current information that we have is that things will likely return back to a level of enormous at normal season started getting into Q4.
Okay understood and then thinking about that exit rate.
Going back to generic question, just a little bit here, but maybe assay in the context of of your leverage target of four times, which Mike I know you pointed out was Aspirationally, which I think is yes, right levered. It got to get to eventually I guess, we're struggling with is the cash flow side of that and maybe what customers are communicate to you to suggest that it seems like that's going to.
Necessitate growth.
21 of her 20 to get there and so as we're thinking about that exit rate recovery for Q3 extent, that's driven purely by a reversal of shot and it sounds like you get the core times out, but working your mouth, but just help me think about it they get the four times, you're going to have to see some sort of increase in actual activity to get there throughout 21 is that fair.
I think the speed is Mike I think thats. It Thats a fair comment, but also doesn't take into the account it take into account the potential for us to divested of noncore assets to further reduce leverage and bring that ratio closer for and when I say noncore I mean anything outside of the DJ Delaware, including equity investments.
Okay that that applied it thanks, everyone.
And Bob I would again comment that relates to the capital side the increase flexibility into 2021.
To be able to modify the capital probably have greater flexibility and modifying the capital program, bringing that capex down in the event that the activity levels don't return.
Appreciate the color thanks, gentlemen.
However, our next question comes from Germany.
JP Morgan. Please go ahead.
Hi, good afternoon.
Just wanted to kind of clarify what a bit around the guidance here and would you feel that kind of share with the forget what.
Hi rig activity is embedded in your in your guidance.
You know you get a guide for the year here in just the trajectory of the EBITDA guidance.
For the balance of the or is it kind of like.
Second quarter is a bit lower than first and then third a bit lower and so on or just any kind of color on that shaping would be helpful as well.
Yes. So in regard your first question, there's very little to no activity that is forecasted into 2020 as it relates to the guidance that is embedded here.
Yeah again, you have as we've talked about Q2 in Q3, you've got the impact of curtailments that might exist.
With with fourth quarter, I would call it unless theres a.
Return in activity level relatively relatively flat flat with Q3.
So step down a little bit.
Into Q2 as it relates to Q1.
Up down maybe a little bit further in Q3, and then Q4 roughly relatively flat was.
Q3.
Got it that's helpful and just wanted to get a better sense just for modeling purposes. It but no wells are connected to your system.
What type of.
PDP declines should we be modeling or thinking about just trying to get a better feel on model. It.
Craig and his team yeah, I would say given the activity levels.
Already come down significantly.
We're going to see the steepest decline over Q2 in Q3, and I expect that declined to two arrest of a bit during the fourth quarter and beyond.
As those wells come off there theyre hyperbolic decline so.
It is frankly just varies.
Based on the maturity of the the developments by each of our customers and so it's pretty difficult to state on average decline rate, but but I would expect most of that to be showing up in Q2 in Q3 this year.
Got it.
Yes.
That makes sense.
I'll leave it there thanks for taking my question.
And our next question comes from Derek Walker.
Please go ahead.
Hey, good afternoon, Thanks for taking my question.
Just a lot to get a better understanding of.
The gross margin natural gas segment, it looks like it was $1.16.
A meaningful step up from prior quarters. So I just wanted to see.
How much of that at the annual rate Redetermination from the across service contracts and should we think about that 116 number.
Sort of the run rate for the year.
Yes, most of that increase in the gross margin on the gas side is attributable to the increase in volumes.
On a relative basis from the DJ and the Doe and the Delaware basins.
Even those are higher margin.
Gas molecules and then the balance of the portfolio, which is on decline.
So I would I would say that the first quarter margin for gas is probably reflective of what we'd expect balance the year as well.
Okay, Great and then as far as I know, it's early days here, but as we do the next sort of a operate redetermination in sort of how you're thinking about things.
Turning for light perspective, or how should we think that written and a 2021.
Yeah, we redetermine the cost of service rates it ended the year.
Redetermined annually and and those rates are based on.
Function of capital Opex and volumes, both actual the volume volumes delivered as well as.
Forecasted volumes and the associated capital, but that's required to support them going into the future and so.
We'll work with producers and update those cost of service models at the end of the year.
But as it would be.
Premature to anticipate what those rates might look like.
Okay, and then maybe just a quick one on a.
I think it broadly from two on a in the quarter I guess, what do you guys sitting on utilization now into the how do you.
It's kind of factored into your guidance.
Yeah, you know lytham fits into our DJ complex.
Processing and.
Through the first quarter.
Since that plant came on came online it's effectively been fall.
It's obviously, a hyatt highly efficient plant and so we preferentially we'll keep keep those efficient plants loaded.
But it's been running at capacity both ways than one and two had been running at capacity.
And.
Okay.
And some of the was sufficient plants is where we source some at gas from but we have yeah.
Sample processing capacity available and.
I think the upshot of the environment that we're in is from a capital standpoint.
Both in the DJ and the Delaware, We're we're well positioned for for some time with respect to our processing capacity.
And so in terms of lumpy capital going forward.
I think we think we're in pretty good shape and not having to.
Two.
Span processing capacity, which which as as we now is pretty significant chunks of capital. So we feel like our capital program going forward is very flexible and animal and we can leverage that as activity levels change in the future.
Great. That's it for me you guys appreciate the time.
And ladies and gentlemen, as a reminder, he would like to ask a question. Please press Star then war.
Question today, social should we also ball with Seaport Global Securities. Please go ahead.
Hi, good afternoon, everybody and thanks for taking my question.
I was just kind of curious if you could talk a little bit about you know more recent trends that you're seeing in Midland as it has delivered in you know I split as the gas line ratios are concerned.
The producers that you so and also.
Produced water to light ratios are you seeing any significant changes in those trends.
As producers or modifying completions that are shutting in wells.
No, we havent seen any significant change and that.
Inflection of.
That product mix across our producers I would say.
Over the next several months as volumes.
Our curtailed.
Clearly, we may see some shift and how that looks but.
In terms of a shift based on completion designs and and reservoir.
Maturities, we haven't seen a material shift from from where we've been.
Okay, and just a clarification snail that that would be just Delaware comes down Youre right, we would not have insight into the bundling side.
Okay got it.
And then.
On your guidance and then the MVC. That's a trial are there any good assets, which are currently.
Growing below Mbcs.
We have some contracts, where where the producers are below their nvcs and are paying deficiency payments.
Others right.
Most of them frankly are flowing above their nvcs or have been going about their NBC. So that that continues to be changing dynamic as you would expect in this environment.
But.
Yes were continuing to.
To monitor what producers volume expectations will be in the near term and and longer term.
Got it and then one last one for me.
Thanks for calling out.
Leverage expectations I was just curious you know when you think about.
Different competing goals, especially.
The recovery is.
Slower than anticipated.
I would you put distributions, but is leverage reduction goal you know in terms of order of priority.
Our <unk> this is Mike our priorities leverage reduction full stop.
So if in to the extent, we don't see.
Backs that comport with with what we've put together in terms of our own expectations, then we'll need to to revisit distributions at that point in time now we're certainly not there and I can tell you that a lot of a lot of analysis went into.
The financial information that we used to support the distribution cut that we did undertake but that doesn't mean that we can't be nimble if in to the extent, we see the backdrop warn us to take further recommendation for further action.
Okay got it I would leave it didn't thanks much for the color.
Our next question comes from Chris <unk> with Barclays. Please go ahead.
Hi, guys. Good afternoon, I guess first to me.
On the NBC in cost of service contracts are there any noteworthy expirations on those contracts in the next few years or so.
No those are all.
Longer term contracts.
They're averaging eight to 10 years and remaining 10 or so.
No near term expirations.
Those.
Okay. Thank you and then.
Maybe just to follow up on from the questions from from earlier can you quantify in terms of you know EBITDA, our operating income what the level what percentage of earnings today are coming from you know NBC in cost of service contracts.
No. We don't have that available no. Okay, okay, well I guess, maybe sort of another way to think about it would be our the margin that are charged under those contracts either on the gas or the liquid side materially different.
And the margins that are that are dealing.
On the with on the volume metric contracts.
Again, I I would say.
We would we we don't talk specifics as it relates to.
Individual contracts and specific contracts so.
I'm afraid I can't really provide any insight to you on that specific question.
Okay understood.
Obviously different that that goes into the general question that you're asking there so.
You know given we don't actually talk about individual or or even company specific contracts we would.
We just can't provide any any real insight to respond to your question.
Well.
Our next question to.
Oh Shneur Gershuni with yes. Please go ahead.
Sorry, guys to come back and I remember when these calls each only 15 minutes, but it's it's running longer than that.
I think immune response to Rob's question, you talked about the decline rates would be bigger upfront into like say to Q3, Q and it would a rest when you say a robust are you, saying it is zero decline rate or are you, saying, it's just politics and looked at 20% decline rate show that the theater.
10% decline rate, just just trying to understand what you'd meant by that comment.
Yes, so what I meant by that again, we were talking about cash flows there and again the the dynamic that I was trying to highlight is that.
We do have.
Dynamics that have been built into the model based on feedback received from all of our customers. It relates to curtailments that would be taking place.
For the most effect into Q2 in Q3.
And so we would expect to step down in EBITDA Q2 relative to Q1.
Potentially another step down into Q3, but that Q4 would potentially arrest that decline in part because.
We are not currently.
Forecasting the curtailments to continue into that period.
Okay.
Meeting, we'll keep our current elements to continue into that period.
Okay, and I mean does that take into account oxys common at I think they said something like 10% of wells are shut in and it seemed reasonable across the Permian DJ and international and that some of them what actually never come back is that sort of baked into that guidance assumption, yes, what's what's baked into the guidance.
As a direct information that we've received from all of our customers, including Oxy.
Got it.
Okay.
One final question just on the balance sheet, you did some debt buybacks this quarter.
That is strategy you expect to continue pursuing.
If we see if we see the price arbitrage that makes sense to us. The answer is absolutely I think we're on record and several instances of commenting that we have no near term need to access.
The capital markets, which basically means in terms of 2021 and 2022 maturities we plan to pay those off so if we see an opportunity here in the near term to take those out for below par. We think it makes all the sense in the world to take it out earlier, if we have the liquidity to do so rather than paying a full books so to speak at maturity I note highlight.
As it relates to that that again the focus is on near term maturity that if you're.
Repaying those below par that it's actually liquidity enhancing overall.
No I completely agree with that just wanted to clarify this tragic perfect. Thank you very much I covers my follow ups.
Our next question as a follow up from Germany is one that with JP Morgan.
Hi, Thanks, just a couple of clean up here.
Opex I think came in auto worldwide.
Quarter diversification and just wondering.
It is ratable.
No element here carry a lower.
I will then that we should be thinking about.
What did the titles like kind of the cost savings that you guys were looking to the cheap and that kind of baked into this level.
Yeah, Jeremy we identified a number of places where we can cost save costs for this year and I would say that what you see in the first quarter Opex is.
Not particularly reflective of all those cost savings measures that we've identified.
So we would expect to to be able to save even more from the opex relative to the first quarter Opex numbers that we've reported.
Got it that's helpful and then just.
I wanted to think about the you know family relationship with Oxy here, obviously oxy is under a bit more stress and they want to be is there room for kind of any level of.
You know deals with with.
I could be win win on both side just no peanut does anything left on that.
We're always willing to do when when transactions with any of our customers.
And I would just a highlight that you know the interaction the relationship overall with oxy incredibly positive.
Very supportive across the board. So clearly if there are when when transactions that work for both of us that that we would absolutely engage in those interactions and would expect that we would have the same type a fulsome engagement that we received from oxy throughout.
And expect to have that continue.
That's helpful. That's it for me thanks.
And ladies and gentlemen. This includes a question answer session I want to turn the conference back over most of your CEO for any final remark.
Thank you everyone for joining the call wanted to again reiterate just how excited we were for the incredible results that the team has been able to.
Achieve.
We have.
Absolutely done on wonderful job and being able to adapt to this environment. So thank all of our team members and being able to do that we wish everyone to continue to stay safe.
And expect a better and brighter things into the future. Thank you very much for joining the call.
Thank you. This concludes today's conference call you May now disconnect your lines have a wonderful day.