Q1 2020 Earnings Call
[music].
Good morning, everyone and welcome to the Equitrans mid stream Corporation, M.E.Q. and mid stream partners first quarter 2020 conference call. At this time, all participants are in a listen only mode.
After the speakers presentation, there will be a question and answer session to ask a question. During the session you will need Crestar one on your telephone if you require any further assistance. Please press start zero I would now like to hand, the conference over to your speaker today make tetlow, Vice President corporate development and Investor Relations. Please go ahead.
Thank you good morning, and welcome to the first quarter 2020 earnings call for Equitrans mid stream and BQM Midstream partners.
Replay of this call will be available for 14 days, you're getting this evening.
The phone number for the <unk> is 805 858367.
Or or one six.
Six to 146 sport too.
Conference I'd is five 710 108.
Today's coal may contain forward looking statements related to future events and expectations.
Actors that could cause the actual results to defer materially from these forward looking statements are listed in today's news release.
And under risk factors in both E.T.R.N.N.H.U.M. spawn 10 K.'s.
For the year ended December 31st 2019.
Both of which are filed with the S.P.C. and updated by any subsequent foreign 10 cues.
Today's call me also contain certain nongaap financial measures.
Please refer to this morning's news release indoor Investor presentation.
Disclosures regarding such measures, including reconciliation for the most comparable gap financial measure.
On the call today, Tom Cam chairmen and C.E.O.
Diana short Leota, President and Chief operating Officer.
Kirk Oliver Senior Vice President and Chief Financial Officer.
Justin Makin senior Vice President gas systems planning and engineering.
And Brian portray Andrea Vice President and Chief Accounting Officer.
After the prepared remarks, we will open the colts questions, what's that alternate over to Tom.
That's neat.
Morning, everyone.
First let.
Let me take a moment to acknowledge the dedication and professionalism of our workforce.
It's the onset of coping 19 or feel teams have never missed a beat you continuing to safely operate and maintain our assets and we continue to move overeat B.C. per day.
Dispensable natural gas to the nation.
Or management team and functional departments transitions to remote work in early March.
Since that time, the teams productivity and kind of activity.
Have remained high.
And our new technology platforms have been able to scale up with only a few minor temporary hiccups.
We were fortunate to have implemented a telecommuting policy last year, which gave us a head start the transition to remote working conditions.
Well, we were among the first to go remote we will be very thoughtful about how and when to change this policy.
Silver lining in all of this is what we're learning about how we can evolve our work environment.
And still be productive and remain connected.
That information will inform us as we plan for the future.
Beyond our own workforce.
As members of the community we are forever grateful to the front line healthcare in the central workers with a great service. They are doing for our country risking their own help keep us help.
All of US are companies neighbors friends and members of the communities have an obligation to support those who are suffering as a result of this pandemic and to alleviate the stress and anxiety.
Surrounds us as much as possible.
Donations from our eat train foundation as well as directly from our corporate local giving programs.
We have acted and will continue to act in support of many of these efforts to help.
We encourage all of our employees and all of you listening to do all you can to help as well.
Now moving on to our business report.
This morning, we amount strong first quarter of results, which exceeded our plan.
Confirming or optimism for Twentytwenty.
Work will give you the numbers in a minute.
Late February we enough for transformational actions, which allow he trained to be a strong seacorp able to thrive in this or any environment.
First we executed a 15 year blend abroad, and then extend agreement with D.Q.T.
Strengthening both companies.
Allowing for the most capital efficient development plans.
The new agreement enhances our stable cash flow profile as over 70% of our revenue will be generated from take or pay contracts. Once M.B.P. is placed inserts and.
And the new agreement provides us with long term meaningful capital efficiencies.
Diana we'll discuss this in more detail in a few minutes.
Second you train purchased 25.3 million of it shares for me Q.T. in exchange for future regularly.
These shares were retired in early March.
Oh, Lord we established and industrial style dividend and capital allocation policy.
Focused on achieving positive retain free cash flow.
Quickly delevering.
Shoring up our liquid.
Before we announced the proposed roll up a BQM by eating.
He trained shareholder vote and he too I'm Union holder boat are scheduled for June 15th.
And we are targeting to close the acquisition.
Shortly after.
He's actions immediately strengthen our balance sheet provide flexibility for our largest customer to optimize its development.
While delivering significant value to us.
As long as well as creating a strong seacorp entity.
I'm not turn it over to Diana who will provide an operations update.
Kirkwall them provide a financial update and I'll come back with some closing remarks before we open the call to your questions.
Yeah.
Thanks, <unk> good morning, everyone.
Also went good terms opening remarks regarding the extraordinary work of our employees as well, there's two or on the front line, hoping to keep each of us safe.
He has never been more true we are indeed.
This together.
I'll be I'll be gain by briefly emphasizing the significant future capital savings from our news gathering agreement with <unk>.
Creating a comprehensive gathering agreement with single M.D.C.
T.T. can execute it's condo development drilling strategy without contractual constraints, it's creates two significant benefits for us.
First we can reduce the amount of required gathering pipeline as a result.
Compact geographic development approach, we estimate that this saves us approximately $250 million over the next few years.
And second it to tease returned to pad drilling plant will result in substantial feature capital avoidance, when H.T.T. returns to Pat which we estimate will start in about four years existing mixture in infrastructure installed for phase one development or be utilized again for phase two development.
This means that our feature gathering capital would be greatly reduced enhancing trains ability to generate meaningful and sustainable free cash flow.
Now moving on to N.P.P.
On the Appalachian Trail crossing we were encouraged by the town oral arguments at the Supreme Court on the Atlantic has pipelines case and remain hopeful that the forced circuit courts original decision will be overturned.
Regarding M.D. keys biological opinion, the U.S. fish and wildlife recently requested an extension to continue its review of N.V.P.'s information.
Expect and endorse this extension as it is far more important that the agency is focused on an accurate thorough and comprehensive biological opinion, which M.V.P. expects to receive in early July.
Finally with regard to the recent Montana Federal Court decision impacting the nation wide 12 program.
Perplexed by the judge's decision this week to narrow the rolling to apply only totally on gas pipeline projects.
We will continue to monitor this case, including any appeal to the ninth circuit.
Provided we received the biological opinion in July and <unk>. The stop work order I construction plan incorporate sufficient tie in work an activity to get us into the file without the nation like 12. This keeps us on track with the existing schedule and budget.
Putting all that together means we still have a narrow path to achieve the targeted full in service date of late 2020, and an overall project cost of approximately $5.4 billion.
Lastly, we completed a review of our capital requirements for 2020, and we're able to reduce estimated capital expenditures in capital contributions I approximately $150 million. The reduction is driven by 75 million of capital pushed into 2021, largely related to south gate capital and N.B.
Reclamation capital and 75 million in reductions based on development scope changes and efficiency gains related to the new H.U.T. gathering agreement.
We continue to be actively engaged with our customers I remain focused on the plane capital efficiently with that I'll turn the call over to Kirk.
Thanks, Diana This morning, we reported net income attributable to you train of approximately $70 million in earnings per diluted share of 28 cents for the first quarter.
After adjusting for certain non recurring items and again on derivative we reported adjusted net income attributable to eat train approximately $118 million.
Trusted earnings per diluted share of 46 cents.
You train also reported not cash from operating activities of $249 million.
Cash flow $31 million.
We reported net income attributable to eat QM of $252 million.
Me too when my just city, but was $381 million cash provided by operating activities was $285 million and distributed all cash flow was $283 million.
First quarter results were impacted by several non recurring items.
First he train and E.Q.M. head of 56 million dollar impairment of long lived assets associated with the Hornet gathering system, which he UQM acquired in April 2019.
Second.
You train had a 25 million dollar loss on early extinguishment of debt, which is primarily associated with the early retirement of the train term long be during the quarter.
And lastly, EQM had about 4 million of transaction costs and he train had about 7 billion of its own transaction cost.
First quarter EQM operating revenue.
Spite $63 million compared to the same quarter last year.
Increase was primarily related to the addition of your Rica in Hornet assets, an increase water revenue, which was partially offset by lower transmission revenue.
E.Q.M. operating expense increase by $80 million compared to the first quarter of 2019.
$56 million was related to the impairment charges and the remainder was primarily from the addition of your Rico and Hornet assets.
The day, we also announced an increase in our full your earnings and casual guidance for each frame primarily based on the strong first quarter results.
The mid point of our guidance range. We now expect for your net income attributable to eat train of approximately $408 million.
Pro forma you train adjusted EBITDA of $1.175 billion.
Bird revenue, which will be reflected in the contract liability on the balance sheet of approximately $225 million.
Free cash flow of negative $125 million and retain free cash flow of negative $535 million.
Terms of the water business.
Our first quarter water, you, but $25 million was driven by our customers completion schedules.
For the year 2020, we're forecasting water, you, but $60 million to $65 million.
I will also note that we intended to discontinue reporting D.C.F.
An ongoing maintenance cat backs.
Blowing the close of the UQM acquisition.
These measures are common in the M.L.P. space, but we believe free cash flow and retain free cash flow will provide see corp, investors with a more <unk> with more useful information.
For the first quarter E.Q.M. will pay a quarterly distribution of 38 three quarter cents per common unit on may 14th a common unit holders of record the close of business on may 5th <unk>.
He trained will pay a 15 cent quarterly dividend on May 21 to shareholders of record at the close of business I made 12.
As a reminder, reactions, we announced in February create some accounting items important to our financial reporting.
Burst gas scattering agreement with you Q.T. has a gathering rate profile that gradually reduces overtime.
<unk> towing for the remaining term.
Under gap, but we will recognize revenue.
An average gathering rate for the M.B.C.'s over the 15 year contract <unk>.
This creates deferred revenue over the next several years as a cash received will be higher than the revenue recognized.
This dynamic did not impact first quarter results as the contract rate structure commenced on April one.
You'll start to see the deferred revenue impacts in the second quarter.
The second quarter, we estimate deferred revenue of approximately $75 million.
Second.
The agreement with you Q.T. includes a provision entitling eat train to receive cash payments for me Q.T.
This is conditioned on specific Nymex Henry hub index prices exceeding certain thresholds.
This provision applies during the three years following M.V.P.'s and serve estate was now that but does not extend beyond December 2024.
The agreement is accounted for as a derivative at fair value and marks the market at each quarter end.
Subsequent changes in the mark to market value will be recognized through the income statement.
Quarter end, the derivative fair value of the asset was $56 million.
Terms of liquidity, we had about $1.3 billion available on our 3 billion dollar EQM revolver a quarter end.
Well, we have ample liquidity on the revolver will continue to monitor the debt capital markets.
Are also planning to secure M.V.P.J.V. level debt financing when the project is in service.
Made it to the Delevering plan and continue to target a sub 4.0 times leverage ratio on now turn the call back to town.
Thanks.
Despite this truly challenging time.
Hmm appear to have stabilized in the natural gas space and specifically for those operating in the a base.
We are increasingly bullish about natural gas prices as we see the oil and gas recount dropping each week.
And we also see the relative resilience of natural gas demand.
There's not much doubt that the supply and demand dynamics are good for gas near term.
The real questions or how good and for how long.
You train has great assets long term contracts very limited exposure to N.G. ALS.
Customers that are positioned to take advantage of.
The improvement in the northeast gas and bomb.
Not seen any material pull back and producer activity around our assets and expect that the improving natural gas strip will allow our customers to maintain and eventually increase activity.
So to conclude in February we took action on everything within our control.
We remain competent that we will get M.B.P. over the goal line.
Our operations continued to deliver solid results.
And we're optimistic about the macro set up for natural gas and the Appalachian Basin.
They say.
Wash your hands.
Continue supporting our health care workers in our other first responders and we're happy to take your questions.
[noise] [noise] as a reminder to ask a question you will need to press started one on your telephone to try your question press, the pound or Husky P.C.M. Bible, we capacity Kunaev roster.
Your first question comes from Jeremy town. It G.P. market here line is open.
Hi, good morning.
Was just wondering if I could start with the guidance here and if you could provide a whatever more detail as far as kind of the drivers Annapolis bridge through the guidance provided last quarter, even on cat backs and really what were the moving P.C.'s to get you to this updated guidance for both would be helpful.
Hi, German this is Tom I can give you a high level and then maybe Kirk and fill in some of the details for you.
Nearly we have more confidence given that we printed the first quarter and it was pretty strong and volumes are.
Ours as we had anticipated the the water.
<unk> was up front loading a little bit in our nearly guidance, but still.
Ahead of playing a little bit.
So I think that the movement, we've made in in our Guy Who's just reflects the fact that we have one quarter behind us and we have more certainty about the trajectory Oh bar business.
One add anything to that.
I think that pretty much captures it down.
Okay. Thanks for that.
And then I guess just on the N.B. piece I, just want to acquire probably a little bit more I guess with a nationwide 12 permit.
Kind of being on certain at this point you just walk as to where I guess, how you know you're able to kind of complete construction here <unk> with the pipe move forward even without.
Even if N.W.P. 12 is kinda delayed here.
Yeah, Jeremy So that's that's a good question and and again I'll I'll speak to the high level and then maybe Diana can fill in any any gaps to what I say here, but.
Well permit specifically speaks to.
Bodies of water and stream crossings the vast majority of the remaining work we have the project is upland work.
We received the biological opinion in July as we expect and for releases or lifts. The stop work order, we will be able to modify our workstreams and have sufficient work.
To complete substantially all of the Oakland work.
It goes right to fall.
And that's why we still believe that while we describe it as a narrow path we're still on that path.
To complete by the end of year at $5.4 billion.
And.
And and that's why we still have confidence in that.
Diana did I Miss anything.
No. That's that's correct we have over 30 miles of I plan work to do so we'll get started on that as soon as were allowed for anticipating that to be July and plenty of work on that and from tying work that we still have left to do to get us through for the courts to work out the nation wide 12 issue.
[laughter] cell phones, just one last one if I could I'm just wondering what what.
<unk> gas price level, you think we'd really and then more activity on the drag outside just trying to get a feel for outside of V.Q.T.. What you guys are seeing production activity wise from your other customers.
Yeah. So that's a great question I think that goes back to what I said in the script as too we mow the macro environment is he's getting better we don't know how good <unk>, how long I think.
Most of our customers have 2020 pretty wall hedge them and how about I don't want to sit down and glide path, but they're certainly on a path.
Those volumes are.
Are more visible to us.
I think it might be later in the year before we start to see a.
Movement on the forward strip.
Certainly the closer you get to $3 and that's true I think they're more confidence producers may have been modifying their plans and still be able to drill and generate free cash flow but.
You know to any more specific than that Jeremy I think I'd be getting.
For all over my skis so.
I'll leave it as the closer you get to three Bucks <unk>.
The better the environment is.
Got it I'll stop there thanks for taking my question.
Size Jonah. Your next question comes from a snare <unk> from U.P.S., Yeah line S.L.P.N.
Oh good morning, everyone. Just wanted to follow up to Diana's response actually to to Germany, just before on the on the nation like 12 to this one to make sure I heard correctly that you can do all the output of work with the nation like 12 or do you need to nationwide 12 to do that just try to understand what the nation wide 12 actually would.
Impacts from Oh completion perspective.
Yeah, we can we can do the I planned work with we need the biological opinion, and we need for work to let us start back and let that stop edge, but without the <unk>. The nationwide 12 is really just the water bodies. So we can do all the applin work and whatever tie ins we have reclamation Oliver.
That can be done without the nation like 12.
Got it Okay, and then kind of two questions here you know one to to expand on the your views on how the higher natural gas environment that we have today surge.
Packs everything I'm kind of wondering if it's not you know a one dimensional or two dimensional answer you know I think it's three bucks and so forth, but I'm kind of wondering is when I started thinking about the balance sheets of the northeast producers you know <unk> is it really about a certain price level, where there's a certain amount of time.
To Oh courage at more of a a quantum look at how everything is because you have to repair the balance sheets of the northeast when they can actually get capital to drill and you know <unk>, where does the decline rates become a risk against that that if you know they just sort of sit back collect cash you know repair there.
Balance sheets, and and decide not to increase drilling activity for let's say 18 months.
Where did that impact you versus how that old tied together and kind of wondering if we can sort of have that discussion into more multi dimensional level than than just specifically on price.
Good morning, <unk>, that's that's a pretty whole slate of questions.
Oh did you do have a point then that there.
There's a requirement that each about producers and quite frankly every producer <unk> operating in jail be very sensitive to their balance sheet.
When you talk about improving.
Natural gas prices.
Really you're able to drill more and generate more food cash flow at a certain inflection point of place.
So it's more than two dimensional it's probably three dimensional because.
The current prices is the weakest that we see over the next couple of years and if they can generate sufficient free cash flow now.
Moving into an improving price environment.
That activity will Vermont.
And the decline rate issue that you raise we don't see that as being impacting our business at all.
Because we we see everybody drilling at least that maintenance levels or slightly above.
But you're right. It's it's not it's not a switch on or switch off move it will be something that will take time.
And it'll depend on the opportunity and success that.
You should have been hedging their production and then their their access to capital to drill.
I don't want to say, we view it as asymmetric.
But we are less sensitive to decline rates, where we are in the Appalachian base, and then others might be in in the more oily basins around the country.
But that that makes perfect sense and it really appreciate the thought why don't you Dare. Maybe is is one last a follow up here in the restructuring that was announced earlier this year and you do have some color on it in the forest. It's it's like that could you put out today, you know with the new gathering agreement you know I recall that there are.
Some material cap X. benefits, you should or talk about you know some real efficiencies there and so forth I'm just trying to understand you know the the full impact 222 Equitrans is it you know it's a straight up we're more efficient last cutbacks more free cash flow and it's really kind of an operating webpage.
Benefit or is there something in agreement that would claw some of it back because there's less spending because of how a typical costa service type of agreement works and just trying to understand you know it did <unk> are there any reset clauses that would cost them about benefits back or is it you know truly <unk>.
They should quit.
Yeah. It it's it's a 15 year optimization plan, where the the agreement.
Constructed based on the drilling philosophy of B.Q.T., and thereby directly moving to the capital efficiency benefit to each frame.
That that was really those are two barbells of the deal. So there's no call that provision. It's that's the permanent stay to play.
Perfect. Thank you very much appreciate color today and to be safe and pay thing.
Thanks.
Month that there is a delay should it happen and when I I guess thinking around timing when do you think you'll be in a position to take us update us on whether or not you can still hit that target and then finally, along those lines thinking around alternatives to nationwide 12 does that only relate to the four remaining border crossings or is there an alternative to just.
Permit each water crossing individually thanks.
Good morning School.
I'll take a crack at some some okay answering.
Yeah.
Give me and assist here.
You're correct M.D.P., a substantial complete over 90% Diana said, we have 30 plus miles off and work that we can do.
Where we sit today, we're not in a position where we have enough information to even attempt to quantify.
What what the late cost maybe if there are delayed so I'm just going to leave that leave out there for now.
The timing issue as we said we are focused on this narrow path.
Given.
Biological opinions b. and issues in July and getting though.
Work order lifted by for around the same time, we have ample work to get us to the fall, which will move to complete substantial substantially the remaining construction work.
Which gives us that kind of confidence.
And and I'll take a crack at at a legal assessment here, but the nationwide fault.
His his apartment that's issue in lieu of individual permits.
So that.
Every mid stream company every.
Construction project always has the opportunity to go in for individual permits. The nationwide 12 is designed in part as a more efficient way to facilitate construction.
Diana you want to add some intelligent colors for that I.
I think that was quite intelligent, but.
The as far as the way cost the more and more we get done the less and less delay we have just like the last risk for them to like Hot. So you know if we continue building and we continue doing the up one work and getting things into reclamation, then as we delay that's less substantial to us because we don't have to keep.
All of those environmental.
Protection and controls in place so I would say that the delay and as far as a nation. My tough I agree that was an all encompassing everything under one but to pivot and do it individually is certainly an option for us.
Okay. That's that's really helpful. So he's paraphrase summer that it sounds like if we were to look back at some of your prior delay costs per quarter that would skew us way too high and then Tom on on your timing it sounds like to the extent you get the nationwide 12 from it in the fall is you're sort of running out of work you can mobilize quickly to still hit that that.
That on gold date, and then as far as permitting individually an option, but sounds like a little too cumbersome and not something that can realistically want to do right now it's that kind of unfair.
I think Camille.
Awesome Alright next next question sorry for Meanwhile, when did here just on Catholics cats get to see them kind of come in again, Oh, just curious Diana you mentioned, a little bit you're prepared remarks grow out of that sounded similar to what we heard last quarter. It should just curious how you found these additional efficiencies maybe what changed and as we think about the go forward you go obviously.
I had that outlook multi year outlook. When you did eat you transaction fair to say that gathering <unk>. There was provided for also skews a little bit lower.
Yeah, So I'll start and again, if Justin here's something that I missed out asking to chime in but.
Yeah, the efficiency, so half of that cat backs.
Efficiencies part of it was M.D.P. in South gate, which is just anything but the other is really things that we can save and most of that is due to the fact that we got the complete H.U.T. drilling plan. After we find the deal and affirmed everything up even the places that maybe weren't dedicated to us before that are now.
Now, we got that complete plan and we're able to one gain efficiencies by tying some stuff together building some shorter pipe or just.
Leaving and being able to cut things that weren't need in anymore. So.
That is the main part on that and then going forward again, we will continue to be able to tie things together and utilize efficiencies and compression and now all the systems it doesn't matter, which one we tie to we can tie to the closest one so that's helpful than being pot compact and drilling all in one place again.
Helpful. And then the return to pad will even help our future.
More than what we.
Have out there right now.
Got it.
Oh, Yeah, sorry go ahead <unk>.
This is just than just a a little bit more color.
Diana mentioned the efficiency was I think this is just realizing what we've been talking about for the last couple of calls in terms of the new agreement and work with 222, and then with the other producers we work with them.
Everyday to make sure we understand their drilling activity in their development plans and as they adjust or move into maintenance mode. We've been able to adjust our plans. Accordingly, so I think what you're saying here is just a reflection of all that effort.
[noise] understood. Thanks for the call everyone do well.
Our next question comes from the line of Chris too much from equity research your line or something.
[laughter] water crossings, how many water crossings you guys.
Have left that are affected by the the nationwide 12 issue is just a matter of sort of what's left to build or or it.
<unk> potentially impacts all the crossing through the entire pipeline.
Chris <unk>.
If you wouldn't mind restating that question you you blacked out in the beginning of it we only heard the end of it.
Sure sorry about that I I guess my question was on the the nationwide 12 permit and as it relates to water crossings, just how many of the crossing the permit effect.
Is it a matter of you know what you have less to build or is it would potentially impact all the the water crossings throughout the course of the pipeline.
Yeah, it's so that we have.
Sorry, guys them.
It's just what we have left to build it doesn't impact what we've already crossed.
Okay, and and and you do you have a number on that or or.
Not at the moment.
Not at the moment okay.
Okay, and then I I guess, maybe just from a logistical standpoint on that permit as well what I guess what are the sort of the next step here with that proceeding what are we looking for which we'd be watching the core.
Well I think the D.O.J. is taking the lead seeking to have an appeal of.
The judge's ruling on the on the news from like 12, and and I I believe that will go to the ninth circuit and.
Expectation and what we've seen in red so far is that they're attempting to fast track the process as best they can.
So rather than just taking many many months the hope.
Is that it will be a much more truncated <unk> process.
And that's why is Diana said once we get the biological opinion and the release from the stop work order, we will fully mobilize and get.
Upwards of 4000 people on the the right of way to start doing all about applying work.
As as the nationwide 12 issue works its way to look the courts.
Okay. That's helpful thinks and then.
Last from me on the the.
2021 clocks guidance that was issued with a transaction that was announced in February I guess, maybe just curious to know sort of <unk>.
For thought behind you know withdrawing not at this point in time, particularly given you know a lot of it is backed by N.B.C. then the the the macro <unk>. The macro outlook you know looks more constructive today than it did then so I'm just curious to hear your thoughts on that.
Yeah, Chris I don't believe we.
We withdrew it we just didn't we issue with you and immediate food exactly. The same reason you said that the good microenvironments improving and probably later later this year will will have the opportunity to take a look at the <unk>.
<unk> before with guidance again with more specificity, but.
We focus this corridor 2020, and and and modifying their 2020 guidance to the up side. So it was known tempted or or a desired by us to to show less confidence in 21 forward.
Okay. Okay. Yeah, that's that's helpful and things for clarifying that that's that's it for me.
Thanks, Chris.
Our next question comes from the line of Garrick Walker from Bank of America, Your line or something.
[noise] numerous times and now to be in July.
Have you been in touch with the fish and wildlife, it's or anything in particular are there that they're still working on or is it it's kinda delayed associated with perhaps coven 19 and.
It's any sort of thought on on what's really driving D.C. extensions and it it it tied to.
Perhaps so nationwide 12 <unk>. Thanks.
So we miss the beginning of that quest I'm sorry.
[laughter], yeah actually that were over in that.
Oh [laughter], Yeah, just sound or can you hear me now.
Yes, yes.
Okay, I guess on a biological opinion, the talks about extended or multiple times and just one to.
Or get a sense on this latest extension <unk> did you have any conversations with the fish and wildlife is there anything particular that they're they're looking for or with the exception just related to okay covert 19.
She was and getting people out to evaluations or just any any thought there.
So time I'll go for that one we.
We know that they are very focused on being accurate and thorough and comprehensive and that is really important tasks. We want that to happen. So it really is more or less than wanting to make sure. They have all of the data and they've gone through all the data and they've done a really comprehensive don't think we're seeing an M.P.
From <unk> they've been engaged in the last couple of months and working very hard on it actually were encouraged by the back and forth with them.
Okay. That's helpful. And then I guess just on the nationwide 12, you know assuming a speaker for the the appeal process didn't grow up so finally emotion to stay a potentially as well I guess you have any sense or you on sort of what the probabilities of.
That being granted.
The state being granted no we can't handicap that we <unk>, we think that the judge's decision was wrong.
It doesn't make sense, certainly doesn't make sense, but it can you should opinion like that and only habit apply to oil and gas pipeline. So.
<unk> again, it's going to work its way through the courts, we're hopeful that it'll be a truncated and quick.
It is illegal terms.
But.
Handicapping to stay or not.
That's that's above above are paid right here right there.
Okay. That's it for me for hit.
Thank you.
Our next question comes from the line of <unk> Pagliari from Jeffrey's.
No I didn't feel so good.
Hello.
The money, maybe one yeah I've I've wanted to start with N.B.B.. If I may what is easier to get individually permit strip cross all the walking bar that used to the C.B. is already being done by a fish and wildlife services always be substantial number of crossing with our spending left to be crossed I believe the M.B.B. fighting.
Had 540 crossings.
If the pipeline is 90 per cent bad news it will it be long to assume that 90% of those crossings art I'm really.
They had been crush by the pipeline and you just need to do you know excuse crossing then you can take individual apartments for that.
So I'm just trying not to talk advertise [laughter].
I I would say that it wouldn't be inaccurate calculation to just have the percentage of the pipeline. That's done I've seen that that's how many crossings they're done within back and forth then moved around a bit on that project. So I wouldn't say, it's that but it all of the work is done.
The crossings as far as regulatory data that's been gathered so whether it was gathered to do one nation wide 12 <unk>.
Kermit, where you needed to take that data and divided up to get individual ones. The work is all done. It's just the process in which we need to do it so I'm not super concerned about which way of course, we would love to go the nationwide 12 way, but we can.
We can work through it the other if we need to to work done.
Okay, and I want to go out speakers question slightly differently can you identify the biggest comfinance all cost increases in case. The pipeline is the need how much does it how much does do you need to spend two questions that I took based on M.B.B. on a monthly basis and.
Do you need to spend on just holding the construction contract I I believe those aren't the largest components and the.
Need to spend two according to construct shouldn't call me contracts as much smaller now than it was prior to your construction contract renegotiation.
Is it possible to quantify bush can components off potentially call string cruises.
So it's difficult.
It's difficult because it changes monthly as as we go on and when the when the project is asleep. It's one number and then as we start to ramp up then of course, it's better because all the money that we're spending is going toward productive activity.
From the stop work order and we fully deployed to the right away and the upland construction areas.
The right away that we can permanently restore the more we reduce any delayed costs that potentially may happen I think that that's the way you should think about the right of way more we permanently.
Restore the lower that monthly maintenance costs will be.
Okay.
Okay, <unk> I have to equate Cosby Big question as well <unk> Nice mean, one q. and I believe some of that to see smell and then you have not exclusively talked about any potential opic's saving because I wanted to understand if some of the decline in all thanks in gathering segmenting, one cute sustainable and.
It's such as the other stuff any any any shit gives you might be undertaking.
So we continually free.
Have the initiative to drive down costly work on it every day something that's on the forefront of all of our field People's mind. So they there are so seasonal cost there are things that will go up as we start <unk>.
Activity, but as far as.
So far as personnel and efficiencies we continue to try this down.
Okay.
And then and then just the last one for me if I may Oh capacity volumes and gatherings segment stepped down in one Cuba. They took the 14th 19.
That are those are declining <unk>. So they are focusing depending on 80 or most profitable <unk> on idiots. They were on the N.B.C. is already right to head off you know combining all day at N.B.C. area or is that do too is being driven by any of their producer.
Trying to understand the calls or decrease in phones capacity reservation, London's and guys are going to take it.
Yeah, I see I think there's just a little bit of decline and some of the areas that they weren't drilling and they they don't plan to drill and then it's it's just choppy as far as what's coming on and what.
What's in that type because the water volumes were so high this quarter you can see that the activities there and that as well as well then start turning in line. So we expect [noise] overall mid eight B.C.F. a day average for the year, we don't expect it to expect it'd be a little bit higher than what this quarter.
It was in the next couple of quarters.
Okay.
What did differently is is any other producers been new and B.B.N.B.C., a large produce have been doing P.C.'s. Besides <unk>.
Mm I think there's probably one other producers that that is the low NVC Justin.
Yeah, not not in the material way, but yeah yeah.
Okay, great. Thanks, another color. Thank you very much.
[laughter]. Our next question comes from the line of Michael Bloomberg from Wells Fargo.
Airline and something.
Hey, you're good morning, everyone can you hear me.
Yes, yes, Michael Thank you <unk> just want to make sure yeah just to to quit calling from me one I'm just curious if any of your current producer customers.
Are behind on on payments are is everyone sort of current and is there anything you're doing proctor, where you just sort or protect your yourself on that front to the extent any of your over your customers do run into some trouble here.
So I believe all of our customers are current I think that.
Your your question was a good one <unk> <unk>.
<unk> in the sense that the renegotiated contract, we keep t. stayed it'd be our <unk> as it relates to language and surviving bankruptcy and we feel really good about that oh, the other contracts or market and.
Frankly, the producers even if they run into trouble only have one outlet to generate revenue for themselves. So we feel pretty good about all of our contracts.
In that regard.
Okay Perfect. My question was just.
Now that you know you've announced I guess I call to the Grand the Grand deal or Grand transformation is there any further.
Feedback gotten from the radiation too.
Oh, yes, <unk> the rating agencies of all put on record.
Recently.
Booties and I said he was in early April and Fitch was and.
February.
So you can I mean other comments are there I think in general like for transaction.
And and I've been pretty positive on it.
Oh, there hasn't been anything or.
Specific aside from that.
Great. Thank you very much room.
Mmm.
Thanks.
And our next question comes from the line of the backup Followell from U.S. capital advisers.
[noise] I airliner [laughter] you hear me guys.
Yes.
Good thanks, it looks like deferred revenue went down from 450 to 227.
Did that help drive the increasing eat it all.
Yeah, I'll I'll take him [laughter], so the deferred revenue number.
It it can change as we go forward in time.
Driver there was the change in.
Stock that we acquired a as a part of the transaction or you know the repurchase of our stock and the estimate at the time, we did the transaction versus what the stock price was when we.
When we closed on the purchase of their shares.
So that will change over time.
And really what it does is it changes the amount of revenue that we.
We can recognize so.
You know the the.
It doesn't really impact the.
Economic even of the company. If you will so I think what a lot of investors do is add the deferred revenue to whatever the even die is to come up with what they're sort of calling a cash even done number and will continue to provide.
Every one with the deferred revenue and you, but as we go forward.
So so just to clarify it on the prior numbers you guys had to first revenue for 15 and he trained adjusted EBITDA of 920 to get to the one three h. and so here you could find them 1175 to 27 to hit went to one for.
That's kind of your delta Okay. So uplift is really more like 30 million.
Yeah <unk>, Okay take wanted to make sure if that.
Okay, and then second <unk> on this you're spending on mountain Valley, how much more do you have laughed in 2021.
Uh-huh, an M.B.P. Becca, yes.
Yeah. So we've spent 2.1 to date.
And.
Are spend is 2.7 total helped me name [laughter] that'd be about 50 million left.
Yeah.
50 million.
Great and and then finally I know your work into a lot of different scenarios, but what is the plan be in the event that you don't have a nationwide 12 by the fall.
The plan B. is Diana talked about it is we we always have the right to go get individual permits for those stream crossings. Okay perfect. Thank you.
And again, if you'd like to ask a question that's style one on your telephone keypad. Our next question comes from the line of T.J. show from our P.C.
Your line or something.
Great. Thanks, just one for me as you move to pre cash flow and retained free cash flows to focus point for investors. What's your longterm use ones M.B.P. is online just an optimal payout ratio for you on or just how should we think about a priority to to increase the minimum thanks.
Yeah, Tom I guess I can start on this the the objective is to be able to self on the business going forward. So you should see positive reaching kit a cash flow.
<unk> going forwards basis.
And that's that's how we we will intend to run the company wants once we get to the point, where we get our <unk>.
Leverage ratio down.
Below four times will be you know it'll be obviously reevaluating dividend policy.
[laughter], Yeah, I think that's.
That's right.
Yeah, I guess I could you know, we're expecting retain free cash flow to be positive 21.
And we're looking at you know we've we've given this before we aren't updating guidance or anything but you know what we've said before is.
<unk> free cash flow and 2021 and below four times in in 2022.
Okay. Thank you.
And we have no further question think he'll turn the call back to the presenter extra closing remarks.
Well. Thank you everybody for joining us today as we sat at the outset, we are gaining confidence in in the macro we we believe that yeah.
It could be some strengthening union in the A. basin, certainly what we're seeing and.
Hopefully everybody will stay safe and we'll get through this thank you have a good debt.
Ladies and gentlemen clips today's conference call. Thank you for participating you may know disconnect.
Oh.
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