Q2 2020 Altus Midstream Co Earnings Call
[music].
Any earnings conference call.
At this time all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you would need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your speaker today.
The Patrick Cassidy director of Investor Relations. Thank you. Please go ahead Sir.
Good afternoon.
Thank you for joining us on Altice Midstream company second quarter, 2020 financial and operational results Conference call.
We will begin the call with an overview by Altice midstream CEO and President Clay branches, and then Rogers CFO will summarize our financial performance and outlook.
Our prepared remarks will be approximately 15 minutes in lake.
With the remainder of the call allotted for Q1 day.
Remarks during the call May also referred to the Altice midstream investor presentation.
Which can be found on our Investor Relations website had altice midstream dotcom forward slash investors.
On today's conference call, we made discuss certain non-GAAP financial measures.
A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the investor presentation posted yesterday on the Investor Relations website previously noted.
Finally, I'd like to remind everyone that today's discussion will contain forward looking estimates and assumptions based on our current views and reasonable expectations.
However, a number of factors could cause actual results to differ materially from what we discussed today.
A full disclaimers located with the Investor presentation on our web site.
With that I will turn the call over to clay.
Good afternoon, and thank you for joining Ulta is on its second quarter 2020 conference call.
I want to begin by noting that we continue to operate under newly established safety protocols to prevent the spread of the Corona moderates.
The impact on staff and operations today has been minimal with office staff working remotely in field staff following best practices for minimizing contact with one another.
I recognize the inconveniences an additional burden this can create particularly for field personnel wondering full face masks and 100 degree West Texas heat.
However, these practices are necessary to operate safely and protect our team families in neighbors and I want to thank our team members for their diligence in these efforts.
On today's call will provide an update on our assets beginning with our joint venture pipeline projects, then move on to gathering and processing with men Rogers reviewing our financial performance for the second quarter and updating guidance for the remainder of 2020 in the full year 2021.
Ulta schooled interest in for joint venture pipeline projects that move oil gas and natural gas liquids from the Permian basin to markets on the Gulf Coast.
Three of these projects are currently in service, both coasts Express Cerner and epic crude with the fourth Permian Highway under construction and on schedule for startup in early 2021.
I'll begin with the Gulf Coast Express natural gas pipeline, which is operated by Kinner Morgan and fully supported by minimum volume commitments.
CX continues to make steady contributions to our quarterly results as the nbcs provide for minimal fluctuations in adjusted EBITDA.
Moving on to the Cenote natural gas liquids pipeline second quarter volumes were impacted by reduced drilling activity and production curtailments in the Permian basin.
Low NGL prices, which led to some plants in the basin rejecting ethane in April and May.
Also contributed to lower throughput during the quarter.
In terms of rebounded in June and July in large part due to higher oil prices.
As production activity across the basin resumes and ethane margins remain favorable for producers to recover that portion of the Y grade stream, we expect higher volumes in EBITDA contributions from chenault during the third quarter compared with second quarter.
The epic crude line, which went into full service on April one. This year is supported by a combination of acreage dedications and minimum volume commitments epic continues to attract volume based on the need for Permian operators to access storage and ship loading facilities in the Corpus Christi area.
Permian Highway and natural gas pipeline that will connect west, Texas to the Gulf Coast near Houston remains on schedule for startup in early 2021.
The operator hinder Morgan noted on their conference call last week that construction is nearly 80% mechanically complete on the pipeline and 97% complete on the mainline compression.
With the recent media headlines concerning oil pipeline operators in other parts of the country. It's worth noting here that both Phd and Gtx, our differentiated by being intrastate natural gas pipelines, principally regulated by the state of Texas Railroad Commission and not the federal Energy Regulatory Commission.
The Permian basin remains sort of takeaway capacity for natural gas in these pipelines helped to reduce flaring and associated gas produced from crude oil wells, while safely transporting gas to markets on the Texas Gulf Coast.
Moving now to discussing our GMP business.
In April we achieved a milestone of one year without a recordable injury and our operated facilities.
During this period, we completed construction commissioned and brought online three state of VR cryogenic gas processing plants with SRX technology.
In addition to completing well connections and the other day to day activities across our operations.
During this second quarter gathered volumes averaged 434 million cubic feet per day down 25% compared with the first quarter.
We've seen a significant recovery in July where we averaged approximately 560 million cubic feet per day as a passive return curtailed volumes to production.
The lower gathered volumes in the second quarter reflect nearly 70 million cubic feet per day from the curtailments related to pricing and approximately 40 million cubic feet per day associated with unscheduled maintenance to remove moisture in the residue lines of the system.
A failure in the automated controls so identify liquids entering the pipeline led to a shutdown of the lean gas system for 11 days in the rich gas system for six days.
Following an investigation into the process failure, we identified and remedied the problems as such we don't expect this to be a recurring issue.
With the current outlook for lower activity at Alpine high we continue to focus on reducing our cost structure.
Operating cost during the second quarter were down approximately 10% from the preceding quarter and 23% compared with the fourth quarter of 2019.
And our diamond processing facility during the quarter, we commissioned electrical driven compression to have an addition to our gas fueled units.
This fuel switching optionality allows us to capture electricity load shedding opportunities during periods of peak demand.
The magnitude of the cost savings will depend on the duration and frequency of fuel switching and will be realized with both a direct benefit as well as credit for future use.
We expect to be able to quantify this in future calls the electric units also reduce maintenance and operating cost as compared with natural gas fueled compressors.
Our plants continue to demonstrate excellent operational flexibility running in both ethane rejection and recovery modes during the quarter.
SRX technology, which currently exists today in only a few facilities in Permian basin allowances to quickly make process changes at our plants in response to market prices or other factors that customers can choose to optimize thus, allowing our customers to maintain higher recoveries of propane and heavier in deals.
In ethane rejection mode. This capability is a key differentiator for office.
We continue to aggressively pursue third party volumes and other new revenue streams admittedly with the uncertain economic outlook due to the pandemic and other factors progress is not as quick as we would like but we do have some new business I would like to highlight.
Also has continued to process off spec condensate for third parties during the second quarter.
We also executed two deals with Apache to lease and operate under utilized compression assets outside of Alpine high which will generate revenue during the second half of the year.
We're looking at all of our assets that are idle or under used as result of Apache is lower activity levels, and we will divest these assets or put them to work to create additional cash flow streams for all.
Over the past 18 months Ulta sold approximately $22 million worth of idle assets. This does not include $4 million in compression assets that we've redeployed for revenue generating opportunities rather than selling them in a weak market.
In closing my prepared remarks, I have previously noted that the cobot 19 pandemic present, an extraordinary challenges for the global economy, and a full recovery timeline appears uncertain.
Still altice remains well positioned to meet the headwinds facing our industry through its diversified cash flow streams and healthy balance sheet.
We anticipate generating free cash flow with the startup of the Permian Highway early next year, and we will continue to focus on bringing in additional third party business, reducing costs and operating safely.
I want to thank our team again for their ongoing hard work and now I'll turn the call over to debt.
Thank you play.
And my prepared remarks, I will briefly review our financial results for second quarter comment on our liquidity position, which is stronger than many may realize and conclude with updated guidance for 2020, and our current outlook for 2021.
As noted in the press release issued yesterday Altus reported second quarter net income, including non controlling interests of $18 million.
This included approximately $11 million related to an unrealized embedded derivative loss, which reflects a technical accounting revaluation of the embedded derivative and our preferred units at the end of the quarter.
Excluding this and other items office generated second quarter, adjusted EBITDA of approximately $44 million.
This performance while down from the preceding quarter reflects the strength of our JV pipeline projects as adjusted EBITDA was only down approximately 6% while gathering volumes were down nearly 25%.
The gathering volume decline is related primarily to voluntary production curtailments alpine high as well as the unscheduled maintenance clay discussed.
Approximately 75% of second quarter volumes consisted of rich gas.
With the current commodity price outlook, we expect gathered volumes to increase this quarter as the majority of curtailed production at alpine high as back online.
Capital investment and midstream infrastructure during the quarter was approximately $74 million nearly all of which is attributable to the Permian Highway pipeline. The only JV pipeline project not currently in service.
Capital for gathering and processing infrastructure for the second quarter was $2 million.
Including our gross proportionate share of capital and equity method interests, which is how we guide to growth capital investments 2022nd quarter capital totaled $89 million.
Before moving onto guidance I want to highlight the company's strong financial standing.
Our credit facility extends through November of 2023, and as investment grade like covenants. In January this facility was expanded to $800 million and less than $500 million was drawn at the end of the second quarter.
We expect cash from operations and distributions from our JV pipelines combined with global capacity on our revolver to be more than sufficient to meet our capital needs until Phd comes online.
We currently anticipate covenant leverage on our credit facility to be less than three times through 2021, which is well below the covenant leverage ratio of five times.
Our guidance for 2020 gathered volumes remains 480 to 520 million cubic feet per day.
Volumes are currently trending towards the low end of the range due to the production curtailments in the second quarter.
We are increasing the lower end of our adjusted EBITDA guidance for the year from 150 million $260 million with approximately 55% to 65% attributable to JV pipeline projects.
We're also revising up distributable cash flow guidance for the year to between 101 hundred $20 million.
The revised range is being driven primarily by higher expected cash contributions from Sunoco and Gtx.
In line with previous DCF guidance, there are no cash distributions from epic expected in 2020.
Given the priority to project level finance.
Growth capital guidance is unchanged at this time, we expect capital investments in our GNP business to be de Minimis for the remainder of the year with the majority of capital in the second half of the year being directed towards ERP.
As we've done in the past our guidance reflects our gross proportionate share of capital without taking project finance into account.
Epic crude is the only JV pipeline that has project level financing and the upsides of that debt has funded a portion of the projects capital over us. Therefore, we expect our share of funding will be lower than the gross proportionate share we have outlined.
As Clay noted Phd remains on schedule for an early 2021 in service date.
Which was recently confirmed on can or mortgage second quarter earnings call.
With a startup a fee HP all four of our JV pipeline projects will be in service and contributing to offices results.
And Investor presentation posted on our website last night, we included our revised outlook for 2021, providing guidance on selected key items.
Of note our adjusted EBITDA is currently expected to range from $220 million to $260 million, which at the midpoint represents an approximate 40% increase compared with 2020.
2021, distributable cash flow is anticipated to increase to a range of $150 million to $180 million with a strong year over year growth driven by ph P. entering service.
And our growth capital investments are ramping down significantly 2021 growth Capex is expected to be $30 million to $50 million most of which is attributable to assumed completion of ph p. and the first quarter.
This guidance does not include any volume growth capital or cash flow estimates from new third party business and will be revised necessary when its acquired.
As with other companies in the energy space offices stock price has been severely impacted by the reduced demand for hydrocarbon products.
In May our shareholders approved a one for 20 reverse stock split in order to comply with NASDAQ minimum price listing rules and this was implemented at the end of June.
In closing I'd like to Echo Clay's comments, recognizing our team and overcoming today's challenging environment.
We're making steady progress and these efforts are contributing to an improving outlook for office midstream.
Ill now turn the call over to the operator for QNX.
Thank you Sir.
As a reminder to ask a question you would need to press star one on your telephone to withdraw your question. Please press the pound key.
Please standby, while we compile the came in a roster.
I sure first question comes from Spyros Lewis from Credit Suisse. Please go ahead.
Hey, guys. This is Chad on for Spiro.
Just starting off based on commentary and the rate relief seems like the dividend commencement of this being pushed out in favor of debt paydown on them could you provide a little more color on higher thinking about prioritizing delevering in the future and are you opened to taking down the preferred.
[music].
Good afternoon, thanks for the question.
So.
It's it's going to be a fluid situation I think if we're looking into.
The future as we sit right now, obviously, becoming free cash flow positive.
In the beginning of next year when ph Pete comes online.
Moving to make sure that our leverage levels.
Our very manageable as you can see in our investor presentation that we've outlined.
The crossover for the right time to take out the preferred we've talked about in the past has been at the end of 2021.
So it's kind of late 21 early 22 in terms of the Moa can IR threshold very manageable, 7% distribution rate right now.
And we'll look to.
Different financing alternatives.
Starting next year.
On the preferred as well so.
A lot lot goes into play I mean.
Clade talked about some asset sales, obviously that helps fund.
Predominantly the remaining portion of our Capex, which is Phd.
And you know with declining volumes in the on the GMP side, we're still having conversations for third party, but thats not in our guidance for next year, we've got to take that into consideration as well as you think about funding any opportunity. So it's going to be fluid I just think as we sit here today.
With the backdrop, it's more prudent to make sure you have manageable leverage both.
Through the credit facility as well as through the preferred.
[music].
And we're not taken a dividend off the table.
We just need to make sure that when we do it it can be a sustainable distribution to shareholders.
Okay understood. Thanks, that's helpful. And then just switching gears a bit you mentioned the fuel switching costs and I know you mentioned, we'll get a little more of an update on the magnitude of this cost reductions in the future, but is there anything that you could point too just to sort of get a high level sense about what benefit.
It's could look like.
Yes, Spiro this is clay branches in on the benefits you know there's a program. They can participated in and we are in which you can elect to go off of the grid in go to our gas fired compression.
And in so doing that allows us to reap the benefits from the higher prices in the ERCOT market. So that's something that you can't put.
A.
A hard line on as far as what that values going to be it kind of depends on how hard is it going to be in the state of Texas. During the months of July August and September.
Based on historical.
Prices, we've seen a pretty good benefit from that and we believe that thats going to have benefited something that we'll just have to be able to quantify once that occurs so.
We won't be able to give you guidance on that we'll just have to wait and see how that looks now in terms of operating cost and would you know the the electric.
Powered compression versus the gas fired compression so much cheaper to operate.
And we believe that that is going to be somewhere between 10% to 20% and again, we'll be able to see this in real time and quantify that for you because we're running them side by side. So right now we have the electric powered compression, but we also some gas fired compression out there of equal size. So we'll be able to make that compares.
And again quantify that in the future months and Thats why we didnt try to do it for this particular call and give you those numbers those are numbers that we'll be able to identify and the next call and give you an idea on the owing in cost as well is what we believe is going to be a good number for us to latch onto.
In terms of the savings across the that the peak demand times and pricing times in our caught in the heat of the summer.
So to answer your question.
Yes, it does.
That's it for me thanks for the time guys.
So one way of saying more to come but we but we should be able to give you some better numbers at the next call.
Okay understood. Thanks.
Thank you.
As a reminder to ask a question you would need to press star one on your telephone to withdraw your question press the pound key.
I show no further questions in the queue at this time I would like to turn the call over to Mr. clay pressures, President and CEO for closing remarks.
Thank you operator in thank you all for dialing into our call today I'd like to leave you with the following thoughts about all this midstream.
Our outlook is improving we've provided updated guidance for 2020 and an early look into 2021.
We remain confident in our ability to become free cash flow positive next year, which will be driven by having all of our JV pipelines in service.
Progress on the Permian Highway is the primary reason for this confidence the operator has noted that it's nearly eight.
80% mechanically complete with mainline compression, 97% complete.
We've also made significant progress reducing cost.
We believe further cost reductions can be captured with the shift to electric power, which will also enhance emissions reduction.
We will continue to pursue other sources of revenue, including third party gathering and processing and finding other work for underutilized assets.
Look forward to keeping you apprised of our progress now I will return the call to the operator.
Thank you, Sir ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Yes.
[music].
[music].
[music].
Ladies and gentlemen, thank you for a standby and welcome to the also Midstreams second quarter 2020 earnings conference call at this time, all but that's been talking to listen only mode.
After the speaker presentation, there will be a question answer session to ask a question. During the session you would need to press star one on your telephone.
Please be advised that todays conference is being recorded.
If you require any further assistance please press star zero.
I would now like the hand, the conference over to your speaker today.
The Patrick Cassidy director of Investor Relations. Thank you. Please go ahead Sir.
Good afternoon.
Thank you for joining us on Altice Midstream company second quarter, 2020 financial and operational results Conference call.
We will begin the call with an overview by Altice midstream CEO and president quite branches, and then Rogers CFO will summarize our financial performance and outlook.
Our prepared remarks will be approximately 15 minutes in like.
But the remainder of the call allotted for Q anyway.
Remarks during the call May also referred to the Altice midstream investor presentation.
Which can be found on our Investor relations website at all tissue midstream dot com forward slash investors.
On today's conference call, we may discuss certain non-GAAP financial measures.
A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found any investor presentation posted yesterday on the Investor Relations website previously noted.
Finally, I'd like to remind everyone that today's discussion will contain forward looking estimates and assumptions.
Based on our current views and reasonable expectations.
However, a number of factors could cause actual results to differ materially from what we discussed today.
A full disclaimer is located what the investor presentation on our website.
With that I will turn the call over to clay.
Good afternoon, and thank you for joining all because on a second quarter 2020 conference call.
I want to begin by noting that we continue to operate under newly established safety protocols to prevent the spread of the Corona virus.
The impact on staffing operations today has been minimal with office staff working remotely you field staff following best practices for minimizing contact with one another.
I recognize the inconveniences an additional burden this can create particularly for field personnel wondering full face masks and 100 degree West Texas heat.
However, these practices are necessary to operate safely and protect our team families in neighbors and I wanted to thank our team members for their diligence in these efforts.
On today's call will provide an update on our asset beginning with our joint venture pipeline projects, then move on to gathering and processing within Rogers reviewing our financial performance for the second quarter and updating guidance for the remainder of 2020 and look for your 2021.
Ultra scheduled interest in Florida joint venture pipeline projects between oil gas and natural gas liquids from the Permian basin to markets on the Gulf Coast.
Three of these projects are currently in service Gulf Coast Express share note and epic fruit with the fourth Permian Highway under construction and on schedule for startup in early 2021.
I'll begin with the Gulf Coast Express natural gas pipeline, which is operated by Kinner Morgan and fully supported by minimum volume commitments.
CX continues to make steady contributions to our quarterly results as the nbcs provide for minimal fluctuations in adjusted EBITDA.
Moving on to the Cenote natural gas liquids pipeline second quarter volumes were impacted by reduced drilling activity and production curtailments in the Permian basin.
Low NGL prices, which led to some plants in the basin rejecting ethane in April in May.
Also contributed to lower throughput during the quarter.
Instead rebounded in June and July in large part due to higher oil prices.
As production activity across the basin reasons, and ethane margins remain favorable for producers to recover that portion of the Y grade stream, we expect higher volumes in EBITDA contributions from Sunoco during the third quarter compared with second quarter.
The epic crude line, which went into full service on April one. This year is supported by a combination of acreage dedications, a minimum volume commitments epic continues to attract volume based on the need for Permian operators to access storage and ship loading facilities in the Corpus Christi area.
Permian Highway and natural gas pipeline that will connect west, Texas to the Gulf Coast near Houston remains on schedule for startup in early 2021.
The operator interim Oregon noted on their conference call last week that construction is nearly 80% mechanically complete on the pipeline and 97% complete on the mainline compression.
With the recent media headlines concerning oil pipeline operators in other parts of the country. It's worth noting here, both Phd and Gtx, our differentiated by being intrastate natural gas pipelines, principally regulated by the state of Texas Railroad Commission and not the federal Energy Regulatory Commission.
The Permian basin remain sort of take away capacity for natural gas and these pipelines helped to reduce flaring of associated gas produced from crude oil wells, while safely transporting gas markets on the Texas Gulf Coast.
Moving now to discussing our GMP business.
In April we achieved a milestone one year without a recordable injury at our operated facilities.
During this period, we completed construction commissioned and brought online restated the art cryogenic gas processing plants with SRX technology.
In addition to completing well connections and the other day to day activities across our operations.
During this second quarter gathered volumes averaged 434 million cubic feet per day down 25% compared with the first quarter.
I've seen a significant recovery in July where we averaged approximately 560 million cubic feet per day as Apache return curtailed volumes to production.
The lower gathered volumes in the second quarter reflect nearly 70 million cubic feet per day from the curtailments related to pricing and approximately 40 million cubic feet per day associated with unscheduled maintenance to remove moisture in the residue lines of the system.
A failure in the automated controls so identify liquids entering the pipeline led to a shutdown of the lean gas system for 11 days and the risk gas system for six days.
Following an investigation into the process failure, we identified and remedied the problems.
As such we don't expect this to be a recurring issue.
With the current outlook for lower activity at Alpine high we continue to focus on reducing our cost structure.
Operating cost during the second quarter were down approximately 10% from the preceding quarter and 23% compared with the fourth quarter of 2019.
And our diamond processing facility during the quarter, we commissioned electric driven compression to have an addition to our gas fuel units.
This fuel switching optionality allows us to capture electricity load shedding opportunities during periods of peak demand.
The magnitude of the cost savings will depend on the duration and frequency of fuel switching and will be realized with both a direct benefit as well as credit for future use.
We expect to be able to quantify this in future calls.
Patrick units also reduce maintenance and operating cost as compared with natural gas fueled compressors.
Our plants continue to demonstrate excellent operational flexibility running in both ethane rejection and recovery modes during the quarter.
SRX technology, which currently exists today in only a few facilities in the Permian Basin allows us to quickly make process changes at our plants in response to market prices or other factors that customers can choose to optimize thus, allowing our customers to maintain higher recoveries of propane and heavier in deals.
In ethane rejection mode. This capability is a key differentiator for ultra.
We continue to aggressively pursue third party volumes and other new revenue streams admittedly with the uncertain economic outlook due to the pandemic and other factors progress is not as quick as we would like but we do have some new business I would like to highlight.
Altice continued to process off spec condensate for third parties during the second quarter.
We also executed two deals with Apache to lease and operate underutilized compression assets outside of Alpine high which will generate revenue during the second half of the year.
We are looking at all of our assets that are idle or under used as result of Apache is lower activity levels, and we will divest these assets or put them to work to create additional cash flow streams for all.
Over the past 18 months Altice has sold approximately $22 million worth of idle assets. This does not include $4 million any compression assets that we've redeployed for revenue generating opportunities rather than selling them in a week mark.
In closing my prepared remarks, I have previously noted that the cobot 19 pandemic present, an extraordinary challenges for the global economy.
Full recovery timeline appears uncertain.
Still altice remains well positioned to meet the headwinds facing our industry through its diversified cash flow streams and healthy balance sheet.
We anticipate generating free cash flow with the startup of the Permian Highway early next year, and we will continue to focus on bringing in additional third party business, reducing cost and operating safely.
I want to thank our team again for their ongoing hard work and now I'll turn the call over to Ben.
Thank you play.
And my prepared remarks, I will briefly review our financial results for second quarter comment on our liquidity position, which is stronger than many may realize and conclude with updated guidance for 2020, and our current outlook for 2021.
As noted in the press release issued yesterday Altus reported second quarter net income, including non controlling interests of $18 million.
This included approximately $11 million related to an unrealized embedded derivative loss, which reflects a technical accounting revaluation of the embedded derivative and our preferred units at the end of the quarter.
Excluding this and other items office generated second quarter, adjusted EBITDA of approximately $44 million.
This performance while down from the preceding quarter reflects the strength of our JV pipeline projects as adjusted EBITDA was only down approximately 6% or gathering volumes were down nearly 25%.
The gathering volume decline as related primarily to voluntary production curtailments alpine high as well as the unscheduled maintenance clay discussed.
Approximately 75% of second quarter volumes consisted of rich gas.
With the current commodity price outlook, we expect gathered volumes to increase this quarter as the majority of curtailed production at alpine high as back online.
Capital investment and midstream infrastructure during the quarter was approximately $74 million.
All of which is attributable to the Permian Highway pipeline, the only JV pipeline project not currently in service.
Capital for gathering and processing infrastructure for the second quarter was $2 million.
Including our gross proportionate share of capital and equity method interests, which is how we guide to growth capital investments.
22nd quarter capital totaled $89 million.
Before moving onto guidance I want to highlight the company's strong financial standing.
Our credit facility extends through November 2023, and as investment grade like covenants in January this facility. It was expanded to $800 million and less than $500 million was drawn at the end of the second quarter.
We expect cash from operations and distributions from our JV pipelines combined with global capacity on our revolver to be more than sufficient to meet our capital needs until Phd comes online.
We currently anticipate covenant leverage on our credit facility to be less than three times through 2021, which is well below the covenant leverage ratio of five times.
Our guidance for 2020 gathered volumes remains 480 to 520 million cubic feet per day.
The volumes are currently trending towards the low end of the range due to the production curtailments in a second quarter.
We are increasing the lower end of our adjusted EBITDA guidance for the year from 150 million $260 million with approximately 55% to 65% attributable to JV pipeline projects.
We're also revising up distributable cash flow guidance for the year, so between 101 hundred $20 million.
The revised range is being driven primarily by higher expected cash contributions from Sunoco and Gtx.
In line with previous DCF guidance, there are no cash distributions from epic expected in 2020.
Given the priority to project level finance.
Growth capital guidance is unchanged at this time, we expect capital investments in our GNP business to be de Minimis for the remainder of the year with majority of capital in the second half of the year being directed towards ph Pete.
As we've done in the past our guidance reflects our gross proportionate share of capital without taking project finance into account.
Crude is the only JV pipeline that has project level financing and the upside to that that has funded a portion of the projects capital over us. Therefore, we expect our share of funding will be lower than the gross proportionate share we have outlined.
As Clay noted Phd remains on schedule for an early 2021 in service date.
Which was recently confirmed on Kinder Morgan's second quarter earnings call.
With a startup of fee HP, all four of our JV pipeline projects will be in service and contributing to offices results.
And Investor presentation posted on our website last night, we included our revised outlook for 2021, providing guidance on selected key items.
Of note our adjusted EBITDA is currently expected to range from $220 million to $260 million, which at the midpoint represents an approximate 40% increase compared with 2020.
2021, distributable cash flow is anticipated to increase to a range of $150 million to $180 million with a strong year over year growth driven by ph P. entering service.
And our growth capital investments are ramping down significantly 2021 growth Capex is expected to be $30 million to $50 million most of which is attributable to assumed completion of Phd in the first quarter.
This guidance does not include any volume growth capital or cash flow estimates from new third party business and will be revise the necessary when it's required.
As with other companies in the energy space offices stock price has been really impacted by the reduced demand for hydrocarbon products.
In May our shareholders approved a one for 20 reverse stock split in order to comply with NASDAQ minimum price listing rules and this was implemented at the end of June.
In closing I'd like to Echo Clay's comments, recognizing our team and overcoming today's challenging environment.
We're making steady progress and these efforts are contributing to an improving outlook for office midstream.
I'll now turn the call over to the operator for Q on that.
Thank you Sir.
As a reminder to ask a question you would need to press star one on your telephone to withdraw your question. Please press the pound cake.
Please standby, while we compile the kidney roster.
I sure first question comes from Spyros Donis from Credit Suisse. Please go ahead.
Hey, guys. This is Chad on for Spiro.
Just starting off based on commentary and the rate release. It seems like the dividend can then spend thats being pushed out in favor of debt pay down below.
Got a little more color on how you're thinking about prioritizing de lever and the future.
And our you opened to taking down the preferred.
Hey, good afternoon. Thanks for the question.
So.
It's it's going to be a fluid situation I think if we're looking into.
The future as we sit right now, obviously, becoming free cash flow positive.
In the beginning of next year when ph Pete comes online.
Moving to make sure that our leverage levels.
Our very manageable as you can see in our investor presentation that we've outlined.
The crossover for the right time to take out the preferred we've talked about in the past has been at the end of 2021.
So it's kind of late 21 early 22 in terms of the MOIC and I are our threshold very manageable, 7% distribution rate right now.
And we'll look to.
Different financing alternatives.
Starting next year.
On the preferred as well so.
A lot lot goes into play I mean.
Played talked about some asset sales, obviously that helps fund.
Predominantly the remaining portion of our Capex, which is Phd.
And.
Declining volumes and on the GMP side, we're still having conversations for third party, but thats not in our guidance for next year, we've got to take that into consideration as well as you think about funding any opportunities. So it's going to be fluid I just think as we sit here today with the backdrop, it's more prudent to.
Make sure you have manageable leverage both.
Through the credit facility as well as through the preferred.
[music].
And we're not taking a dividend off the table.
We just need to make sure that when we do it it can be a sustainable distribution to shareholders.
Okay understood. Thanks, that's helpful. And then just switching gears a bit you mentioned the fuel switching costs and I know you mentioned, we'll get a little more of an update on the magnitude of this cost reductions in the future, but is there anything that you could point too just to sort of get a high level since about what benefit.
It's could look like.
Yes, Spiro this is clay branches and on the benefits you know there's a program that you can participated in and we are in which you can elect to go off of the grid and go to our gas fired compression.
And in so doing that allows us to reap the benefits from higher prices in the ERCOT market. So that's something that you can't put a.
A hard line on as far as what that values going to be kind of depends on how hard is it going to be in the state of Texas. During the months of July August and September.
Based on historical.
Prices, we've seen pretty good benefit from that and we believe that that's going to have a benefit but something that we'll just have to be able to quantify once that occurs so.
We won't be able to give you guidance on that we'll just have to wait and see how that looks now in terms of operating cost and weve.
The the electric.
Powered compression versus the gas fired compression so much cheaper to operate.
And we believe that that is going to be somewhere between 10% to 20% and again, we'll be able to see this in real time and quantify that for you because we're running them side by side. So right now we have the electric powered compression, but we also had some gas fired compression out there.
Equals side, so we'll be able to make that comparison and again quantify that in the future months and that's why we didnt try to do it for this particular call and give you those numbers those are numbers that we'll be able to identify and the next call and give you an idea on the owing in cost as well is what we believe is going to be.
A good number for us to latch onto in terms of the savings across the that the peak demand times in the peak pricing times in our caught in the heat as this summer.
So to answer your question.
Yes, it does.
That's it for me thanks for the time guys.
So long way of saying more to come but we but we should be able to give you some better numbers at the next call.
Okay.
Thanks.
Thank you.
As a reminder to ask a question you would need to press star one on your telephone which are your question press the pound key.
I show no further questions in the queue at this time I would like to turn the call over to Mr. clay branches, President and CEO for closing remarks.
Thank you operator, and thank you all for dialing into our call today I'd like to leave you with the Boeing thoughts about Altice midstream.
Our outlook is improving we've provided updated guidance for 2020 and an early look into 2021.
We remain confident in our ability to become free cash flow positive next year, which will be driven by having all of our JV pipelines in service.
Progress on the Permian Highway is the primary reason for this confidence the operator has noted that it's nearly 80% mechanically complete with mainline compression 97% complete.
We've also made significant progress reducing cost.
We believe further cost reductions can be captured with the shift to electric power, which will also enhance emissions reduction.
We will continue to pursue other sources of revenue, including third party gathering and processing and finding other work for underutilized assets.
Look forward to keeping you apprised of our progress now I will return the call to the operator.
Thank you, Sir ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.