Q2 2020 Western Midstream Partners LP Earnings Call
Good day and welcome to the Washington, Midstream Partners' second quarter, two girls reporting earnings conference call.
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After today's presentation will be an opportunity to ask questions.
Last question Your press Star then one already touched on so.
Well George Your question. Please press Star then true.
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Oh, no call Conservative Christian Schultz, Vice President Investor Relations or communications. Please go ahead.
Thank you I'm glad you could join us today for Western Midstreams second quarter 2020 conference call I'd like to remind you that today's call. The accompanying slide deck in last nights earnings release contain important disclosures regarding forward looking statements and non-GAAP reconciliation.
Please reference western Midstreams form 10-Q, and other public filings for a description of risks factors could cause actual results to differ materially from what we discussed today.
Relevant reference materials are posted on our website.
With me today or Michael Young, our Chief Executive Officer, quite Collins, our Chief operating Officer, and Mike Pearl Our Chief Financial Officer, I now would like to turn the call over to my clear.
Thank you Kristen and good afternoon, everyone.
Our outstanding second quarter results evidence, our ability to deliver high quality service that is consistent with our customers expectations and supportive of long term enterprise value creation.
Our expansive asset portfolio located in Premier U.S. onshore basins are strong fee based contracts that are insulated from direct commodity price exposure and our ability to realize operational efficiencies and cost savings position us to generate meaningful returns even during challenging economic conditions.
This profile combined with the successful execution of creative commercial solutions improved commodity prices, that's supported higher than expected producer activity at Occidentale's outperformance on its Delaware Basin legacy Anadarko acreage contributed to our strong second quarter results.
Over the last year, our commercial team focused on securing new business by leveraging our expansive infrastructure and optimizing our existing contracts in response to the recent economic downturn and pronounced energy demand shop, our commercial team worked diligently with producers and other midstream service providers to secure mutually beneficial.
Commercial solutions for example.
And the Delaware Basin, we avoided the curtailment of approximately 130 million cubic feet per day through creative commercial solutions. The provided near term incentives to producers and resulted in additional long term value for wash similar successes continued to generate incremental capital advantaged EBITDA for west while providing near term.
Believed to customers that had been affected adversely by lower energy demand.
With the release of our first quarter 2020 result, we announced revised guidance capital savings initiatives and to reduce quarterly distribution.
As a result of the second quarter commodity price increases driving less than expected producer curtailments and current commodity prices supporting continued producer activity. We've increased our 2020 guidance to reflect anticipated adjusted EBITDA between 1.85, and $1.9 billion, which represents a 100 million dollar.
The increase to the midpoint of our previously issued guidance.
Additionally, we have continued to refine our capital discipline and investment plans and now anticipate full your 2020 capital expenditures between 400 and $450 million reflective of a $75 million reduction to the prior guidance midpoint.
Modification and standardization of facilities improved internal collaboration buyer midstream centric workforce and they focus on capital efficiency and investment lead time to cash flow has enabled capex savings and improved project timelines on costs for example facility redesign and procedure reviews allowed for.
<unk> to three week construction time reductions for West, Texas, Salt water disposal wells and compressor stations, which yielded a 20% to cost savings. Our revised 2020 guidance reflects the inclusion of an additional $40 million of incremental cost reductions, resulting in full year, Twentytwenty, Oh, one m. and DNA cost reductions of.
$115 million, 59% of which had been realized year to date with the majority of these savings being replicable for 2021 and beyond assuming steady state activity in production levels.
Oh in LNG in a reductions originated from our newly minted midstream focused employees, who continue identifying operational efficiencies and cost savings. Our employees are best in class and demonstrate an entrepreneurial mentality and a willingness to broaden their skill sets and areas of responsibility, which positions us to deliver improved results.
Fewer resources.
Throughout the pandemic our employees have remained focused and dedicated to driving improved operational and financial results and I would like to recognize congratulate encouraged them to continue their efforts.
We expect incremental drilling and completion activity to be closely tied to commodity prices as we move into 2021 continued market uncertainty exists. However, we remain committed to pursuing capital efficiency and additional cost savings irrespective of the prevailing economic backdrop, and we maintained our resolve to increase.
Free cash flow after distributions and prioritize leverage reduction for opportunistic and strategic positioning ones current market conditions abate with that I'll turn the call over to Craig who will discuss our second quarter operations Unforecasted 2020 in basin activity in capital plans.
Thanks, Michael first I would like to highlight our continued focus on operating safely in this challenging environment.
Year to date, we have not had a single recordable incident for employees and our combined total recordable incident rate 0.29. This is a remarkable achievement and we continue to champion and enhance our safety first culture to further reduce work related injuries. Additionally, I would like to recognize the outstanding performance that our commercial.
Engineering and operations organization has delivered not just in the second quarter, but through the first half of an incredibly unique and challenging year. Our performance reinforces our thesis that a dedicated workforce supporting this business positions us to maximize the value of our best in class assets by capturing commercial opportunities.
And delivering operational efficiencies.
Operationally gas throughput decreased by approximately 53 million cubic feet per day on a sequential quarter basis, representing a 1% decrease this decrease was driven primarily by producer curtailments in the DJ in Delaware basins, our water throughput increased by approximately 56000 barrels per day, representing.
An 8% sequential quarter increase resulting from additional producer activity increased connectivity with producers and additional disposal capacity brought online in the first quarter.
Since the beginning of a year, we have reduced trucked water volumes for producers in excess of 50% by successfully executing creative commercial solutions.
Expanding capacity that allow us to gather and dispose of produced water in a safe and more efficient manner.
Our operated crude oil and natural gas liquids assets experience the sequential quarter throughput decline of approximately 49000 barrels per day, primarily the result of decrease throughput at our DJ basin facilities and lower equity investment volumes transported on why Thorn in cactus too.
Timing of cash distributions from equity investments and increased deficiency payments supported the second quarter crude oil and natural gas liquids margin of $2.56 per barrel, which represents a 13 cents increase from the prior quarter, although the majority of curtailments that affected our second quarter throughput volumes have subsided we.
I believe drilling and completion activities will return slowly and commensurate with increase in commodity prices based on recurring conversations with our customers. We expect volumes attributable to base production to decline in the Delaware in DJ basins through the remainder of the year with modest activity increases during the latter part of this year leading to study by.
Comes during 2021.
Our forecasted capital spend will be ratable throughout the remainder of the year with a significant portion allocated to Delaware basin projects.
We expect the fourth North loving wrote of train to be completed during the fourth quarter of this year approximately four to six weeks ahead of schedule and 15% under budget as commodity prices continue to recover several of our producers have indicated that they will begin completing DUC inventories throughout the remainder of 2020 and into 2021.
Furthermore, occidental's capital efficient drilling program on legacy Anadarko, Delaware acreage and enhanced collaboration with Wes generates much improved cash flow lead times for both parties are prior period investments into scalable backbone infrastructure assets and the recent commercial successes allow us to respond to market fluctuate.
Actions and quickly accommodate increasing activity levels.
And now we'll turn the call over to Mike to discuss our first quarter financial results and our financial focus for 2020 and beyond.
Thanks, Craig yesterday, we reported and outperforming quarter with adjusted EBITDA of 514 million and free cash flow of 209 million.
Our second quarter EBITDA remained relatively unchanged compared to first quarter 2020, and we generated meaningful free cash flow after distributions notwithstanding the significant challenges facing Wes our customers and the broader energy sector, our second quarter free cash flow after distributions was 68.
Failure, which we have prioritized toward leverage reduction year to date, we've repurchased 165 million of debt that otherwise would mature prior to year end 2023 for 153 million or just under a $12 million discount to par.
Deploying free cash flow after distributions to retire maturities at a discount to par value allows us to accelerate improved leverage metrics and accretive manner.
We also reduced outstanding borrowings under our revolving credit facility from 125 million to 75 million during second quarter 2020, and repaid the remaining 75 million revolver balance shortly after quarter said.
These actions yield a current debt to EBITDA ratio under 4.2 times, which compares favorably to our targeted year end 2020 leverage a 4.5 times.
Our forecasted free cash flow. After distributions currently indicates that we will be positioned to repay all debt maturities through 2024 without having to access the debt capital markets.
We will continue to maintain an aggressive debt reduction disposition and remain committed to meeting or exceeding our leverage targets of below 4.5 times by year end 2020, and at or below four times by year end 2021.
Restoring washes balance sheet and securing investment grade credit ratings remain priorities for us and our current and plant debt reduction actions are intended to achieve these goals. We believe that midstream companies with peer leading leverage metrics will attract premium valuations, thereby aligning the interest of all of our stakeholders.
Now, we'll turn the call back over to Michael for concluding remarks.
Thanks, Mike second quarter results were impacted significantly and positively by the establishment of less as a standalone midstream company.
Enhanced accountability and employee focus has led to implementable ideas for providing improved customer service and meaningful and replicable cost savings.
Our second quarter results in cost savings realizations exceeded our own expectations and accelerated our progress towards strengthening our balance sheet to summarize our revised 2020 guidance reflects an incremental 40 million dollar reduction in current your gionee and on M. costs, resulting in full year 2020 cost savings of 100.
$15 million.
An additional $75 million reduction to forecast a 2020 capital expenditures, resulting in full year 2020, capex reductions relative to initial guidance of more than $475 million and a 100 million dollar increase in forecasted 2020, adjusted EBITDA year to date, we have repurchased approximately.
Hundred $65 million of debt at a reduced our leverage ratio to under 4.2 times, which compares favorably to our targeted year end 2020 leverage of 4.5 times.
Furthermore, the realization of $1.1 billion, an annualized cash flow enhancements comprised of Opex and DNA savings Capex reductions and lower distributions has accelerated leverage reduction and eliminated any near term need to access the capital markets.
This trajectory is entirely consistent with restoring west is investment grade credit rating and positioning west to achieve peer leading financial strength finally, I would like to thank our workforce for its flexibility during the ongoing pandemic and its continued commitment to the long term success of Western midstream West will emerge from this downturn with a renewed focus.
Yes on driving repeatable cost savings exercising capital and balance sheet discipline, and realizing readily available economies of scale by attracting additional volumes onto our systems with that I would like to open the line for questions.
Thank you we will now begin the question answer session.
Who ask a question there were press Star then one other touchtone phone.
We are usually speaker phone what else can you. Please forgive her handset pressing the keys to withdraw your question. Please first stardom true.
Today's first question cultural Spiro Jewish duties with credit Suisse. Please go ahead.
Hey afternoon guys.
First question for Mike Pearl, Mike just curious what your latest thinking is around asset sales felt like there was a sense of urgency last time around just an adverse given the improved outlook, maybe feels like you'd be a little more patient now I ask because you did mention remaining aggressive on the deleveraging process, just curious where all that stance.
Yes, I wouldn't I wouldn't characterize.
A change of attitude with respect to divestitures I think it's always going to be about price discovery related there to.
Hopefully with with the uptick we've seen in the commodity and activity increasing we see some better price discovery, but again I think we said in the past that anything outside of the DJ in Delaware depending on valuation.
Something that we look at.
Seven apply those proceeds to are you sort of that.
Spiro Hey, this is Michael I'd, just add on top of that yes were with the first half of the year and the results we've been able to achieve it definitely allows us to be more patient and definitely very value driven as it relates to any divestitures that we might consider.
Great got it that's helpful. Second question just on Capex looks like you guys have spent about three quarters of whats in guidance now and implies the back half run rate of about $200 million. If we annualize. It. So is that a good representation, we think about 2021, I realize you're already guidance, there yet, but in the low or no activity.
Scenario does that kind of represent some sort of baseline level of capex as we think about next year.
Yes, Faro, it's a it's Michael again, I I think we think of the first half as being a little.
[noise] disconnected from a normalized environment and so as you look at the last half of the year I think we would consider the third and fourth fourth quarter as a little bit more normalized from what we might think of going forward again, a lot of that significant amount of that is very activity based in driven.
But but would look at the last half of the year as a more normalized level from a capital perspective.
Great. That's all I had joined the rest of summer guys.
Okay. Thank you.
Our next question today comes from Carl way with capital One Securities. Please go ahead.
Hi, good afternoon, everyone.
[noise], Michael last quarter, you when you talked about the cadence of the year I believe you mentioned the step down into Q3, Q or somewhat flattening out in the fourth quarter can you give us an update on how you're thinking about the balance of 2020 now.
And collar you, referring if you don't mind on on EBITDA on capital what specifically.
Sure more closely tied to the volumes in EBITDA.
Okay. Yeah. So as you Ken. Thank you as you can see from the revised guidance that we provided and the results we've been able to achieved thus far this year. It does a point to a decline in EBITDA going into the back half of this year couple of things I would note. However is we have seen I'll call them Green shoe.
As it relates to activity on our system in particular, and we've got to we have an inventory of about 250 dogs the back into our system about 100 of those we expect.
To be completed in 2020 that will happen in the back half of 2020, so more likely impacting 2021 volumes in EBITDA than than it will in 2020 about half of those are coming from third parties I.
I would note by the way on those those DUC inventories that we expect to be completed the majority of those the capital has already been spent already connected to the system. So it's it's incremental overall so when you when you look out again going into the back half of the year, we are projecting a decline relative to the first half if you if you.
Read through the full year guidance the that's provided.
Offset again by the activity level that I mentioned before.
Okay got it that's helpful and although you haven't provided guidance for next year, you're alluding to some green shoots in some pickup in activity can you give us any preliminary thoughts on how you think 2021 could compare to 2020.
Yeah, we're still we don't have guidance that we put out yet on 2021.
All all of our customers are still in the process of looking at their capital budgets and activity levels as we go into that year.
So I can provide any specific detail related to that other then again. The details are provided around the DUC inventory that we have what we expect to be completed through the end of 2020, and then what would remain.
He has been what would remain.
After those docs are completed.
As it relates to increased drilling activity into 2021, we're still in the process of constant communication with our customers to come up with what their expectations are and therefore the impact on our.
Forecast for that year.
Okay got it thanks, Michael I'll turn it back.
Thank you.
Our next question today comes from Germany, where Jpmorgan. Please go ahead.
Hey, guys. This is James on for Jeremy I'm mentioning my questions, maybe just starting here.
With Occidental's kind of volume forecast released a year and.
That's true for maintenance in 2021, where do where do you expect kind of margins to be trending for your DJ Delaware, especially in 21 considering.
A flat flattish volume growth.
Yes, a couple of things I would I would mention on that and again, we don't have guidance out yet for 2021 still in the process of being developed.
And oxidation to should certainly comments as it relates to any specifics on details regarding activity levels.
However that that guidance as I heard it was very much at a corporate level right as opposed to just asset specific level, which is more relevant for Wes and so what I would point you to is again the DUC inventory that we have a those are the details that we're we're aware of today.
Okay and any other specifics regarding activity on our asset base, we would wait until those plans are more formally developed and were able to put out 2021 guidance.
Okay Fair enough and then I guess I'm, just going away from external but just broader third party activity across your footprint on how about is trending and maybe just tying into M&A, but do you see opportunities to gain market share as the vitamin improvements into the back up this year in 2021 in regards to third party.
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James This is Craig and I'll take a stab at answering your question. There frankly, we've seen a lot of recent successes on the commercial side.
Our existing infrastructure is provided us a great advantage and and capturing bolt on opportunities and the team has done a fantastic job over the last couple of months.
In a very difficult environment to capture those additional.
Volumes that.
Been able to bring under contract or many of which.
May have been following somewhere else, but what we've been able to bring onto the system. The other thing I would add is.
He is working with our existing customers. We've we've seen a lot of success and really pleased with the work the team's done to to be able to keep those volumes flowing.
As we're all aware and other Vincent significant headwinds over the last few months and and those those producers have options as to where they're going to curtail volumes are where they would curtailed volumes and and so by getting creative and coming up with some really good solutions.
We were able to keep more volumes flowing than what we anticipated and really what that does is it just strengthens the relationship between us and our customers and.
And really gives us a lot optimism going forward I think from a competitive standpoint.
I think the environment that we're looking at going forward is.
No the existing set of participants providing services to customers.
I don't see that changing a whole lot I think what what really.
Gives us an advantage.
As our existing infrastructure.
So extensive we touch a number of producers many of which we do business with today and several of which were engaging too to conduct new business with and because of our proximity to their acreage.
We're very well positioned and and were.
We're looking forward to continuing to add to the successes that we've had of late.
Just out on top of that I think the team has done a a great job at Hudson environments like we've experienced over the past several months, where you're able to demonstrate your customers how important they are and the value associated with the breadth of western midstream and our asset base as well as a financial strength that we have.
As a company and so I definitely would view that as a competitive advantage that we'll have going forward in the areas that we operate.
Got it I'll stop there thanks a lot.
Our next question today comes from Colton Bean with Tudor Pickering Holt. Please go ahead.
Good afternoon. So Mike you mentioned price discovery for asset sales, how does west is trading range factor into put into a potential sale where are all assets considered independently and primarily thinking about the potential for equity investment valuations above the west corporate level.
Yes.
Yes, the GMP, yeah week sort of look at look at the non DJ non Delaware.
Assets in terms of GMP standalone versus long haul pipe type assets that obviously theres a a meaningful differential in terms of a multiple that can be achieved from selling.
Oh pipes versus GMP.
And based on some of the whispered prices as well call it anything.
They they sound attractive on on the long haul pipes I think I think for the GMP assets that are still a little bit depressed.
That price discovery relative to the value that those assets and the cash flow that those assets provide to us doesn't doesn't make a lot of sense here in the near term and until we see.
The prices improve but the long haul pipes those are still going for attractive valuation see infrastructure funds in the like that or flush with cash and cash and looking to put.
That cash to work. So there are some opportunities, but again I would I would differentiate between appear GMP type assets in the long haul pipe equity investments.
Got it in on the long haul assets would you be focused on making sure you realize full value there or if it was accretive to the west corporate profile would that be enough ticket talks going.
We would trend definitely towards a market a market price irrespective of our specific situation.
Financial condition, which by the way we've used to be quite strong.
Yeah.
And then just on the on the oxy side to be de consolidated Wes and have discussed selling down below that 50 lots, 50% Mark now.
Would you all consider buying and those units where is the balance sheet still the near term priority.
Yes balance sheet is first and foremost that is job one for us.
I mean that we wouldn't take a look at Fannie type.
Situation that has arisen back them out or is it hasn't and we maintain focused on focused on our balance sheet getting wess credit ratings back to investment grade.
Understood appreciate that.
Our next question to that comes from Derek Walker with Bank of America. Please go ahead.
Hi, good afternoon, everyone. Thanks for the color. So far just had a couple of clarification questions are you guys talked a little bit about the created a commercial solutions I think you talked about some avoidance of curtailments and just give a little more color sort of.
How that came about what was the type of contract there and sort of color around sort of margin or rate.
That was a that really drove et cetera.
Yeah, I'll give you an example, Derek and.
No.
One particular producer that we have a nice contract with supported by a minimum volume commitments.
They had the opportunity to to curtail volumes on the system.
And because of their over delivery volumes. Historically speaking there are some some bank credits if you will relative to the relative to the to the minimum volume commitment and so arguably they could have curtailed volumes without paying immediately.
Minimum volume commitment obligations.
And so what we're able to work out with them is a some some near term very short term rate adjustments and.
And we got incremental business committed to us from that customer and all those volumes state online and.
That's the type of winning outcome that that we're looking for it helped the producer. It also created additional value for us long term by getting additional acreage dedicated to as proximal to our existing infrastructure.
Appreciate that and maybe just a quick one other curtailment activity.
Are you seeing any that today or is most of that return.
Thanks systems.
Almost all has returned on the system.
Okay. I appreciate it will last for me. It's just a match the 250 ducs lighting system that can you talk a little flavor of sort of where that is by basin.
You bet you expect a 100 to be completed second half just want to get a sense of Oh, how those fall between the DJ Delaware. Thank you.
Yes, so within the DJ it's.
Probably little it's a little over 40% of the of the Hundredd a little over 40% will actually be in the DJ and the remainder in the Delaware.
Looking around for confirmation on that actually it's a little bit higher.
Really skewed toward the DJ for the latter half of 2020.
Okay.
Thank you I appreciate guys. Thanks very much.
Our next question today comes from Sunil Sibal were Seaport Global Securities. Please go ahead.
Hi, good afternoon, everybody and congrats on a good quarter.
Many of my questions have been hit a just had a few kind of clarification.
On the leverage I think you said no goal is to get to Fourx by end of next year.
And then subsequently how should we think about not is I'd kind of reading ought to getting to that you did the first is the most important goal before do you think about it on the cash to shareholders.
Then why would I DB so critical.
For the June patients.
Yeah I'll take that I. Appreciate the question are we view investment grade as being vitally important for US we think it aligns the interest to all of our stakeholders.
Whether its unit holders or or debt holders.
Conversations with the rating agencies are ongoing and productive.
To be perfectly off we do have a tie the occidental given the customer concentration Occidental represents and so.
We want to move away from that and step one and being able to achieving.
Disparate credit ratings is to get our on balance sheet and order.
I think the argument to this associate or be decoupled from Occidental ratings is a lot stronger when your own balance sheet metrics warrant investment grade rating and it's important to us.
The bond issuance that we did in January 3.5 billion contain coupon status.
25 basis points per agency for downgrade there has been for such events, which is increasing our annual borrowing costs by 35 million, we view that a low hanging fruit to recapture and it's a meaningful amount of annual cash flow.
Hi, getting getting our credit rating back to back to investment grade.
To answer your question.
Yes, thanks, so that clarity and then on no.
Thank you Glenn if I did most of the shut in volumes are back now could you give us a sense of.
Volumes are tracking as up now versus what you averaged in Q2.
So deal.
Delaware.
No. We don't have any update I'm that we can provide right now as it relates to current status.
Okay and my last question was.
Got to your Mbcs into two basins.
Thank you it pretty you know.
I mean, it pretty large remitting like is there any kind of MVC contracts expiring is that we should be there no for the next couple of years.
Not a meaningful amount no.
Okay.
Thanks, a lot.
And then its worst cultural Gabe moreen with Mizuho. Please go ahead.
Thanks for squeezing me in just a quick question on the water opportunity I think you mentioned some pretty decent success in terms of getting volumes off the road or under systems just wondering.
How large that opportunity is.
Relative to getting the truck volumes off mall onto your system, how much runway there was left there.
Yeah, We gave we see a number of opportunities and we continue to pursue those in fact, we've we've been capturing.
Several of those here over the last couple of months.
These are bought.
As you could imagine producers are looking to reduce operating costs anyway, they can and so to the extent that they're still trucking.
Water volumes and Theres proximity to our system for through a capital efficient.
Pointing to a capital we can get connected to them and provide services at a much lower costs than what what they would otherwise be paying a there's a lot of mutual motivation to get to get that kind of incremental business done and so we've been saying a lot of lot of success in that area and a continued to remain optimistic there.
I think and as you point out.
We've we've made significant progress over the last several months getting more and more of the Occidental water volumes onto our system from trucks and so.
It's been a huge.
Huge success for us in a big part of our second quarter success really.
As I just to comment on that because that was a an effort that.
Resulted from a lot of collaboration actually back between us and and an occidental to be able to achieve something that it was mutually beneficial overall so.
Kudos frankly to the ability of both organizations worked really well together into the the commercial organization and operations team to to get those volumes online in a in a much faster period than we had projected.
Great. Thanks, guys.
Our next question comes from Shneur Gershuni, Yes. Please go ahead.
Sorry was on mute.
Good afternoon, everyone, maybe I'll just start off on the cost side of the equation.
Mike when when you guys sort of.
Took over you basically talked about the whole separation from oxy.
You chose.
The employees very carefully and you try to rightsize everything to make sure you get everything correctly.
Given accordingly, we just went really given you know oxys forecast about exit rates and very few well completions and so forth over the second after this year are there any more opportunities to take cost down further. Despite the fact that you had attempted to rightsize going into all of that's.
Yes. So thanks for the question sooner and yes, I did mentioned that at the very beginning we were very thoughtful about the way that we could.
Set up the company in such a way there was right sized going forward frankly, I think we have we've done a really great job and being able to increase the overall cost reduction effort.
Thus far so $115 million significant amount of that in the Gionee side, we expect of the 40%. This still remains for this year, a good 30% to 40% will be in the DNA arena and a good part of that is frankly instead of rebuilding some of the existing infrastructure. The we felt like.
It was needed the very beginning we're finding that the employee base is eager and open to taking on additional responsibility and therefore, reducing the need to fill a lot of those spots and so.
Right now as we look at it we feel like with $115 million worth of overall cost savings.
That puts us in a very good position in a very optimal place relative relative to peers relative to what we thought at the beginning of the year.
Oh, maybe as a follow up question here I'm, sorry, you can clarify on the water side.
If the opportunity basically wells come back online and we'll see the de watering benefit essentially or is there or is there an additional upside when drilling returns boxes from deepwater, but from a water supply perspective.
Generic it's both a and as we've noted most of the volumes are back online and but as we continue to move forward and operators get into a more normal.
Cadence in terms of their activity levels again, because of the relationships that were building right now with these new customers and and a introducing our system to them and in deploying.
Marginal incremental capital to get connected to these new producers.
We're well situated for when that upstream capital does return.
And the development.
Begins even even if it's on a slower pace and what may have been historically.
For us that's incredibly capital efficient.
By getting connected to the these producers with with the opportunity to two to move their water barrels going forward [noise].
It's also a pretty unique offering the that west is able to provide to customers to be able to gather oil gas and water.
In the area. So we look at it as you know able to be a one stop shop for those for those producers and.
In the Delaware.
Which with the scale that we haven't that is very unique.
Have you been able to take any market share or take volumes were competitors journalists curatives uncertain.
Yes.
It would be the short answer.
Not as much as I would like because I have very high expectations for our team and they've done incredibly well, but we're continuing to add to make inroads, there and and where we're seeing a lot of direct success as we compete with those existing participant in the basin.
Okay.
And maybe just one final question.
Just with respect to Oxys expectations, obviously, you up cost of service agreements and.
How they're talking about volume impacts you the same way, but do we get to a point where it creates some friction.
Given what we will effectively be a rising Carol if I did my math correctly last year or going into this year you had to step up if their exit rates are accurate volumes are going be down year over year, which would that imply that you would go up next year does that get to a friction point do you ship guaranteed may do we take a pause.
It's on that increase until volumes come back how do we manage this situation so that it doesn't become a pushing situation with you in your largest customer.
Yeah, I would say sooner.
A couple of comments there are number one we have great alignment overall with oxy.
Great alignment in terms of the objectives of bringing his many volumes on the system as possible.
We've talked about a lot of the cost cutting metrics that we've been able to do and frankly getting some of those volumes on the water side and the collaboration associated with that so first thing I would say is that the we see great alignment overall with oxy as it relates to any impact on the cost of service contracts on something that we do on an annual basis. There are lot of factors that go into.
That.
Not just.
Near term volume so not just 2021 volumes as volumes far into the future and that's also capital and what we've been able to and costs overall on what we've been able to show is that we've made great inroads on the capital and cost side that also plays into that so it would be very premature at this stage to to give any comments as to what the.
Potential impact might be on a cost to service.
Adjustment.
Perfect Alright. Thank you very much guys really appreciate the color today and stay safe.
Thank you. Thank you.
Ladies and gentlemen. This includes a question merger sessions during the conference back over to the management team for any thought on <unk>.
Thank you everyone for joining the call really appreciate the time I wanted to again, thank the employee base for the great efforts during what has been a very unprecedented period for our industry and for our world.
Thank you all for joining please stay safe.
Thank you Sir This concludes todays conference call you may now disconnect your lines another wonderful day.