Q4 2020 Altus Midstream Co Earnings Call
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Ladies and gentlemen, thank you for your patience and please continue to standby.
Midstream fourth quarter and full year 2020 earnings results call will begin momentarily. Thank you for your patience and please continue on standby.
[music].
And.
And.
And.
And Oh.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the office midstream fourth quarter and full year 2020 earnings results call.
At this time all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question. During this session you will need to press Star then one or your telephone.
Please be advised on today's call is being recorded and people.
And quite a useful assistance. Please press star then she works with and operator I.
And I turn the call over to Patrick Cassidy Director of Investor Relations. Please go ahead.
Good afternoon.
And thank you for joining us on Altus midstream company's fourth quarter, and full year, 'twenty and 'twenty financial and operational results conference call.
We will begin the call with an overview by Altus midstream CEO and president quite a breakfast and.
Ben Rodgers CFO will sit.
Or is there a financial performance and outlook.
Our prepared remarks will be approximately 15 minutes and linked with the remainder of the call allotted for Q&A.
Remarks during the call and they also referred to the Altice midstream investor presentation.
And which can be found on our Investor relations website, and altice midstream dotcom 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 on the investor presentation posted yesterday on the Investor Relations website previously noted.
Finally, I'd like to remind everyone that today's discussions 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 discuss today.
A full disclaimer is located with the investor presentation on our website.
With that I will turn the call over to clay.
Good afternoon, and thank you for joining altice on its fourth quarter and full year 2020 results conference call.
I know many a relieved to have last year behind us and are looking forward to the year ahead.
Despite the many headwinds faced last year Altice turned in a strong performance and this sets up for a continued improvement and 2021.
My remarks today will review last year's results, noting highlights within our joint venture pipeline businesses and gathering and processing operations.
Including our views on ESG and accomplishments and that area of our business.
I'll provide an update on our outlook for 2021, and then we'll review our financial performance 2000, and 'twenty. One guidance then open up the call to any questions from sell side analysts who follow us.
I'll move on now to our results.
And under weighted aspect that we're working through a difficult circumstances is that they can reveal strengths and weaknesses that might not become a parent otherwise 2020 was certainly a challenging year, but we successfully weathered the storm.
Adjusted EBITDA distributable cash flow and gathering and processing volumes all came in at or above the midpoint of our guidance for 2020, which was reassessed and may as the impacts from the pandemic emerged.
We subsequently raised guidance in July and November with our improved outlook for adjusted EBITDA and DCF.
Our diversified asset base combined with a relentless execution by altice team members to optimize their performance contributed to the improved results during the year.
Our growth capital expenditures for the year it came in and just over $360 million.
Which was a high end of our guidance range.
This reflects a shift and some of the Capex spending for Permian Highway from 2021 into 2020.
Which accelerated the commissioning and in service dates for PHP.
This is a trade off we were eager to accommodate as it pulled forward contributions to authors from this asset.
The strength of our JV pipeline assets paired with a startup of PHP is a primary reason, we were able to initiate a $6 per share annualized dividend this year.
All four pipelines are in service with <unk> and PHP fully subscribed under long term binding commitments.
The liquids lines, Shin Oak NGL and epic crude have been impacted by the reduced drilling activity in the Permian basin and the Delaware Basin in particular from the recent rig count was 116 down from pre pandemic levels of 236, only one year ago.
We do see a potential upside as activity continues to climb.
We had a strong year operationally and expanding our midstream products and services portfolio.
We are looking to secure further commitments for third party business.
For the sixth consecutive quarter, we reduced operating expenses.
Year over year operating expenses are down by nearly one third and we expect to continue capturing cost savings throughout 2021.
Importantly, we remain committed to asset integrity safety and the environment completing the fourth quarter with no injuries to a workforce and no reportable spills.
It's been nearly two years since our last recordable injury, a great outcome, considering all of the activity. Our team has managed over that time period.
Or a COVID-19 protocols remain in place and have been effective.
We did see increased absences related to the pandemic during the holidays, which redressed with schedule changes and contract labor.
To date, we have no known instances of employee to employee COVID-19 transmission and I want to acknowledge the team for their ongoing diligence and this effort.
We continue to focus on improving our operating efficiency and reducing our environmental footprint.
Building, a strong ESG culture provides benefits beyond compliance and profitability.
We recognize that outperformance in these areas provides a competitive edge.
Third parties want to partner with cleaner safer more efficient service providers employees want to work at the best midstream facilities and communities and appreciate the best operators and deserved that performance.
To that and we have executed or are implementing a number of projects with positive ESG attributes to.
To a highlight a few of these altice features new highly efficient plants and compressor stations with vapor recovery on all tankage, which eliminates gas sprinting to the atmosphere.
We use compressed air to operate hundreds of pneumatic Lee control devices, instead of using older technologies that debt.
Natural gas to the atmosphere.
We've implemented a proactive and intensive natural gas leak detection program at all compressor stations with testing frequency double that of the regulatory requirements.
Our operations, followed best practices with maintenance blowdown procedures designed to eliminate methane emissions.
We initiated a policy last year to optimize our use of electric compression assets by.
By limiting the use of gas fired engines and relying predominantly on electric generated compression.
We are reducing the overall emissions from our operating regions.
We have backup generation power for the Diamond Cryo facility that reduces flaring related to power outages.
Finally, working with the staff from the nearby and Mcdonald Observatory, we modified our facilities lighting designed to help maintain optimal nite sky viewing conditions.
That is a handful of examples and we continue to identify and implement others.
I'll move on now to fourth quarter highlights.
Earnings benefited from the early commissioning phase at PHP, which partially offset a decrease in EBITDA from lower G&P volumes that was driven by voluntary price related curtailments and natural production declines.
Despite the pandemic and reduced drilling activity, we have had some initial success capturing new revenue streams.
This includes processing off spec condensate volumes, which increased in the fourth quarter from the third.
Providing new compression services outside of the Alpine high area.
And electricity load shedding and the diamond cryo processing plant.
As we look ahead I am encouraged by the positive momentum we have entering the year.
Multiple COVID-19 vaccines are rolling out and our economy and strengthening with improving demand for oil and gas products, both domestically and for export.
We are beginning to see renewed interest and drilling and completion activity that will be necessary to replenish depleted inventories and fuel economic growth.
Our focus this year is the capture of third party volumes for our GNP business, including expanding our business with Apache outside of Alpine high.
We continue to seek deals to optimize underutilized assets, whether through divestment or redeployment.
On the ESG front initiatives are underway to further reduce flaring by 10% and unplanned equipment flow downs by 30%.
And protecting our dividend, while continuing to analyze financing alternatives for a preferred equity remains a high priority.
2021 will be the first year, all four of offices JV pipes will be and service and contributing for a full calendar year.
Our growth capital obligations are negligible after the first quarter and shareholders will see their first dividend payment at the end of next month.
We had a strong performance and an especially tough environment last year.
Our team rose to the challenge and I firmly believe and even better performance is ahead of US now I will turn the call over to Ben.
Thank you clay and my prepared remarks, I will review <unk> financial performance for the full year and fourth quarter, a 2020 cover our guidance for 2021 and provide our thoughts on the balance sheet and a year ahead and how we're looking at addressing the preferred equity.
As noted in a press release issued yesterday Altus reported net income, including Noncontrolling interest of $80 million for the full year 2020, adjusted EBITDA was $191 million and growth capital expenditures were approximately $362 million.
For the fourth quarter 2020, net income, including Noncontrolling interest was $60 million.
<unk> EBITDA was $48 million and growth capital expenditures were $42 million.
Adjusted EBITDA includes approximately $36 million related to and unrealized embedded derivative loss for the full year and a $40 million unrealized gain for the fourth quarter, which reflects a technical accounting revaluation of the embedded derivative and our preferred units at the end of each respective.
Active period.
Gathered volumes for the full year averaged 499 million cubic feet per day of which approximately 73% was rich gas.
For the fourth quarter gathered volumes averaged 455 million cubic feet per day.
Also approximately 73% rich gas.
Volumes for both the year and the fourth quarter were impacted by price related curtailments.
I'll move now to guidance, which you can also view and the earnings presentation posted on our website yesterday with a news release.
Our guidance metrics are all consistent with the update we provided in November.
E&P operators are still rolling out 2021 budgets with many noting that capital will be flex, depending on the stability or volatility of commodity prices.
As we did last year, we will adjust our outlook throughout the year as activity levels and their impacts become clear.
While we have seen oil and gas prices improve and some uptick and drilling activity as clay noted a common theme from drillers is that priority is being given to operating discipline and returning capital to investors versus the sector's historic pursuit of production growth from.
And for Altice. This new priority may have a direct impact on the capture of third party G&P business as there's less urgency among upstream producers to secure midstream services.
Similarly in our JV pipeline business, we are taking a conservative view on the utilization of the Shin oak and epic pipelines that move products from the Permian basin to the Gulf Coast.
We have not factored and prospective third party G&P business or an increase and liquids production into our current guidance and either event as potential upside to our outlook.
At Alpine high Apache has updated its completion schedule for the year with two <unk> coming online this quarter and five more expected to be completed later this year over the next few months, we will gain more clarity around expected duct production volumes were.
We are also finalizing the effects from last week's freeze offs on our G&P business as well as any potential volume impacts that Shin oak and epic we will provide an update during our first quarter earnings call in May.
Guidance for 2021 and growth capital Hasnt changed so on.
I would note we are expecting approximately $5 million and maintenance capital for our G&P business, which is taken into account and our DCF guidance for a JV pipes, we anticipate minimal maintenance capital. This year is all these pipes a relatively new.
As we look at the balance sheet, we have plenty of liquidity under our $800 million revolver, which doesn't mature until the fourth quarter of 2023.
We are also considering multiple funding alternatives to refinance the preferred equity with the objective of maintaining a conservative balance sheet and leverage metrics, while continuing to support our $6 per share annualized dividend.
I'll close by echoing <unk> remarks regarding the positive momentum, we're seeing and our space. Today. This includes additional completions at alpine high and contributions from alternative revenue streams and upside potential with related and third party business opportunities we.
And we look forward to updating you on our progress and a year ahead.
Operator, we can now open the call to any questions.
As a reminder to ask a question. Please press Star then one.
A question has been answered and you'd like to limit yourself from the queue press the pound key.
Our first question comes from Spiro <unk> with credit Suisse. Your line is open.
Hi, guys. This is Chad on for Spiro I guess, just starting off with.
With a gas price strength that we've seen this year has the prospects for third party opportunities improved or conversations fairly consistent with the messaging you provided in prior periods.
So Chad this is clay branches and thanks for the question and.
We're very positive about the increase in gas prices, we do believe it's going to create some third party opportunities.
And then alluded to this in his prepared remarks and that is producers are being careful and I don't want get out over their skis in terms of capital spending.
But at the same time and there are some some prospects and positive prospects in and around the alpine and area of production. So we do believe that there is some opportunities here I think it's something that will come later in the year not something that the producers are going to jump on right now, but we have had some <unk>.
Conversations with others.
We're very encouraged by the ducks the completion of the two dogs that Apache announced this morning that they were pleased with also and their call.
Five more are scheduled for this spring sometime beginning in April so excited about what that can can possibly do for the field and for throughput on the G&P side. So overall I think just given the commodity price environment. We do have a better year ahead of a certainly better than 2020 in terms of prospects.
And even in 2020, when we didn't have a lot of prospects, we were able to dig a few added a dirt and and get some some third party business and increase our EBITDA with a third party business.
And we have expectations that we'll be able to do even even better this year.
So again I think I think the price is definitely something that's going to help us on this both oil and gas associated gas that it would come from oil producers as well as just outright gas players in the area.
Okay.
Okay. Thanks, that's really helpful. And then I guess just a follow up just looking at your 2021 object because you mentioned the preferred a brief refinancing is on the horizon do you have a preferred method of refinancing our one that you see is more likely to address debt preferred equity or is it still too early to say on that.
Yes, it's really too early.
You can you can tell and one of the pages from our Investor presentation. We do have some retained cash flow this year.
Right at the mid point of our assuming the midpoint of our DCF guidance.
So there could be some upside there that assumes no additional asset sales we've talked about some of those in the past as well.
And as you can tell we ended the year last year.
With almost $25 million a cash on the balance sheet. So.
So we'll have a little bit a cash.
And we're looking at all sorts of different alternatives really too early to tell right now and we're sitting in February and.
We still have some time as we've said before kind of a perfect timing.
Of the crossover of the millwork and IRR on that is kind of late 'twenty. One early 'twenty. Two so we've got some time, but it's it's good to see the market's opening back up the high yield market and.
And other capital markets opening back up and other companies accessing those markets at attractive terms.
I will tell you that.
Our focus is going to be too.
Keep very manageable leverage.
And.
And also protect our dividend.
Okay. Thanks, that's clear that's all I had thanks for the time today guys.
Sure thing thanks.
Our next question comes from James Carreker with US capital Advisors. Your line is open.
Hey, guys. Thanks for the question.
The seven ducks that Apache talked about this year is that.
All of a ducks that they have on this system are there more and they could potentially a complete down the road and then is there any.
Potential for them to return active active rigs to the alpine.
Hi area.
Yes, James this is clay and Apache has.
Mentioned that they have additional ducks before but these are the ducks that they are prepared to move on right now they've only mentioned these seven for 2021.
It remains to be seen whether or not they would go after the remaining ducks and the future.
But that is.
Certainly something that we would we would hope for as far as Altus is concern, but that will be dictated by the economics of Apache.
Okay.
And I'll just add real quick.
He commented this morning, and we're not going to add any color to that but you did comment that those wells.
First two ducks are performing very well.
And I think that.
There could be and opportunity.
For them to bring and some additional capital.
And to develop out at Alpine high.
Time will tell on that.
Obviously, you need all seven ducks to perform well and so.
Needs a little bit a time, but it's definitely a positive indicator for us on the G&P side of the business.
Got it and then I guess shifting over to you to liquids pipes.
Talked about kind.
Kind of being flat year over year.
Any sense for what that implies on.
On a capacity utilization.
Or what the operating Leverages to Shin Oak.
If more volume to materialize back half of the year of 2022 and beyond how much that could add.
Yes, it's kind of hard to say James we've not provided that pipe level detail.
I just would reiterate that we're assuming kind of year over year flat volumes.
On.
Barring any material impact on on thinking it's going to be material as you look at the full year, but any material impact from the freeze off last week.
A couple of weeks ago and.
And so.
That's why I think that at $60 $65 oil, we'll just have to continue to monitor.
On the utilization of that pipe I think that there is some upside there and I think we are using a conservative estimate which is good and appropriate.
And for guidance levels, and and that's what's considered and earn and our numbers for both DCF and EBITDA.
On.
So another another impact that I am sure you are aware for the NGL pipes across the entire base and not just Shin oak.
As ethane rejection.
Gas prices are up propane prices kind of a C three plus.
All up and ethane.
And just hasnt experienced.
On the price increase with the Ngls.
And so that's something to kind of counterbalance any potential growth from additional y grade.
On the system.
But even that being said.
As we've seen in the past and you look at even last year as a barometer.
There was a little bit of ethane rejection.
But definitely didn't last for a consecutive time period of more than a few months and so.
All that being said you wrap it up I think year over year flat.
And as appropriate for where we are today too.
Two months into the year, we will update it when we get more color, but there could be some upside to that number.
And then Oh.
Over to epic crude.
On.
What's the latest status of the term loan and what's the timeline to potentially.
Receiving.
Distributions from from that investment.
So it's a.
The timeline for distributions there is has been pushed out.
As we were sitting here last year as a beginning of 2020 pre COVID-19 levels.
It was looking more promising.
And the <unk>.
Near term at that time, and then obviously.
Oil averaging in the high Thirty's from <unk> last year had a material impact on.
Production flows and so.
So.
Probably can't get and speak too much out a turn there is a 15% owner I can tell you that we're not expecting any covenant issues with that term loan. It was a seven year term loan.
They issued in 2019, so plenty of runway there.
On.
And it and it's publicly traded so you can see kind of where that term loans marked and make your own assessment.
But I don't think that its going to be.
Too onerous on the equity, but I do think that any near term distributions from that from an equity perspective had been pushed out for quite some time.
And just with the cost overruns do you have a.
Debt balance or I don't know if there is a term loan plus.
From other debt or just whats the overall.
Leverage.
Epic.
Do you have debt.
I'd have to low.
And what is kind a get back to you I needed to confirm that.
We could even speak to that just kind of given I know that the term loan trades, but I'm not sure how a publicly available some of those numbers are so maybe we can follow up Pat Cassidy and I can follow up with you on that.
Okay. Thank you.
That's all I have.
Okay. Thanks James.
And again to ask a question. Please press Star then one.
There are no further questions I'd like to turn the call back over to clay President and CEO for closing remarks.
Thanks, everyone for listening to our call today I'd like to leave you with a following closing thoughts about <unk> midstream.
We enter into 2021 with significant momentum.
All of our JV pipes are in service, we are seeing additional completion activity at alpine high and the prospects for new business from related and third parties is encouraging.
While recent headlines have noted new federal rules concerning limits to oil and gas activities on federal lands.
I should note that offices assets do not operate on federal lands.
Freezing weather like we had last week reminds us of the ongoing need for a resilient and reliable energy supply.
And lastly, altus is well positioned to generate free cash flow throughout 2021 day.
This supports our objective of returning capital to shareholders and I am pleased we will deliver our first dividend payment next month.
Operator that concludes our call I will turn it over to you.
Thank you ladies and gentlemen, this does conclude the program and you may now disconnect everyone have a great day.
Sure.
And then.
And.
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Okay.
And.
[music].
[music].
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to the office midstream fourth quarter and full year 2020 earnings results call.
At this time all participants are in a listen only mode.
After the Speakers' presentation there'll be a question answer session to ask a question. During this session you will need to press Star then one on your telephone please be advised on today's call is being recorded.
If you require a useful assistance. Please press star then zero switched on operator and.
And I'll turn the call over to Patrick Cassidy Director of Investor Relations. Please go ahead.
Good afternoon and.
Thank you for joining us on Altus midstream company's fourth quarter, and full year, 'twenty and 'twenty financial and operational results conference call.
We will begin the call with an overview by Altus midstream CEO and President Clay breakfast and Ben Rodgers CFO will summarize our financial performance and outlook.
Our prepared remarks will be approximately 15 minutes in length with a.
The remainder of the call allotted for Q&A.
Remarks during the call and they also referred to the Altice midstream investor presentation.
And which can be found on our Investor relations website at Altice midstream dotcom 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 on the investor presentation posted yesterday on the Investor Relations website previously noted.
Finally, I'd like to remind everyone that today's discussions 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 discuss today.
A full disclaimer is located with the investor presentation on our website.
With that I will turn the call over to clay.
Good afternoon, and thank you for joining altice on its fourth quarter and full year 2020 results conference call.
I know many are relieved to have last year behind us and are looking forward to the year ahead.
Despite the many headwinds faced last year Altice turned in a strong performance and this sets up for a continued improvement and 2021.
My remarks today will review last year's results, noting highlights within our joint venture pipeline businesses and gathering and processing operations.
Including our views on ESG and accomplishments and that area of our business on.
I'll provide an update on our outlook for 2021, and then we'll review our financial performance 2000, and 'twenty. One guidance then open up a call to any questions from sell side analysts who follow us.
I'll move on now to a results.
And under weighted aspect of are working through a difficult circumstances is it taken reveal strengths and weaknesses that might not become apparent otherwise 2020 was certainly a challenging year, but we successfully weathered the storm.
Adjusted EBITDA distributable cash flow and gathering and processing volumes all came in at or above the midpoint of our guidance for 2020, which was reassessed and may as the impacts from the pandemic emerged. We subsequently raised guidance in July and November with our improved outlook for adjusted EBITDA.
And DCF.
Our diversified asset base combined with a relentless execution by altice team members to optimize their performance contributed to the improved results during the year.
Our growth capital expenditures for the year it came in and just over $360 million, which.
Which was a high end of our guidance range.
This reflects a shift and some of the Capex spending for Permian Highway from 2021, and two 2020, which accelerated the commissioning and in service dates for PHP.
This is a trade off we were eager to accommodate as it pulled forward contributions to authors from this asset.
The strength of our JV pipeline assets paired with a startup of PHP is a primary reason, we were able to initiate a $6 per share annualized dividend this year.
All four pipelines are in service with Gcs and PHP fully subscribed under long term binding commitments.
The liquids lines, Shin Oak, NGL and epic crude have been impacted by the reduced drilling activity and the Permian basin and the Delaware Basin in particular from <unk>.
A rig count was 116 down from pre pandemic levels of 236, only one year ago.
We do see a potential upside as activity continues to decline.
We had a strong year operationally and expanding our midstream products and services portfolio.
And we're looking to secure a further commitments for a third party business.
For the sixth consecutive quarter, we reduced operating expenses.
Year over year operating expenses are down by nearly one third and we expect to continue capturing cost savings throughout 2021.
Importantly, we remain committed to asset integrity safety and the environment completing the fourth quarter with no injuries to a workforce and no reportable spills.
It's been nearly two years since our last recordable injury, a great outcome, considering all of the activity. Our team has managed over that time period.
Our COVID-19 protocols remain in place and have been effective.
We did see increased absences related to the pandemic during the holidays, which redressed with schedule changes and contract labor.
To date, we have no known instances of employee to employee COVID-19 transmission and I want to acknowledge the team for their ongoing diligence and this effort.
We continue to focus on improving our operating efficiency and reducing our environmental footprint.
Building, a strong ESG culture provides benefits beyond compliance and profitability.
We recognize that our performance in these areas provides a competitive edge.
Third parties want to partner with cleaner safer more efficient service providers employees want to work at the best midstream facilities and communities and appreciate the best operators and deserved that performance.
To that and we have executed or are implementing a number of projects with positive ESG attributes to.
To highlight a few of these altice features new highly efficient plants and compressors stations with vapor recovery on all tankage, which eliminates gas spending to the atmosphere.
We use compressed air to operate hundreds of pneumatic lead control devices instead of using older technologies that debt natural gas to the atmosphere.
We've implemented a proactive and intensive natural gas leak detection program at all compressor stations with testing frequency double that of the regulatory requirements.
Our operations, followed best practices with maintenance blowdown procedures designed to eliminate methane emissions.
We initiated a policy last year to optimize our use of electric compression assets by.
By limiting the use of gas fired engines and relying predominantly on electric generated compression we are reducing the overall emissions from our operating efficiency.
We have backup generation power for the Diamond Cryo facility that reduces flaring related to power outages.
Finally, working with a staff from the nearby and Mcdonald Observatory, we modified our facilities lighting designed to help maintain optimal nite sky viewing conditions.
That is a handful of examples and we continue to identify and implement others.
I'll move on now to fourth quarter highlights.
Earnings benefited from the early commissioning phase at PHP, which partially offset a decrease in EBITDA from lower G&P volumes. It was driven by voluntary price related curtailments and natural production declines.
Despite the pandemic and reduced drilling activity, we have had some initial success capturing new revenue streams.
This includes processing off spec condensate volumes, which increased in the fourth quarter from the third.
Providing new compression services outside of the Alpine high area and.
And electricity load shedding at the Diamond Cryo processing plant.
As we look ahead I am encouraged by the positive momentum we have entering the year.
Multiple COVID-19 vaccines are rolling out and our economy, and a strengthening with improving demand for oil and gas products, both domestically and for export.
We are beginning to see renewed interest and drilling and completion activity that will be necessary to replenish depleted inventories and fuel economic growth.
Our focus this year is the capture a third party volumes for our GNP business, including expanding our business with Apache outside of Alpine high.
We continue to seek deals to optimize underutilized assets, whether through divestment or redeployment.
On the ESG front initiatives are underway to further reduce flaring by 10% and unplanned equipment flow downs by 30%.
And protecting our dividend and while continuing to analyze financing alternatives for our preferred equity remains a high priority.
2021 will be the first year, all four offices, JV pipes will be and service and contributing for a full calendar year.
And our growth capital obligations are negligible after the first quarter and shareholders will see their first dividend payment at the end of next month.
We had a strong performance and an especially tough environment last year.
Our team rose to the challenge and I firmly believe and even better performance is ahead of US now I will turn the call over to Ben.
Thank you clay and my prepared remarks, I will review Altus is financial performance for the full year and fourth quarter, a 2020 cover our guidance for 2021 and provide our thoughts on the balance sheet and a year ahead and how we're looking at addressing the preferred equity.
As noted in a press release issued yesterday Altice reported net income, including Noncontrolling interest of $80 million for the full year 2020, adjusted EBITDA was a $191 million and growth capital expenditures were approximately $362 million.
For the fourth quarter 2020, net income, including Noncontrolling interest was $60 million.
Adjusted EBITDA was $48 million and growth capital expenditures were $42 million.
Adjusted EBITDA includes approximately $36 million related to and unrealized embedded derivative loss for the full year and a $40 million unrealized gain for the fourth quarter, which reflects a technical accounting revaluation of the embedded derivatives and our preferred units at the end of each respective.
<unk> period.
Gathered volumes for the full year averaged 499 million cubic feet per day of which approximately 73% was rich gas.
For the fourth quarter gathered volumes averaged 455 million cubic feet per day.
Also approximately 73% rich gas.
Volumes for both the year and the fourth quarter were impacted by price related curtailments.
I'll move now to guidance, which you can also view and the earnings presentation posted on our website yesterday with the news release.
Our guidance metrics are all consistent with the update we provided in November.
E&P operators are still rolling out 2021 budgets with many noting that capital will be flex, depending on the stability or volatility of commodity prices.
As we did last year, we will adjust our outlook throughout the year as activity levels and their impacts become clear.
While we have seen oil and gas prices improve and some uptick and drilling activity as clay noted a common theme from drillers is that priority is being given to operating discipline and returning capital to investors versus the sector is historic pursuit of production growth for.
And for Altice. This new priority may have a direct impact on the capture of third party G&P business as there's less urgency among upstream producers to secure midstream services.
Similarly, and our JV pipeline business, we are taking a conservative view on the utilization of the Shin oak and epic pipelines that move products from the Permian basin to the Gulf Coast.
We have not factored in and prospective third party G&P business or an increase and liquids production into our current guidance and either event as potential upside to our outlook.
At Alpine high Apache has updated its completion schedule for the year with two <unk> coming online this quarter and five more expected to be completed later this year over the next few months, we will gain more clarity around expected debt production volumes were.
We are also finalizing the effects from last week's freeze offs on our G&P business as well as any potential volume impacts that Shin oak and epic we will provide an.
Update during our first quarter earnings call in May.
Guidance for 2021 and growth capital Hasnt changed though I would note we are expecting approximately $5 million and maintenance capital for our G&P business, which is taken into account and our DCF guidance for a JV pipes, we anticipate minimal maintenance capital. This year is all of these pipes are a relatively new.
As we look at the balance sheet, we have plenty of liquidity under our $800 million revolver, which doesn't mature until the fourth quarter of 2023.
We are also considering multiple funding alternatives to refinance the preferred equity with the objective of maintaining a conservative balance sheet and leverage metrics, while continuing to support our $6 per share annualized dividend.
I'll close by echoing Clay's remarks regarding the positive momentum, we're seeing and our space. Today. This includes additional completions at alpine high and contributions from alternative revenue streams and upside potential with related and third party business opportunities.
Look forward to updating you on our progress and a year ahead.
Operator, we can now open the call to any questions.
As a reminder to ask a question. Please press Star then one if a.
A question has been answered and you'd like to remove yourself from the queue press the pound key.
Our first question comes from Spiro <unk> with credit Suisse. Your line is open.
Hi, guys. This is Chad on for Spiro I guess, just starting off with.
And with gas price strength that we've seen this year has the prospects for third party opportunities improved our conversations fairly consistent with the messaging you provided in prior periods.
Okay.
Yes.
So Chad this is clay branches and thanks for the question and.
We're very positive about the increase in gas prices, we do believe it's going to create some third party opportunities.
And then alluded to this in his prepared remarks and that is producers are being careful and I don't want get out over their skis in terms of capital spending.
But at the same time and there are some some prospects and positive prospects in and around the alpine and area of.
On a production. So we do believe that there is some opportunities here I think it's something that will come later in the year not something that we're that producers are going to jump on right now, but we have had some conversations with others.
We're very encouraged by the ducks the completion of the two dogs that Apache announced this morning that they were pleased with also and their call.
Five more are scheduled for this spring some time beginning in April so excited about what that can can possibly do for the field and for throughput on the G&P side. So overall I think just given the commodity price environment. We do have a better year ahead of a certainly better than 2020 in terms of prospects.
Even in 2020, when we didn't have a lot of prospects, we were able to dig a few added a dirt and and get some some third party business and increase our EBITDA with a third party business.
We have expectations that we'll be able to do even even better this year.
So again I think makes a price is definitely something that's going to help us on this both oil and gas associated gas that it would come from oil producers as well as just outright gas players in the area.
Okay. Thanks, that's really helpful. And then I guess just a follow up just floating entered 2021 and objectively you mentioned the preferred refinancing is on the horizon do you have a preferred method of refinancing our one that you see is more likely to address debt preferred equity or is it still too early to say.
On that.
Yes, it's really too early.
You can tell and one of the pages from our Investor presentation.
We do have some retained cash flow this year.
Right at the mid point of our and assuming the midpoint of our DCF guidance.
And so there could be some upside there that assumes no additional asset sales, we've talked about some of those and the path as well.
And as you can tell we ended the year last year.
And with almost $25 million a cash on a balance sheet. So.
So we'll have a little bit a cash.
And we're looking at all sorts of different alternatives really too early to tell right now and we're sitting in February and.
We still have some time as we've said before kind of a perfect timing.
Of the crossover of the millwork and IRR on that is kind of late 'twenty. One early 'twenty. Two so we've got some time, but it's it's good to see the market's opening back up the high yield market and.
And other capital markets opening back up and and other companies accessing those markets at attractive terms.
I will tell you that it's.
Our focus is going to be too.
Keep very manageable leverage.
And.
And also protect our dividend.
Okay. Thanks, that's clear and Thats all I had thanks for the time today guys.
Sure thing thanks.
Our next question comes from James Carreker with U S Capital Advisors. Your line is open.
Hey, guys. Thanks for the question.
The seven ducks that Apache talked about this year is that all.
All the ducks that they have on this system are there more and they could potentially a complete down the road and then is there any.
Potential for them to return active active rigs to the alpine.
Hi area.
Yes, James this is clay and and Apache has.
Mentioned that they have additional ducks before but these are the ducks that they are prepared to move on right now they've only mentioned these seven for 2021.
It remains to be seen whether or not they would go after the remaining ducks and the future.
But that is.
Certainly something that we would we would hope for as far as Altus is concern, but that will be dictated by the economics of a Apache.
Okay.
And I'll just add real quick.
He commented this morning, and we're not going to add any color to that but the EBIT comment that those wells.
First two ducks are performing very well.
And I.
Think that.
And there could be and opportunity.
For them to bring in some additional capital.
And to develop out at Alpine high.
Time will tell on that.
Obviously, you need all seven ducks to perform well and so.
Needs a little bit a time, but it's definitely a positive indicator for us on the G&P side of the business.
Got it and then I guess shifting over to you to liquids pipes.
Talked about kind.
Kind of being flat year over year.
Any sense for what that implies on.
On a capacity utilization.
Or what the operating Leverages to Shin Oak.
If more volume do materialize back half of the year of 2022 and beyond.
That could add.
Yes, it's kind of a hard to say James we've not provided that pipe level detail.
I just would reiterate that we're assuming kind of year over year flat volumes.
Barring any material impact on on saying, it's going to be material as you look at the full year, but any material impact from the freeze off last week.
A couple of weeks ago and.
So yes.
And that's why I think that at $60 $65 oil, we'll just have to continue to monitor.
On the utilization of that pipe I think that there is some upside there and I think we are using a conservative estimate which is good and appropriate.
For guidance levels, and and that's what's considered and earn and our numbers for both DCF and EBITDA.
On.
So and another another impact that I am sure you are aware for the NGL pipes across the entire base and not just Shin oak.
And our injection gas.
Gas prices are up propane prices kind of a C. Three plus are all up and ethane.
And just hasnt experienced.
The price increase with the Ngls.
And so that's something to kind of counterbalance any potential growth from additional y grade.
On the system.
But even that being said.
And as we've seen in the past and you look at even last year as a barometer.
There was a little bit of ethane rejection.
But definitely didn't last for a consecutive time period, a more than a few months and so.
All that being said you wrap it up I think year over year flat.
And as appropriate for where we are today too.
Two months into the year, we will update it when we get more color, but there could be some upside to that number.
And then over to epic crude.
On.
What's the latest status of the term loan and what's the timelines and potentially <unk>.
Receiving.
Distributions from from that investment.
Yeah.
So it's a.
The timeline for distributions there has has been pushed out.
As we were sitting here last year as a beginning of 2020 pre COVID-19 levels.
It was looking more promising.
And the.
Near term at that time, and then obviously.
Oil averaging in the high Thirty's from <unk> last year had a material impact on <unk>.
Production flows and so.
Probably can't get and speak too much out a turn there is a 15% owner I can tell you that we're not expecting any covenant issues with that term loan. It was a seven year term loan debt.
And they issued in 2019, so plenty of runway there.
On.
And it's publicly traded so you can see kind of where that term loans marked and make your own assessment.
But I don't think that it's going to be.
Too onerous on the equity, but I do think that any near term distributions from that from an equity perspective had been pushed out for quite some time.
And just with the cost overruns do you have a.
Debt balance or I don't know if theres a term loan plus.
From other debt or just whats the overall.
Leverage.
Epic.
Do you have debt.
I'd have to low.
Let us kind a get back to you I needed to confirm that.
We could even speak to that just kind of given I know that the term loan trades, but im not sure how core publicly available some of those numbers are so maybe we can follow up Pat Cassidy and I can follow up for you on that.
Okay. Thank you.
That's all I have.
Okay. Thanks James.
Again to ask a question. Please press Star then one.
There are no further questions I'd like to turn the call back over to clay President and CEO for closing remarks.
Thanks, everyone for listening to our call today I'd like to leave you with a following closing thoughts about <unk> midstream.
We enter into 2021 with significant momentum.
All of our JV pipes are in service, we are seeing additional completion activity at alpine high and the prospects for new business from related and third parties is encouraging.
While recent headlines have noted new federal rules concerning limits to oil and gas activities on federal lands.
Note that offices assets do not operate on federal lands.
Freezing weather like we had last week reminds us of the ongoing need for a resilient and reliable energy supply.
And lastly, altus is well positioned to generate free cash flow throughout 2021.
This supports our objective of returning capital to shareholders and I am pleased we will deliver our first dividend payment next month.
Operator that concludes our call I will turn it over to you.
Thank you ladies and gentlemen, this does conclude the program and you may now disconnect everyone have a great day.