Q4 2020 Williams Companies Inc Earnings Call
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[music].
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Good day, everyone and welcome to the Williams of fourth quarter and full year 2020 earnings conference call.
Today's conference is being recorded.
At this time for opening remarks, and introductions I would like to turn the call over to Mr. Daniela Giovanni Vice President of Investor Relations. Please go ahead.
Thanks, Lindsay and good morning, everyone.
For joining us and for your interest in the Williams companies.
Yesterday afternoon, we released our earnings press release, and the presentation that our president and CEO Alan Armstrong.
And our Chief Financial Officer, John Chandler will speak to this morning.
Also joining us on the call today are Michael Dunn, our Chief operating Officer, Lynn Wilson, Our General Counsel and Chad Zamin, our senior Vice President of corporate strategic development.
In our presentation materials, you will find a disclaimer related to forward looking statements.
This disclaimer is important and integral to our remarks and you should review it.
Also included in our presentation materials are non-GAAP measures that we reconciled to generally accepted accounting principles.
Reconciliation schedules appear on the back of today's presentation materials.
So with that I'll turn it over to Alan Armstrong.
Great and thanks, Danilo and thank you all for joining US today, we're pleased to share the results of a very strong fourth quarter rounding out a year of record business performance for Williams. It yet again illustrates the stability and predictability of our business. So starting here with slide one.
First of all I am thrilled to announce that our EBITDA once again exceeded the midpoint of our original guidance range for the fourth quarter.
Second of the year and resulted in a 4% CAGR for the same four year period.
Also during this same period, we dramatically improved our credit metrics through our asset sale program. So really a nice steady period here of very predictable growth and balance sheet improvement.
This unmatched predictability is important to our value proposition and is further reinforced by this being the 20 <unk> consecutive quarter of meeting or exceeding street expectations.
We also met or exceeded all of our other key financial metrics, allowing us to once again produce positive free cash flow even after buying the outstanding interest and came in to that controls blue racer midstream in the fourth quarter.
Our focus on continuously improving our project execution, our operating margin ratio reliability metrics and safety performance delivered strong financial performance again in 2020 and allowed us to yet again achieve record gas gathering volumes and contracted gas transmission capacity.
And all of these steady improvements and accomplishments build off of a clear foundational strategy that allows us to stay focused and aligned across the organization.
We demonstrated incredible business resiliency in a year of unprecedented change challenges for our industry and our country. Our strong results in 2020 show just how durable this business can be against several headwinds such as the COVID-19 pandemic and the associated oil.
This collapse major customer bankruptcies, and an active hurricane season in the Gulf of Mexico that exceeded anything from an outage standpoint that we had on record.
This to multiple tumultuous 2020 market environment allowed us to truly distinguish ourselves in fact, we were one of the few midstream companies to maintain and in fact deliver on our pre Covid guidance ranges that we provided to you in 2019 and I'm excited to see what this organization can produce.
Without the large number of headwinds that we navigated through this past year in 'twenty one.
Moving on here in addition to executing on our business in 2020, we accelerated our ESG performance last summer Williams became the first U S Midstream company to announce a climate commitment setting and emissions reduction goal for 2030 that is based on real achievable.
Target and that imposes accountability on the management team at setting. These goals, we believe that focusing on the right here and right now opportunity sets us on a positive trajectory to achieving net zero target by 2050.
In addition, we call that an industry effort to standardize ESG metrics with the energy infrastructure Council.
And in January we hosted the industry's first ever ESG event, specifically devoted to sharing the companies direction goals aspirations intangible accomplishments related to ESG performance.
In summary.
In 2020, we once again demonstrated the stability and predictability of our business and importantly, we've also shown the ability to focus and execute our plan without being distracted by the challenging macro backdrop.
And with that I'll turn it over to John to go through the details.
Thanks, Alan at a very high level summary for the quarter, our cost reduction efforts, new Transco projects brought into service incredibly strong results out of our northeast G&P segment, and a catch up of minimum volume commitments EBITDA from a favorable warm center south in bankruptcy settlement.
To offset a decline in profits from deferred revenue step downs at our Gulf Star Deepwater platform, along with shut ins from hurricane activities early during the fourth quarter of 2020.
As you can see the strong performance in our statistics on this page in fact, we saw improvement in all of our key financial metrics, both for the fourth quarter and for the full year.
First our adjusted EBITDA for the quarter was up $52 million or 4% for all of the reasons I just mentioned.
The same played out on our year to date results adjusted EBITDA year to date was up $90 million or 2%.
However, I think it's interesting to point out that if you adjust for noncash deferred revenue step downs at our Bill Star platform and at our Barnett gathering system, both of which were known and expected as well as a few other smaller non cash items our year to date adjusted EBITDA without these non cash comparability items is actually up 4% again much like it was.
During the fourth quarter.
We will discuss EBITDA variances in more depth in a moment.
Adjusted EPS for the quarter increased 29% largely due to increased EBITDA and reduced income taxes were during the fourth quarter of 19. There were there was a large a larger than normal state tax adjustment and also to certain extent lesser interest expense. This year our year to date EPS is also up 11% again due to increased EBITDA low.
Allocations of income to non controlling interest owners and again to a lesser extent due to lower interest expense.
This quarter, we're presenting a new cash flow metric and we will continue to present. This going forward. The measure is available funds from operations. This measure will replace distributable cash flow and a similar to DCF, except it's derived from cash from operations and as before all capital spending including before maintenance capital.
Or said differently <unk> is simply cash from operations.
Adjusting out working capital fluctuations and also adjusting for cash flow from or to our non controlling interest owners that shows up in the financing session section of our cash flow statement are.
A reconciliation of this measure of the cash from operations can be found in the appendix of this presentation and also in our analyst package you can see the SSO grew for both the fourth quarter and year to date similar to the growth in adjusted EBITDA, except some of the EBITDA growth is from a consolidated JV and so some of that growth as belong and does flow through our <unk>.
The owners.
Distributable cash flow increased for the quarter due to higher EBITDA and also due to a $42 million alternatives alternative minimum tax refund. We received during the quarter that was not present in the 2019 period.
DCF for the year is also up again due to higher EBITDA and lower maintenance capital offset somewhat by increased EBITDA paid to our non controlling interest owners.
And due to lower alternative minimum tax cash refund that we received for overall in 2020 versus 2019.
On the capital spending from our intentional capital disciplined growth capital spending down this year and free cash flow up.
And to that point, our total capital spending for the year was 40% less than last year.
And that our spending this year included the acquisition of <unk>.
Most of the remaining interest in the Cayman two blue racer ownership for about $160 million in mid November as a result.
Of that acquisition, we are now at 50% owner of Blue racer with first reserve owning the other 50% interest and we're excited to see what synergies we can bring to that business now that we have a larger stake and we are the operator.
Included in this capital spending number is also maintenance capital, which for the year was $393 million about $107 million less than it was in 2019.
Finally, if we put our <unk> in 2020 of $3 6 billion up against our total capital spending including maintenance of $1 5 billion and our dividends of $1 9 billion. You can see that we were free cash flow positive in 2020.
This strong cash generation and capital discipline has helped move us towards our goal to improve our leverage metrics for the year and this year our debt to EBITDA metrics ended at 435 times down from 439 times at the end of 2019.
So now let's go to the next slide and digging a little deeper into our EBITDA results for the quarter.
Again Williams performed very well this quarter as you'll hear throughout each segment cost control has been a big benefit this year.
Before we dive in each segment, we believe it's important to isolate a few unusual items to make the numbers more comparable and reflective of the ongoing performance of the business.
We've identified those unusual items, which are shown on this chart as noncash comparability items.
Interestingly for the quarter, they net to only $2 million.
And that consists primarily of two things. The first is a $24 million reduction in non cash deferred revenue step downs in our transmission in Gulf of Mexico segment on our deepwater Gulf Star platform.
As a reminder, on deferred revenue, we receive significant upfront cash payments several years ago from the deepwater producer, but did not recognize revenue at that time, we have been amortizing. The payments. We previously received into income over the last several years and net amortization has been shrinking.
The second unusual items is a $20 million minimum volume commitment true up entry that we made in the fourth quarter of 2020 related to our settlement with south on who agreed to pay us the nbc's they owed us for the year. This adjustment is for the first through the third quarter that we recorded in the fourth quarter. We had stopped recording those MVC is at the beginning of 2020.
When south on originally filed for bankruptcy.
So with or without those noncash items, our EBITDA was up over 4%.
Our transmission in Gulf of Mexico segment produced results that were $25 million better than the same period last year.
New transmission pipeline projects added $17 million on revenues for the quarter, including the Gateway project that came into service in the fourth quarter of 2019, the Hillary Phase II project that came into service in the second quarter of 2020, and the staffing of our eastern trails project that went into service during the fourth quarter of 2020.
We also did have a little over $20 million on lower cost during the fourth quarter of 'twenty due to lower maintenance and lower labor expenses.
Offsetting these positives was $10 million and lower Gulf of Mexico profit due to shut ins, resulting from hurricane activity occurring in October which is unusual for hurricane activity. This late in the year.
The impact of the shut ins can be further <unk> and reduce deepwater gathering volumes, which were down about 13% quarter over quarter.
The northeast G&P segment continues to come on very strong producing record results on contributing $29 million.
Of additional EBITDA this quarter.
Collectively total northeast gathering volumes grew 7% in the quarter and processing volumes were up 9% the.
The volume growth was predominantly at our joint ventures, and the graphics supply hub, where we benefited from a gathering system expansion on that system in the late in late 2019 and at our Marcellus gas supply basin, where we benefited from more productive wells that larger pads.
As a result, our EBITDA from equity method investments improved by a little over $20 million on the northeast, which also includes the additional benefit of additional profits from Blue racer again due to our increased ownership, which again was acquired in mid November the.
The northeast also benefited from cost reduction efforts of about $9 million much of which came from reduced labor costs.
And then finally on the left our West segment was down about $8 million compared to 2019, but within that revenues overall improved a little less than $10 million on the west with increases coming from higher rates and net <unk> in the Eagle Ford supply basin due to the contract renegotiations that we completed with Chesapeake in late 2019.
And due to special payments received from our partner on oppo for allowing them to pull volumes off of the system.
These revenue increases were offset somewhat by lower deferred revenues in the Barnett shale.
Lower haynesville revenues due to lower volumes and rate and slightly lower volumes in the mid continent and Rockies.
Despite revenues being up in total gathered volumes for the west were down 8% interestingly, though roughly 90% of that volume decline occurred in the Haynesville Eagle Ford and <unk> and.
And of note each of these basins were impacted by customer bankruptcy with and with the south and filing a bank.
Reimbursement styling and a couple of weeks ago, all of those bankruptcies should be resolved soon.
Also of note in two of those three basins, where we saw the majority of our volumes decline specifically in one center in Eagle Ford our revenues are protected by MVC. So overall, the reduced volume only had a small impact on revenues.
And just as with our other segments the less experienced lower cost of about $3 million as we keep our relentless focus on efficiencies and cost controls.
Now offsetting the higher revenues and lower cost in the west where commodity margins, which declined about $8 million due in part to lower volumes and due to a contract amendment. There. We also had the absence of a favorable property tax reimbursement that we received in the fourth quarter of 2019 that was $6 million of something that we've received from a third party compression provider.
And we also had lower JV EBITDA in the fourth quarter of 'twenty of about $4 million with most of that coming from lower oppo profits and again, though our partner on <unk> PL cap as whole as I mentioned a minute ago reflected in our revenues.
Now moving to year to date results our year to date results showed growth of one 8% on adjusted EBITDA driven by many of the same factors affecting our fourth quarter growth.
The Barnett and Gulf Star non cash deferred revenue step downs totaled $109 million in 2020 versus 2019, while the net impact of commodity price fluctuations on our inventory line fill position created created an $8 million noncash reduction on EBITDA, so without those noncash and payer ability items full year adjusted EBITDA.
Our results were actually up more like 4% much like our fourth quarter results.
And then looking at that by segment the transmission in Gulf of Mexico assets delivered $41 million of growth with an uplift coming from expansion projects and expense reductions being offset somewhat by lower Gulf of Mexico volume and the impact that has had on commodity margins.
The <unk> area.
In the Gulf of Mexico, the total impact of shut ins from Covid Hurricanes and the price collapse earlier in 2020 had about a negative $49 million impact to our EBITDA.
The northeast is obviously, a huge part of our growth this year, adding $194 million on EBITDA in 2020 versus the prior year with the overall gathering volumes up 7% and incremental revenue is being realized from processing transportation and fractionation of gas and Ngls.
At the same time, we have been reducing costs and finally in the west.
Off by $33 million, largely because of the Barnett MVC payments that ended in June of 2019.
And lower Haynesville profits due to lower realized rates at.
That being offset somewhat by reduced operating expenses in the west.
Otherwise on the less our gathered volumes were down about 4%, but they were largely offset by higher rates and the nbc's on the Eagle Ford due to the renegotiated contract with Chesapeake in December of 2019.
So again all in all despite a tough market and a tough hurricane season, we've had a really good year on the back cost reductions northeast performance and new pipeline projects coming into service on Transco.
I'll now turn the call back over to Alan to discuss our 2021 guidance Alan.
Thanks, John and now we're going to turn to our 'twenty, one EBITDA guidance metrics. So on.
I want to emphasize that we continue to expect the same level of supportive fundamentals underpinning our base business grew 21. However, we do have more upside potential than we had in 2020 in this plan due in part to upstream transactions that have the potential to drive incremental cash flows across our midstream asset.
In 'twenty, one and beyond.
Plus and emerging gas storage imbalance caused by the recent higher demand that will likely put a call on gas directed drilling here in 'twenty, one as well. So we are providing our initial EBITDA guidance range of five 5% to 535 billion with the midpoint up 2% over last year.
And we will get to EBITDA drivers here.
On what those specifics are but let's go through the rest of the guidance here are available funds from operations or <unk> as John described which will now replace Dcs are expected to be within a range of $3 five 5% to $3 85 billion, which translates to a per share range of $2.
92 suits.
Up to $3 16 per share.
And importantly, even with a two 5% increase from the dividend announced earlier in the year, we are still maintaining similar coverage on our dividend whether looking at DCF metric or <unk> metric and this continues to really underscore the continued safety of our dividend on.
Our growth Capex of one point over $1 2 billion is expected to remain in line with 2020 and this includes known offered to <unk> upstream acquisitions in the <unk> basin that will be immediately accretive to both credit metrics and earnings and notably we still expect to generate free cash.
Flow after capex and dividends, which provide us financial flexibility.
And speaking of financial flexibility, we estimate ending the year with a leverage ratio of four to five.
With the line of sight that we have currently to a targeted for two objectives as we have consistently over achieved on this metric and I know a lot of y'all follow that very closely we continue to perform very well on that and we think we've got a lot of things that can help drive us towards that 42, we're getting to that four to one.
So looking at the drivers of our 21 EBITDA guidance.
We expect continued northeast G&P growth from the base business into a lesser extent the bolt on blue racer acquisition.
On our transmission in Gulf of Mexico business.
We see transco growth continuing to add stable EBITDA via the southeastern Trail project that was just placed in service ahead of schedule at the end of the year.
And.
On.
We expect late year contribution to come from our Leidy, South expansion, which is now under construction and Additionally, we expect a nice recovery in our Gulf of Mexico earnings this year due to less production outages from hurricane and the Covid.
19 pandemic impacts.
Offsets to our EBITDA growth driven primarily from lower NGL throughput on the jointly owned overland pass pipeline lower earnings on our jointly owned Rocky Mountain Midstream business in the deep in the DJ basin and lower gathering rates from our global resolution in the Haynesville with Chesapeake.
Energy. So these are partial offsets that we do already have built into our guidance and of course on that last note a lot of potential upside to us coming in the haynesville, both from a much healthier Chesapeake well positioned to develop.
On the Haynesville, which is very well positioned in this gas market as well as our ability to drive volumes on the upstream properties that we now control.
Our takeaway here is that our EBITDA is primarily driven by growth in the base business with upstream EBITDA accounting for less than 1% of this forecast. We purposely did not include a full year of the upstream EBITDA from these existing producing reserves because we fully intend to transact during the year in a way.
That allows us to enjoy midstream cash flow growth in 'twenty, two and beyond as we find the right partner to fully exploit the growth available in these high value properties that we were able to pick up this past year.
So we are in a very strong position now to ensure that this acreage is developed quickly and gets turned into fee based growth on our existing midstream capacity. So we really are excited about the upside potential that we've positioned ourselves for around that business.
So in closing I'll.
I'll reiterate that intense focus on our natural gas based strategy has built a business that is steady and predictable with continued moderate growth improving returns and free cash flows are best in class long haul pipes are in the right place and our formidable gathering assets are in low cost basins that will be called on to me.
<unk> gas demands that continue to grow.
We remain bullish on natural gas because we recognize the critical role it plays and we will continue to play in both our countries and the world pursuit of a clean energy future natural gas is an important component of today's fuel mix and should be prioritized as one of the most important tools to aggressively.
Place more carbon intensive fuels around the world.
Williams has focused on sustainable operations, including ready now solutions to address climate change and by setting our near term goal for 2030, we will leverage our natural gas focused strategy and today's technologies to focus on immediate opportunities to reduce emissions in and around our business.
We also are looking for and anticipating future innovations and technologies that we can use on our key energy networks to deliver on this next phase of energy transition.
I also think it is important in light of last week's severe cold weather event to talk about the resiliency and reliability of our natural gas infrastructure. Despite historic coal that envelope much of the country.
Williams did not have we did not have to curtail any services to our gas transmission customers and in fact operated above design capacity on our northwest pipeline system for a period and delivered flawlessly on our new record three day, Pete on the North northwest pipeline.
Awesome.
Our customers expect this from US based on our long history of performance and we're certainly glad that they do however.
However, last week's weather demonstrated the importance of a comprehensive energy strategy of the need for comprehensive energy strategy for the U S. One that doesn't demonized, one introduce source over the other but that includes a mix of energy that does not drive towards singular dependency because of labels and <unk>.
Those by the environmental opposition and there are important and complex decisions that need to be balance to address the things that we all want from our energy sources.
Liability affordability and.
And balancing the issues of carbon intensity.
And when we think about carbon intensity, we really have to consider that from a global perspective.
And we believe that when all of these factors are accurately weighed in balanced natural gas will be a very critical part of the energy mix for many more decades to come.
So finally I want to recognize the tremendous efforts of our entire workforce.
And ensuring the safe and reliable delivery of natural gas to American cities and communities not only this last week in the face of severe weather challenges, but amidst the ongoing COVID-19 pandemic many of those who benefit from our services, we never realized the work needed to ensure the continued access to safe and <unk>.
<unk> energy our employees are critical infrastructure workers on the frontlines of keeping our country's natural gas system operating and flowing.
Doing so while also enduring power outages and lack of water at their own zone.
I am extremely proud of our employees for their efforts to keep our operations running smoothly. During these extreme circumstances, while also moving the extra mile to keep themselves and their coworkers safe and health.
And with that I'll open it up for your questions.
At this time, ladies and gentlemen, thank you ask a question. Please press star one on your telephone keypad.
Our first question comes from Ken Thompson from Jpmorgan Securities Your.
Your line is now open.
Hi, good morning.
Good morning, Jeremy.
Just wanted to touch based on the Capex outlook.
You talked about a third of 1 billion to $1 two and just wanted to see what's the drivers behind that could there potentially be capex creep or do you see this as kind of a steady level and then just if you could expand a bit more on the opportunistic upstream acquisitions from the warm side or what that is exactly.
That would be very helpful. Thanks, you.
You bet, Jeremy Thank you well first of all.
I would say in our base business, we have about $900 million of capital in what would be on a normal base business. So it is a little bit lower than what we've had historically.
And that.
Is about half of that is in <unk>. So that includes.
Well. It includes building out why we saw kind of the final dollars on southeastern trails, and clean up and so forth on southeastern trail and some money on the front end of the <unk> projects. So that's kind of the primary drivers there.
On.
On T on Thats about half of that 900 and then.
On the balance of that about two thirds of that in <unk>.
Northeast, both finishing up projects.
As well as.
Getting some new projects started that are driving higher margins forest in the northeast and some of that growth a lot of that investment actually we will drive growth in 'twenty two there in the northeast as well.
And then finally the balance of that.
<unk>.
In the west some of that is in the Permian pretty good expansion going on in the Permian as well as in the Haynesville area as we're really going to be.
Moving to work hard to keep out in front of a lot of drilling activity that's emerging.
Hey, Bill so that pretty well rounds set up the second part of your question around the <unk>.
The optimistic upstream.
Involves us taking advantage of the strong position, we had with our midstream assets out there, particularly around the south from bankruptcy.
<unk>.
And we will be.
On the position of acquiring.
Both the BP acreage out there, that's adjacent and intermingled with that as well as south acreage.
And we were able to given our position in the bankruptcy there we will able to pick that up for some very attractive pricing.
And as a result, now we're going to be working to <unk>.
Gain a the right person the right party.
To rapidly develop those reserves and take advantage of the late and midstream capacity that we have out there. So we're really excited about that both in <unk>, because it's a tremendous amount of value can be driven across our midstream asset by using the PDP cash flows to drive that as.
Well as in the Haynesville, where we're already seeing.
Chesapeake get very focused on.
Developing the remaining the northern part of the Haynesville that day hung on to and as wells from very attractive interest coming from parties that were in a process to find the right partner to develop the haynesville acreage. So I want to make it clear we have no intention of hanging on to that we're not going on.
Become an E&P business, there is no if ands or buts on that front.
But this does allow us to put the Wright Arlington plate and assure ourselves that we have the right partners in place to take the cash flows off of these assets and put it back into the drill bit to drive midstream cash flow. So really has turned into something actually a lot more positive than we were expecting and we will.
I feel like Theres, a lot of upside from this both in 'twenty one.
And as well, though into 'twenty, two and beyond as we can we attract the capital.
To develop those reserves so really.
Normally.
An area that might have been a problem for us with all of these bankruptcies, we really were able to find a way to really turn some lemons into eliminate there and we're really excited about the kind of value that is going to be driven out there over the next several years and Jeremy just to be clear there and I think it will.
But just to reiterate in our midpoint guidance for growth capital of $1 1 billion that included those acquisitions of that upstream acreage and the one center and so Alan mentioned run rate run rate for everything other than that of 900, maybe a little bit more than $900 million. So.
So we paid less than 200 million for those assets actually significantly less $200 million of more of the tune of $1 50 to 160 for that acreage.
We have very little EBITDA on our guidance for that is we're not sure exactly what kind of partnership structure, we will have.
Somebody else buy us out of that acreage will be partner in this EBITDA uplift. So theres a lot of big upside I think that we can see out of that.
One thing to note.
One of the reasons why we were uniquely positioned to step in this transitional role in long letters to bps at the south on asset or a checkerboard acreage and warm Sutter and so we were uniquely positioned to acquire this property.
And together as one contiguous package and then move that asset to the producers that can have developed it to its full potential it was really locks.
In a situation, where we could have producer.
Our full potential out of that acreage because of the checkerboard major farm centers. So we're we're able to clean that up and now we're going to focus on moving net debt now contiguous position to a producer that can fully develop it really reach its full potential.
Got it that's very helpful color, Thanks, and just to recap on the Capex side. It sounds like it's a very disciplined approach there Don not really expecting any kind of creep over the course of the year from what you guys can see.
Is that fair takeaway there.
Yes.
Just as we demonstrated in the last several years, we continue to impose a lot of capital discipline around our decisions.
Even last year lowering as you recall the only thing we did move in our guidance last year.
Was lowering our capex during the year and then we wound up even even including the Blue racer acquisition coming in under that so yes, we and I will tell you. Our project execution teams have really been knocking it out of the park in terms of managing costs very tightly even even in a difficult environment might COVID-19 continues.
Over our projects under budget so.
We feel very good about the capital budget.
And two key points there.
We are free cash flow positive in 'twenty, one that will generate more than enough cash to cover our dividends and capital and it will allow us to deleverage a little bit thats. The first important point. The second thing I would say, we did give you maintenance capital guidance of I think at the midpoint $4 50, obviously, we spent under $400 million. This year in 2009 2020 just art.
Fiscally loads due to COVID-19 and some issues getting some step down in the field. So I wouldn't call that creep. It is going back up from sub 400 about $4 50, but thats kind of what we believe kind of that run rate maintenance capital.
Got it Thats very helpful. On just one more if I could post the election here. It seems like Theres, new energy policy commodity DC and could impact on federal lands production. Just wondering any thoughts you could share with us on higher level thoughts on energy policy commodity CE and specifically federal lands, how do you think about that thanks.
I would just say I'm going to have Mike will give you some detail here on the deepwater Gulf of Mexico, because obviously, that's the area that would most impact us of all of our areas otherwise were not too terribly impacted by it.
But.
But we've seen may.
It may be a different story than has been that you are hearing in the media in terms of the actual actions going on up there and most of the acreage is ready to develop a mitral COVID-19 kind of shares from the detailed on we're seeing there in the deepwater.
Good morning, Jeremy we are seeing continued permitting activity coming from current administration since executive order came out.
We've seen.
For applications, where permits to drill <unk> 60 of those have been issued in the Gulf of Mexico <unk>.
13 of those being on properties that are delivered to US and then when you talk about permits for modifications such as Workovers things of that nature on existing wells 163 of those have been approved by the current administration.
<unk> 30 of those are on our of our asset footprint.
So we're seeing a lot of activity for permit approvals out there and in fact, we received our gas pipeline permit after the executive order for the rail project.
And they're continuing to process permit.
And we had a whale.
The pipeline already last year, and so we're continuing to work with our producer customers out there as you probably know there is a lot of leases that they've locked up.
On a lot of permits that they already have in hand, and so there's a long runway of activity that will continue to occur in the Gulf of Mexico, We believe.
Got it that's very helpful. Thank you.
Our next question comes from.
On the cash with Wells Fargo. Your line is now open.
Thanks. Good morning. So now that you are the operator Blu ray sorry can you just elaborate on any of the steps you could take there to increase utilization on the system or capture any of the <unk>.
Low hanging cost synergies.
Yes, sure Michael you would take that sure. Good morning, Yes, there is definitely an opportunity to capture some synergies there just like we did with <unk>.
<unk> acquisition that we.
It became the operator on that asset we will that in towards the northeast JV.
We are having those conversations.
Very similar with Blue racer, where we can.
Holiday some of the operations up there utilize latent capacity either one of our system.
The benefit of the other.
A lot of activity currently on our northeast JV systems up there, where our processing thats hold per day.
And our Frac practices uses facilities are full as well and so we would be looking to possibly use on the blue racer capacity should it become available.
On those volumes over to them and vice versa. Ultimately, so we think theres a lot of definite commercial synergy there ultimately and Doug.
Some operational synergies with the teams.
But are there.
Great. Thanks, and then can you provide any more details on the producing assets that you received from Chesapeake in the Haynesville.
Specifically what is the production at right now those assets.
And any more clarity in terms of when you plan to monetize that.
Yeah sure Hey, this is Chad.
Relatively small amount of existing production around 30 million a day on a free last week's poll.
Recovering dropped a bit but is recovering.
So not a lot of existing production around 130 existing well.
First day, we were really encouraged to see Chesapeake emerging from bankruptcy and it really healthy customer.
Touch on South Antelope second, but just know that they are very active up in the spring Ridge area, where they remain the owner operator with two rigs and we think would likely go into three rigs. So that was good to see you in itself Mansfield.
<unk> added an additional opportunity that we have.
350 to 550 million a day of capacity available from a midstream perspective for development in that area.
We closed on that transaction.
<unk> to 'twenty one.
We've been out now talking to potential partners, we've seen incredibly robust interest in this asset it is contiguous.
Locked up position in some really top tier both haynesville and Bossier.
Area.
And again it had available midstream capacity.
I would say that we're likely to finalize our partnership strategy over the next couple of months I expect that we will have a very strong well capitalized partner that will operate that asset and we will dedicate.
One to two rigs at any given time to really fill up and utilize that capacity. So we see it on an incredible amount of interest and I think we're really confident that we're going to find a great partner there.
And unlock the potential net asset.
Yes, and I would just add to that we are well into that process.
In terms of finding.
Right partner on that is we've been very encouraged by it.
Level, a strong level of interest from a number of parties. So.
We're not waiting around on that very quickly Chad is very quickly to find the right partner.
Great. Thank you.
Our next question comes from Christine Cho with Barclays. Your line is now open.
Thank you.
If I could maybe just talk about the high end of the day EBITDA range that you gave for 2021.
Alan It sounds like you said, it's mostly driven by leaning on your expectation for I'll call on cash.
Especially with what went on last week.
Really driven by G&P volumes and is that mostly in the northeast I just wasn't sure.
Haynesville and one center was included in that.
Or if that was more of a post 2021 day impact and have the producers behind the system and then you started to talk to you about these plans.
Yes.
Yes. Thank you.
Christine.
We are targeting right on the correct issue there we really developed that plan before we've seen this recent call and I think this week, we're going to see a huge pool on natural gas.
From storage this week.
And like from cadence down below the five year average and Meanwhile, production, we really haven't seen the activity.
In production.
To stabilize that decline in storage.
And the places that are going to be able to respond to that quickly we're going to be the haynesville and Marcellus.
In Utica and so we didn't have any of that in our plans. When we laid this plan outflows certainly that is upside too.
Through this in fact, most of the growth in the northeast was really just margin expansion on wasn't really a lot of volume expected volume growth. The growth that we've had there has really just been margin expansion.
So that is certainly an attractive upside for us there. It is not based on the upstream at all impact we basically assumed we just got the PDP flowing in here for Haynesville on warm Sutter.
Assuming a.
July kind of finality to finding the right owners. So we only have cash flows and here on the warm center area through about July.
And.
And in the Haynesville, we do have the PDP.
In there, but we also have development capital that likely would be coming out of there.
That gets done so.
Would be the first to admit that we have been very conservative.
On our on the upstream side with this because we really wanted to leave ourselves full flexibility.
We didn't need to be able to to either fully dispose of the asset at the right price was there but at the end of the day. We just wanted to have full flexibility. So we were very.
Conservative in how we included the value of those of those upstream.
Thats treating physicians and Youre right I think.
No.
On the upsides are probably mostly related to volumes in the northeast, but I would also say we were we remained pretty conservative in the forecast that we have for the deep water.
And any other areas frankly that can contribute from a GAAP side. So.
And then I would say the other area that we have included we have assumed rising cost.
2020 did a great job in 2020 on cost in our 'twenty, one does assume that we've got some.
Come back on cost net frankly, the team has been doing a terrific job of managing and so that's another area of opportunity for us as well and just a couple of things maybe to play on that a little bit.
On the on time on Transco.
We're successful in 2020, so on short term firm both on transfer on northwest pipe and we don't have a repeat of that really in any meaningful way in 'twenty, one that possibility still exist, we add all of that hurricane activity in 2020, and our team reversed most of that in the forecast, but not all of that.
We do expect that could be a little bit more active in 'twenty, one and so if that doesn't happen I think theres upside of some additional EBITDA.
Submit additional EBITDA, which did put in that was at the end.
It's just that conservative.
For hurricane activity on that Alan pointed on the expenses. So some of this is on <unk>.
Okay. That's helpful. And then actually if we can move on to the weather impacts that we've seen in Texas and from a lesser extent Inc.
Is all of your natural gas storage on Texas contracted to third parties or do you have some for your own.
And how should we think last week's weather impacted you guys. It sounded like it was pretty neutral from a financial perspective.
Remarks, but any color there would be helpful. Yes.
Yes, Thanks, Steve.
First of all we actually don't have any.
Gas storage in Texas.
So are the storage on Transco is that Washington, which is kind of the middle part of the state.
By Opelousas, and so that's where that's where the storage facilities are.
And.
So there really wasn't a whole lot of impact there and obviously transco is designed to flow from that area designed to flow to the northeast not non back taxes.
In terms of the impact to us.
I would say.
<unk>.
Pretty small in terms of the impact of our gathering volumes just because we have such a dispersed business from the vast majority of our gathering is out as either northeast where in the Rockies, which will not.
Directly impacted.
The but I would just say as well our team did a great job of doing things like selling fuel and strength that we had bought it for a month.
Turning down on our processing recoveries, and then selling that fuel and shrink back into the market.
And so I would tell you that I think net net it's going to be a little bit of a positive for us.
In terms of the way, we manage things, but but we certainly saw a lot of outage in the Oklahoma, Texas, Louisiana area on our gathering system is just pretty small piece of our overall percentage.
Of the business.
Got it thank you.
Our next question comes from Gabriel Moreen with Mizuho. Your line is open.
Hey, good morning, everyone I just had one in terms of basis in Appalachia, and just how you're thinking about that within your forecast from kind of the cadence of the northeast is there anything.
And your forecast for producers toggling gas on and off particularly during the shoulder seasons.
Gabe No I would just say, we've pretty well just stick with the producers' forecasts.
They've given us and obviously they take that into consideration.
And it's the prices come up they'll terms on volumes on an end, but a lot of other producers have their own takeaway capacity and certainly.
The amount that they are selling into that spot basis is pretty small.
But it does it does impact their ability to sell incremental volume if they have that.
<unk>.
But we're not that bad.
Isn't driven.
A lot into our calculation, we basically just take this issue.
We're going to do and to the degree that we have a line of sight for how that's going to happen that we've taken so far as a J.
Pretty accurate consistently pretty accurate.
And the way that they've been forecasting that they know their reserves and they know the market I will say that obviously cited about leidy, south coming on and opening up additional capacity Thats about 580 million a day of additional takeaway capacity out of the northeast and our team has got a really good head start.
On Leidy south on the projects there.
So again, great execution going on by that team and then ultimately our EBITDA will be additional takeaway out of that areas as well so.
We're.
Really.
Those projects are very important from a synergy standpoint, because not only do we get nice returns on the transmission get together volume uplifts upstream of that as well.
To the question on shut ins in response to price, we certainly could still see producers respond to market dynamics, but I do think 'twenty. One is going to look different in 'twenty, we're coming into.
Out of the winter at a much different storage inventory level, we're seeing natural gas price is stronger than they were a year ago.
We do think that there will be basis that will continue to represent the value of our existing infrastructure, we're going to see some more LNG demand come on line. This year and we're going to continue to see the need for growth and supply items northeast, though.
I'm not sure we will see basis that will drive shut in activity, but I think it will continue to reinforce the value of having infrastructure to move from Appalachia to growth markets.
But we'll certainly keep an eye on it.
Thank you and then maybe if I can just ask on kind of interesting that a lot more time has been spent on the call upstream asset sales on midstream asset sales, but maybe if I can ask kind of where the latest thinking is on.
Additional midstream so asset sales on whether I guess some of the impairments on assets like Rocky Mountain midstream kind of change your thinking on evaluation about how those assets might fit with the portfolio longer term.
Yes really.
So Dave I think we were as to the RMM impairment that we took.
That's been an equity level of investment so.
Obviously, it's very different than along the way you value a consolidated asset where you take the total cash flow is on the asset over time, but those do you actually have from market to market effectively and we've given some of the sales that we've seen in the space we've seen.
Some lower markings on the value of assets and that's what drives those kind of considerations and in fact as a result of that it would probably drive us on the other direction, because it's basically saying there was a weak market right now or GDP assets.
And if that's true then it's probably wouldn't be the right time to be.
Liquidating asset so not to say, we don't constantly have our eyes open to structure and things that can add value from that but.
But I think we're in a position of.
Getting to our leverage metrics.
In a pretty straightforward manner on particularly these upstream assets that would be a really nice tool for that as well and so right now and tell you I'm not I'm not sure.
It's time to be trying to liquidate.
I gave one thing I think that is interesting when we were thinking about this early 2020. It was actually in January of 2020, I think we were heavy in the middle of thinking about trying to market some of our assets in the west and there were a lot of question marks at the time.
Around Chesapeake, what's going to happen Chesapeake, what's going to happen in the west in general and I think now a lot of those questions are cleared up and you can see through our performance I think we demonstrated the resiliency and through diversification and not that we didnt have issues in certain basins, but we had.
Good performance in other basins and it kind of washes itself out and so what I would say is while the market is probably a little bit weaker I think are our demonstrated performance on the businesses a little bit stronger a little bit clear now a year later, so I'm not sure what all that means that debt.
I think there's still opportunity still out there and I think we've demonstrated strong performance, which should help it if we ever wanted to pursue that.
Thanks, Alan Armstrong.
Our next question comes from Scott Davis with Credit Suisse. Your line is now open.
Hey, good morning, everybody.
First question is just on how youre thinking about sustainable EBIT growth in the current environment.
Just once again highlighted about $12 billion backlog on transmission projects and so simplistically the way I thought about it was kind of reflects about 10 years of growth.
At current Capex levels, which I guess it was enough to grow EBITDA about 2%. This year in 2021. So just curious if based on that backlog of projects in front of you you think sustaining 2% annual growth call. It for the next decade, or so is it maybe a floor or something you deem sort of easily achievable.
Yes, I'm going to have Mike will speak to that backlog on projects, but I think you have to be careful about draw on that time.
<unk> now most of the projects that we've been doing have been.
6%, we still were rolling off a lot of deferred revenue this last year and a little bit into 'twenty. One. So I think you have to be careful about.
Making those kind of broad assumptions. So for instance, when the deepwater business comes on that.
Thats going to be a very high growth rate on a fairly low amount of capital.
And in the northeast some times we get.
Nice surges of margin based on very high incremental return opportunities as they come to us and on the other hand, we have a decline.
Bill.
The gathering business. If there is an area that's not growing there's a decline in this working against.
It all the time, but.
I would.
Tells you that it's more complex than than taking $1 billion in saying that that produces 2%.
On the other thing on I would say I think we feel very comfortable with the 2% growth rate. If we are investing $1 billion, we feel very comfortable with achieving a 2% growth rate, but given some of the upsides that we got on some of these areas.
I think that probably would be kind of considered a floor from my perspective.
So Mike and Mike talked about strength.
Yes.
Yes.
We've looked at backlog at its really dynamic because we had a lot of projects that come into that backlog and that we execute on a lot of those projects.
Southeastern trail as what it came out on the backlog line itself.
Sales of that backlog and became an execution project and regional energy access will be the same once we get that filing underway that are permitting underway.
You'll continue to see projects come out of our backlog is moving into the execution phase over the next several years there is a plethora of opportunities along the Transco corridor.
Take advantage of coal fired generation, that's going to come offline and ultimately be converted to gas and renewables.
And I think.
Activities, we've seen in Texas, and Oklahoma over the last week.
It really needs to be fixture of energy generation resources.
Mix in order to diversify.
Cross fuel sources and so on.
On a true believer that our company is definitely on natural gas focus.
Companies now.
And so on renewable mix into the.
Into the play there to take advantage of some opportunities we have but ultimately on the Transco system, we're going to be able to drive a lot of new capital investment there on the.
Back to coal fired generation going away.
And then lastly are.
Emissions reduction program project.
We have upwards of one six to $1 $7 billion of investment opportunity there on the Transco system.
Likely replacing a large component of our recent perfect on compression.
In modern either electric drives for gas turbines to reduce our emissions footprint there along the Transco corridor. So there is definitely a lot on investment opportunity that we envisioned coming in the future for Transco.
Asset footprint.
Got it I appreciate the color on that second one just briefly going back into rates or can you just talk about some of the circumstances that led up to you increasing your interest there and how youre thinking about the remaining stages still down on.
Yes, so just to.
Remind people the ownership there.
Blue racer.
As.
And came in too by the way is no longer in.
Steve will now be Blue racer Midstream Holdings, Inc. Q.
<unk>.
And so now that is on the effectively 50% by Williams and 50% by first reserve.
The the.
Parties that got out.
Primarily driven.
Consortium by in cap flat rock midstream.
And.
So that that group has been investing in that from a longtime along with some of the management from Cambridge two.
And obviously that had held on to that much longer than a typical private equity shop like food and.
We've worked with them to liquidate them at the appropriate time, we think we.
Think we bought it right and at the right time.
And particularly given the large amount of synergies that we have available to extract from that business. So we're excited about the transaction I can tell you we were super patient.
We've been wanting to gain control of that asset and exploit the synergies between both our <unk> system in our Ohio Valley River.
<unk> been wanting to take advantage of those.
And it's been hard to.
Do not but we've been patient and I think our patience paid off and we were able to pick that up on a very attractive value.
So that's on a hive offer that but in a day.
David.
Private equity held investment that was needed to get out to go that was the last investment they had and wanted to funds they were wanting to get that.
And it was a pretty complicated structures on knowledge, we get it adopted.
Good value.
Cleaned up and we were the majority owner came in which was half of the owner in Blue racer.
There were two different board that manage the joint venture and there was a lot of governance complexity.
We cleaned up that asset governance, and when you think about the two large joint ventures net part of the system that you have our OEM system, which is.
5% Williams, 35%.
You have the rates are which is to have 50%, 50% first reserve much cleaner.
Landscape for us to try to work on.
Creating value and optimizing value.
Got it thanks for the color guys, Steve Hello, everybody.
Yes.
Comes from comes from Tristan Richardson with <unk> Securities. Your line is now open.
Hey, good morning, guys.
All the comments on the Gulf of Mexico, and around the outsized impact from 2020.
I think you noted in the slides.
$9 million.
Downtime impact there question just on 2021.
Normalized season looks like or sort of just a regular strong seasoning that maybe what you have baked in are generally your assumptions for 2021.
Mike.
Yes, I would say normally our team does put some hurricane impact that they're in it's usually between five and $10 million of EBITDA impact based on what.
Don on Hurricane year would look like so it's not a huge reduction that we would typically see there on a on a normal year that we built into our forecast.
And I think I alluded to a minute ago I think Christine was asking questions.
Of that 49 negative impact we had in 2020 versus 2019.
Got all but about 10 million of that reversing itself in 'twenty 'twenty, one so we still.
Bill held $10 million of even maybe a little bit more than normal outsized negative into 2021 as well because the 49 month comparisons and I think that's right.
Yes.
That's helpful. Appreciate it John and then just.
Thinking about where your commodity exposure lies.
In the G&P businesses.
Could you maybe just give a quick high level.
Maybe where the most.
Lives versus keep whole.
We should think about those exposures regionally just at a high level.
Yes.
Very little interest.
Starting off with it.
Compared to.
The the way the business used to distract from just had very little.
And it's getting harder and harder to see frankly, but the areas that we do that on most exposure our keep whole primarily keep whole agreement and our old Pal.
Area.
And.
And we do have some exposure in the Gulf coast as well so you'll see that listed in southwest Wyoming sales.
Our EBITDA breakout I think it shows in the southwest Wyoming, So thats the majority of that exposure.
And again, we do have some margin in places like our discovery asset.
In the deepwater Gulf of Mexico, but I think.
Total and plan on a gross margin basis, we're down dip well under 2% now so it's really really small one.
One of the benefit from one set of real small amount of market sentiment. We will we will actually modernize those contracts the fee base as part of our clean up along with other basins.
Further reduce a little bit.
Sure.
This thing.
And people.
I might just add so I might just add so we don't skip over one thing we do have in areas like the Barnett, where our gathering contracts are exposed they have a floor, but then they're exposed to gas prices above that similarly in Laurel Mountain midstream.
Inc.
We have those contracts basically are.
Base level, but then they have exposure to gas price above that so we do have some contracts that have direct gas price exposure in the Barnett and more mountain on the two areas that really have loans.
Yeah.
That's helpful. Thank you guys very much.
Our next question comes from Darren.
Thank you Don Maier John Your line is now open.
Hey, Thanks, guys nowhere over the hour here. So I'll just two quick ones from me.
Alan I think in your formal remarks.
You talked about line of sight on the leverage side with the potential to have that I.
I think that flow to target achieved in 2021 standard.
You're talking about some other drivers.
Getting to that.
With the $4 five but.
How do you think about.
Key drivers to getting that <unk> and 'twenty platelets.
Yes, I would say, there's really two areas. There one is obviously the obvious.
Talk with Christine earlier about some of the upsides drivers for 'twenty, one on our EBITDA, obviously, that's the simple way for us and probably.
I'd say, the most profitable, but as well capital reductions that would come to us.
Associated with the transactions on the upstream as well, where we would lay offs in the net capital responsibility.
Third party. So those are the two kind of easy ways to get there I would say and obviously the EBITDA upside is one that probably have the claris one site.
Got it and then maybe just a quick one.
Alright.
Separately are you seeing much I know, there's a lot of commentary around the upstream side of things, but are you seeing much different from the behavior ex COVID-19.
Bankruptcies from.
Public e&ps versus private E&ps and what areas are you seeing some of the big differences if any.
Yes, I've noticed that a lot of lot of analysts who are starting to pick up on that and clearly the public markets are just have been sour about spending on anything and I think the private markets have been seeing the opportunity to it.
Taking advantage of that pullback. We certainly are seeing that haynesville is the is the poster child for that for sure whether so much private capital that's going to work there, but can extend a contract in place because you don't have a lot of the basis risk that you have to manage in the long haul capacity risk that you have to manage coming on.
Marcellus So it's an easy place to go in.
Is it fairly derisked manner, and that's what's attracting as Chad mentioned, that's also what's attracting a lot of capital to our opportunity there.
Bill so.
Definitely.
The money that can come in and get out pretty quickly.
By turning a bit and turning it into cash up against before the current forward strip, which is what a lot of private parties are doing is.
What we're seeing so it's a fairly derisked model and.
And Theyre just looking around the various basins for opportunities to do that but we're clearly on online site Haynesville theory, thats getting the most attention.
I appreciate it thanks, so much.
Yes.
Our next question will be.
From Colton Bean with Tudor Pickering Holt Your line is now open.
Good morning, just wanted to follow up on some of the commentary around volumes.
It sounded like for GNP, the guidance assumes something close to maintenance in the northeast is on a fair characterization and then just any high level comments on what Youre looking for in the west would be appreciated.
Michael Yes.
On the gathering side.
We are looking at most likely maintenance type activities on the <unk>.
Gathering side from the processing side.
It's highly dependent on the producer in the basin in the northeast just to be clear there are some upsides. The downsides on the processing side, we are seeing a large influx of volume year over year that we will continue to enjoy.
Hortons there are processing at Oak Grove is at capacity and that we're finishing up our THB three there that should be online next month, and our fractionation facilities as I said earlier.
At the capacity level as well so we're seeing a lot of activity continuing in the West Virginia, Ohio tablet era.
Yes.
Net sales will drive a lot of volumes to our processing facilities, where we see the upside of Curry.
Two our 2020 performance in 2021.
One thing that Youll see in the northeast as even though our volumes, but what theyre going up that much in the northeast Laurel Mountain midstream Chevron pullback Eqt's take net production over we have an MVC. So it really doesn't have a meaningful revenue impact to us, but they know that volume is declining there that's muting, maybe a little bit of the volume growth. The other Reits that have seen in the northeast, especially around Marcellus.
Sal.
And just to be clear there, it's a little bit confusing sometimes in the southwest Marcellus in West Virginia area. There because we gather some of that gas and then we spin it off to third parties.
Other third party processors, because we've been full.
And so once we have that capacity built we get that business back and so that that's not obvious sometimes that we don't process everything we gather and we don't gather everything in process and so those two numbers don't go hand in hand necessarily.
Donald will receive the lease activity in the Eagle Ford, which had NBC.
NBC protection, so those nice season.
Additional volume decline MVC protected in the Eagle Ford and we should see activity increasing in haynesville and those gas directly.
A majority of our west beyond Eagle Ford as GAAP directly at activities with a relatively robust gas price.
We should see good activity on that on a GAAP side of that.
<unk>.
But not as much production activity in the Haynesville as we've seen now with Chesapeake back recapitalized and new producers in South landfill that we're working with and in one side at the same is happening on Whatsapp VP wasn't really active nor was south on obviously to their Macon.
We're going to see that 'twenty, one 'twenty two I think.
Brown.
Great I appreciate that detail on just a final one from me I mean, you all have highlighted a couple of times here will be.
Either near or at the long term leverage target to exit this year.
So as you look forward can you just update us on where you stand on capital allocation, whether that be further debt reduction looking at our buyback authorization or supplementing the existing backlog with some renewables investments I appreciate it.
Yes.
Hey.
The.
That question, obviously is something that we've been.
The same for quite some time will be coming to us and I think to get to the end of this year obviously.
Net debt will be but make no.
Mistake about it the first thing and we've been very clear on this is is debt reduction.
First place to go with that.
Once we get beyond that things like.
Investing in our rate base on.
On Transco on things like the emission reduction.
That will be put up against other alternatives for that capital reduction, whether thats further debt reduction or share buyback and those are the things that would be competition for that further capital allocation as we get into that year, but it's an interesting.
Dilemma, because not very many people in fact, I don't know if I could describe to you too. Many other pipelines that are in the position of being able to invest in the rate base.
And for US the cost of capital it just hasn't met that return hurdle.
Internally so in the past it really hadn't been thought of as an opportunity, but as we think about the emission reduction project at some very sizable capital investment opportunity that will make a decision on that versus other alternatives from a cost to capital strength. So I think thats. The best color I can give you on that at this point.
Great. Thank you.
Thank you.
Our next question will come from Michael <unk> with Goldman Sachs. Your line is open.
Hey, guys. Thank you for taking my questions one on.
On the one which is opex and G&A in 'twenty, one over 'twenty up down flattish.
Just trying to look for a little direction, there and then second core remind us what the expected capex for regional energy access from what are the key permitting milestones we need to look for.
My point you take both from those.
Yes on.
On a regional energy access we have publicly stated in our pre filing was a 768 billion a day project I think by the time, we file here in a few weeks, we'll be at or above that level.
And what we've said in the past is between $800 million and $1 billion of investment and we're probably at the lower end of that right now based on where our filing.
<unk> loans.
So yes, John it's going to take the first part of your growth DSO on operating cost at the moment a drag it through some numbers here real quick, but if you look at our analyst package.
If you look at the operating cost in each of our segments and you compare.
2019 to 2020, you'll see a number of $223 million reduction in operating expense, but I want to be clear on that.
2019 had incremental expenses, because we did a voluntary severance program and we're cutting costs of 29 cost at 2019 for elevated 2020 costs on a low because we've changed the benefits program around.
Net days off in any way it resulted in a $40 million benefit 2020 COVID-19 dragged.
Dragging through all that to say that 2000 223 million reduction in expenses on a normalized adjusted EBITDA basis is only on $100 million reduction 103 million reduction in expenses between 2019, and 2020 and that includes an $11 million increase in property operating taxes Avalon taxes, and so we saved about 104.
$14 million between 19 and 20.
We think about 70% of that will stick going into 'twenty, 1% to 30% of that revert. It. So we'll see costs go up by about $30 million.
Just due to operating cost kind of net.
It's not retaining all that savings and then operating taxes, probably good for another $20 to $25 million. So youre looking at probably $50 million total expense increases in 'twenty one.
So great job were retained at 70% of our cost savings.
Therefore on 'twenty.
Thank you Super helpful. I'll follow up from here came offline much appreciate it guys.
Okay. Thank you all.
I will now turn the call over to Alan Armstrong for closing comments.
Great well. Thank you all very much for joining us today, we really are excited to continue to.
Reduce such predictable cash flows from the business and we're really excited about some of the catalyst for growth that really will drive.
On 'twenty, one and as well give us some upside here for 'twenty. One so thank you for your interest and stay safe and healthy.
This concludes today's conference call you may now disconnect.
Okay.
Yes.
Yes.
[music] zone.
Okay.
Okay.
Bill.
Okay.
Okay.
Don.
Thanks, John.
Okay.
Okay.