Q1 2021 DCP Midstream LP Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2021 D C. P Midstream earnings conference call.

At this time all participants lines are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone please.

Be advised the today's conference is being recorded.

If you require any further assistance please press star zero.

I would now like to hand, the conference over to your Speaker today, Sarah Sandberg Senior director of Investor Relations. Thank you. Please go ahead.

Thanks, Angela and good morning, and welcome to the DCP Midstream first quarter 2021 earnings call today's call is being webcast and I encourage those listening on the phone to view the supporting slides, which are available on our website at DCP midstream Dot com before we begin I'd like to point out that our discussion today includes forward looking statements actual results may differ due to the.

Certain risk factors that affect our business. Please review the second slide and the deck that describes our use of forward looking statements and for a complete listing of the risk factors. Please refer to the partnership's latest SEC filings. We will also use various non-GAAP measures, which are reconciled to the nearest GAAP measure and schedules and the appendix section of the slides Wouter van Kempen CEO.

And Sean O'brien, CFO will be our speakers today and after their remarks, we'll take your questions with that I'll turn the call over to Dara. Thank you Sara and good morning, everyone. I appreciate you joining us.

Our team delivered solid first quarter earnings despite managing through the historic volatility created by Winter storm here first and foremost I want to thank our team for tremendous execution through this event, but are the single safety incident or any employee of contractor of injuries.

Work helped us achieve adjusted EBITDA of 275 million and distributable cash flow of $175 million, which resulted in leverage of four one times and over $1 billion of liquidity at the end of Q1.

We maintained our dedication to cost and capital discipline, but the 22% reduction and cost and 55% production and sustaining capital versus the fourth quarter of 2020.

And all we generated the 5% sequential increase and excess free cash flow totaling approximately $90 million and the first quarter.

This full of quarter is testament to the multi year strategic transformation of our business model with.

And we balanced and diversified our portfolio prioritize capital discipline and invested and DCP, two point, though to drive efficiencies and our business and restructure our cost basis.

These deliberate strategic actions of position DCP to successfully navigate the historic supply and demand shocks, resulting from a pandemic compounded by adverse actions by OPEC and Opex winter storm and ours.

The continued to prove the earnings power generating significant excess free cash flow throughout the historically challenging environments, which brings me to slide four.

And total winter storm jewelry resulted in the $60 million of adverse impact to our first quarter earnings.

As a result severe producer volume declines of record natural gas pricing the storm created negative impacts from commercial settlements, including natural gas marketing swaps, which were partially offset by DCP is balanced portfolio and integrated value chain, including gas storage.

The DCP team prioritize safety and proactively prepared our assets for the storm and maintained near perfect reliability, while gas flow still being produced.

We were also able to leverage the DCP to point, our platform and our integrated collaboration center to provide our teams enhanced visibility into our assets with real time data, enabling and informed and proactive response of.

Our team's exceptional preparation and execution supported by our lead and digital platform was instrumental and our ability to safely and effectively manage through the storm and maintain our 2021 financial guidance and.

As you can see on the slide exit to exit our GNP and NGL pipeline volumes have improved and we are confident and our team our strategy our portfolio and ultimately our continued success.

On slide five I'll highlight the versatility of the DCP portfolio and the connectivity of our fully integrated volume change was a critical component of our success. During these recent challenges.

We generate diversified earnings from multiple basins and revenue streams from wellhead gathering and processing fractionation and storage. The DCP portfolio is positioned to maximize earnings across the value chain.

Over the past decade, we've invested and expanding our logistics portfolio and strategically connected sand and southern hills to our G&P business we.

We also were able to leverage our G&P footprint to vertically integrate fee based natural gas transportation pipelines like Gulf Coast Express and the Cheyenne connector.

Since 2010, we have stabilized our cash flow as we grew our Elena and earning share from 10% to 60% of adjusted EBITDA.

And 2019, we anticipate the industry super cycle of growth coming to an and and employed a capital efficient supply long capacity short strategy to mitigate overbuilt and utilize the existing third party capacity and infrastructure rather than build new assets.

Along with shifting and optimizing the asset base, we took additional transformative action to better position DCP for a sustainable future.

<unk> was the first mover and the industry's digital transformation investing and DCP two point out since 2016 to drive efficiencies enable real time improved physician, making and enhanced safety reliability and asset optimization.

We have reinvented the way we operate our business, which has helped to reduce our annual cost per $155 million or 15% since 2015, while absorbing inflation and investing and transformation initiatives and improving our culture and employee experience.

Combined these dedicated strategies of stabilized our cash flows and position DCP to generate excess free cash flow, which has enabled us to delever the balance sheet and provide increased financial flexibility through even the most challenging environments I'll now turn it over to Sean who will walk us through the financial details of our first quarter.

Thanks to the outer and good morning, everyone. I also want to thank our team for the incredible hard work in the past quarter of year.

And Q1, we generated adjusted EBITDA of $275 million and DCF of $175 million, resulting and leverage of four one times and.

As Bob mentioned, we added $60 million adverse impact due to winter storm jewelry, which was primarily due to lower volumes gas marketing losses associated with financial swaps and higher costs due to increased labor and utility expenses and some of them are affected asset.

The key drivers offsetting the headwinds created by jewelry include the strong performance of our spend on top of natural gas storage business cost and capital discipline as well of the favorable commodity price environment.

Outside of the storm GNP margin was impacted by lower volumes quarter over quarter, which includes the expected contract explorations in the Eagle Ford.

The logistics and marketing segment was impacted by lower sales volumes attributable to continued ethane rejection by third parties during the quarter, which was partially offset by stable southern hills volumes due to incremental supply from the DJ.

For the quarter costs came in at $187 million, which was the lowest quarter of spin spend and over a decade.

Commodity pricing for the quarter was also favorable by $36 million.

Primarily due to strong NGL and crude price.

Looking to the second quarter, G&P and logistics volumes of April improved relative to Q1.

Average sand hills volumes were up 29% and April compared to the first quarter due to improved ethane recovery and increased third party volumes out of the Permian.

We are also seeing improved G&P volumes across the footprint approaching Q4 labs during.

During the second quarter, we anticipate some cost and sustaining capital that was deferred due to the store.

With this solid quarter of earnings we expect to be and a great position to meet our 2021 guidance and remain on track to continue to reduce debt.

On slide seven and I'll highlight that our stable cash flows, which were 88% fee based and hedged along with our focus on cost and capital discipline and DCP well positioned.

And the first quarter, we generated $89 million of excess free cash flow, which was at the $121 million increase from Q1 of 2020.

With the strong start in Q1, we continue to expect to retire our upcoming September bond maturity, primarily utilizing excess cash.

Debt reduction continues to be our top capital allocation priority and we remain committed to our mid <unk> leverage target and the midterm.

With that I'll turn it back over the balance.

Thanks, Sean.

Up on slide eight.

The DCP team and portfolio continue to perform very well and evidenced by our ability to offset three separate and remarkably challenging black swans and the past 14 months.

True stress test after stress test, we have proven the benefits of our long term capital allocation strategy.

Quality of our assets and the earnings power of the competitive advantage of our DCP, two <unk> digital transformation and our ability to quickly adapt control and we can control and effectively manage any environment. We will build on this momentum and remain focus on safety operational excellence and customer service.

While maintaining our cost and capital discipline, and although we will speak to our sustainability efforts and more depth on our second quarter earnings call. We're excited to be making considerable progress all of our ESG efforts.

The 15% reduction and scope one emissions from 2018 to 2020 increased diversity on the board of directors continued leading safety metrics. Many many other advancements we look forward to sharing our progress on our second and our.

Our second annual sustainability report this summer.

And all with a strong base business demand recovery and sites and a constructive commodity price environment, we're well positioned to build on our first quarter performance and meet our 2021 commitments to increase excess free cash flow and strengthen our balance sheet and with that.

Looking forward to taking your questions before that I want to thank Sarah Sandberg, Sarah has been with us for two years and the Investor Relations role Sarah really appreciate everything that you've done to set the bar really really high for people that come after you and Mike <unk> is going to take over from <unk>.

And.

Absolutely, 107% confidant of Mike will do a fantastic job. So Sarah good luck and all the best I know youre going to do great things for the company and.

And with that I'm handing it over to and July for the Q&A section.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound.

As a reminder, please mute your line while you are not speaking please.

Please standby, while we compile the Q&A roster.

Your first question comes from Jeremy Tonet with Jpmorgan.

Hi, good morning.

Good morning, Jeremy.

And just wanted to kind of start with I guess, the recovery here coming out of the storm and into the second quarter. It seems like things are really improving here and just wondering if you might be and expand a bit more on that I guess as far as Joe and cadence over the rest of the year and are you seeing kind of different trends from from private versus public there and and how does that impact you guys.

Jeremy Hi of Sean I'll start a little bit and let Bob talk about the what's going on with some of the producers but from in terms of a trend perspective.

We are definitely seeing some really good trends obviously, it's good to get your read behind us.

A couple of couple of things to consider we are seeing we've been and recovery.

Since last year, but we are starting to see third parties go into recovery. So some of my comments alluded to some pretty good volumes on sand hills, and Youll see that and hopefully continue through the rest of the year, but definitely a trend in the Q2.

In terms of there was a little bit of a lag and some of the volume growth that we were expecting this year and a couple of regions. We are seeing those start to tick ups of the Permian, Delaware Basin, Youre seeing volumes coming in a little bit stronger I'll remind you that the that's another plus for sand deals not only recovery, but youre seeing incremental volume and then on southern Hills and the DJ.

We are seeing volume is definitely start to improve and pick up again post Yuri.

And and into Q2 and that bodes well for the G&P business up there as well as the southern Hills pipeline so as.

As we sit here today the outlook in Q2, I think you're reading it right is.

He is definitely improving and it looks pretty good.

Yes, Jeremy a couple of things to add in general and I'm very proud of the team and our team continues to perform I think the assets are running very well right. Now obviously it took a while of getting out of the storm, but if I look at all of our operational excellence Kpis.

Around safety around the reliability things things are going well, so that is and thats, a nice way to kind of GAAP get out of the storm and kind of and so it gets things set up nicely.

And we'll from a volume point of view I think the trend is kind of the same as it has been here for the last couple of months really good disciplined by I would say the larger.

Public producers and I think that is a really really good thing.

Having discipline and making sure that we don't overextend ourselves quickly overshoot the market flood the market with supply I think that is of very very good thing for our industry overall and so the discipline around free cash flow being measured.

<unk> seeing that with our large producers at the same time, we are definitely also seeing them looking into the second half and say hey, maybe there is an opportunity to add some cruise add some rigs and things alike and then.

What we're seeing and like I think many other seeing as well is the smaller producers the private.

Private producers are definitely adding rigs and volumes sonars.

You definitely see a bit of the discrepancy between the between those two players, but overall I am pleased and general with everything that I see around the company.

Forward too good the rest of the year.

Got it that's helpful. Thanks, and obviously.

<unk> sustainability energy transition topics that are really kind of dominated investor conversations.

As of late just wondering if you could expand a bit more on what that means for DCP. Obviously the trick is you want to do things that are economic and capital efficient as opposed to just chasing things out there just wondering what you see on the.

And in front of you here is carbon capture on your radar to the 45 accused make it economic for you or any thoughts you could share on these fronts would be helpful.

Yes, no that's.

Youre, absolutely right I think outside.

Winter Storm Yuri energy transition sustainability is something that we have discussed most sitting in this room, where I'm currently taking this goal with the rest of our of our management team and people and the company and we.

Half of around the energy transition there is a very dedicated and formed effort that we have internally. It is led by a number of.

Two of our EC members of our Executive Committee team members, we of DCP Tech ventures, and historically most focus on really expanding our focusing on just digital now very much focused also on the low carbon and we're looking at a variety of options of routes.

Energy transition.

<unk> solar Ccs electrification of the fleet.

And I think in the and if you look at energy transition and so really part of a comprehensive sustainability strategy.

And yes, even though sustainability is kind of buzzword and everybody's talking about it for us. It has been a very long time focus and let me explain net a little bit when.

And when you think about safety and.

Since 2007, which is as far as I could get the HR and records to go in the company and.

We've had every single employee within DCP midstream had as part of their bonus are we operating safely and the communities that we serve reliability, we have and our bonus structure, it's all about reliability.

And if you think about reliability and sustainability go hand in hand, when your assets continue to run when you don't have any upsets you do not you do not flare and.

And it's good for cost it's good for.

And your profitability and revenue and margin. It's also really good from sustainability and from and emissions point of view and.

<unk> has been in our bonus metrics for at least five years as well. So there's a lot of stuff that we've been always doing within the company that is focused on making sure that we are of good reliable and therefore clean and operator.

We issued our inaugural sustainability report in 2020.

And we're going to issue. The next one here. This summer so that's why one of the <unk>.

<unk> quarter earnings call. We ship, we hope we've talked a little bit more about it we're going to give you more robust disclosure and our team's Sarah has been working with EIC and GPA and kind of a comprehensive template of many people and the industry are going to use so we make it easier for the for you as analyst community for investors to look at things to compare.

And to see how we how we're doing things.

I'm.

Im.

Really pleased with what I'm seeing and like we've done a lot of our goal of cleaning the core I've spoken about the.

And largest industry methane survey that we started the skyros aerospace where we are.

We're flying our lines in the Permian and.

The DJ basin in the mid continent, and looking at fugitive emissions and making sure that we get on top of it as quickly as possible. We've always spoken about the consolidation of assets you guys have always given us a lot of credit and say Hey, you guys are very proactive at how can you consolidate assets and we were always focused on the HAE bullish the.

Of course picture of that but the emissions picture of that is very significant as well and you have fewer plants running and be attempt to consolidate and your stronger better assets. So that's why you've seen our scope one emissions go down fairly significantly from 2018 to 2019 by about 10%.

And then by from 2019 to 2020 by about 6% and then on top of all of that we haven't and indeed team that we put in place. This year, we have a broad based R&D Committee I've mentioned improved board diversity. So I gave you a long answer I think but hopefully it from a comprehensive but theres.

A lot of things that the team has done and that we're doing we continue to do and.

And we're hopefully being able to disclose with you here in the in the coming months.

Got it that's very helpful. I'll stop there. Thank you.

Thanks, Jeremy.

Your next question comes from Cheniere Giussani with UBS.

Hi, good morning, everyone and congrats the Sara on the the new opportunity and.

Looking forward to March doing well.

And maybe to start off a little bit here.

Wondering if you can talk about the operational and sustainability of the first quarter.

And if I sort of add back the the negative impact from the storm.

And annualize it it would seem that you're.

Did very well and the first part of that would be above kind of on an annualized basis. What you did what you are guiding for the year.

Is there some timing benefits and so forth within net can you talk about how that momentum sets up for 'twenty two trend wise, just assuming a constant of commodity environment.

Yeah, and Cheniere Shaun I think couple of things to think about I think your general thesis is correct and in Q1. If you took the storm out obviously would be of pretty strong quarter for DCP moves towards the very solid quarter.

There is some timing cheniere, we can't just take some of those run rates in Q1, and just exclude the negatives and.

And that some of the positives were going to continue for instance, I'll give you a couple of easy ones prices Rand, obviously that could be of negative and we talked some about that and our written remarks, but there were some areas, where we were still running of the DJ was running quite well and CIB prices ran up and they are and they've now come back to more.

<unk> levels. So you can extend that all the way into the remainder.

And there were some areas and the south of that May where we had some assets running the mei.

The pricing and those those hubs were very very strong you can extend that and I think the biggest one and I and we talked about a little bit as you can.

I'm very proud of the way the company operated around costs and sustaining capital and Q1 and I mentioned it was the lowest and a decade, but please don't annualize that we have some catch up to do.

Various reasons and Q1, you have not of lot of work happening because of the weather and we obviously were trying to keep the belt pretty tight see how we got through this event.

And again got through it very very well, but we'll have we'll need to catch up on some of that having said that if you look at the overall fundamentals going forward post Yuri.

And you know things hanging and where they are hanging game right. Now we gave some commentary volume seemed to be improving and commodity is very.

Constructive right now and we can stay in this environment, we've always said the DCP.

Our portfolio is very balanced performed pretty well in these types of environments. So you can take the whatever curve you want and put it on our sensitivities and come up with various levels, but.

The things hang out where they are at I think we're set up for a pretty good year cheniere.

I appreciate that and maybe just to follow up on that a little bit here.

And sort of talking about your commodity exposure and your hedge positions sort of giving.

And the strength of.

The market's out right now and do you try and lock in some 22 hedges.

Or is the liquidity of a little too light.

But just given and then and sort of thinking about that given your experiences during <unk> in terms of some of of how some of your hedges work.

Is the strategy to run a little less hedged or where do hedges a little differently in terms of avoiding basis hedges and so forth.

I think theres, two things, there and I'll address them both cheniere.

Of the generic hedging of our equity line.

We do of a multiyear hedging program.

We have a lot of gas hedged for this year.

And advantageously as we sit here today, we have some room on the NGL and crude and Thats, probably not a bad thing, but but again I'll remind you of with the growth and the fee and the hedges we have in place we're 88% of your hedges here that continues to grow we are looking at 'twenty, two but our hedge targets are pretty strong.

Batter and make sure that.

And that we're keeping a pretty good view and if we are going to put hedges on that day or junior what we're really focused on around that pricing is leverage covenants and so forth and so we will hedge at levels that keep us and moving towards that mid <unk> target. The other question I think that you asked is in Q1, we had some swaps in place.

And obviously with massive amounts of shut ins and he ended up a little bit long on some of those swaps on the gas daily basis and.

And when you don't have the volume to cover it and I want to give some kudos to the team we covered a lot of those positions the team scrambled and Houston, our marketing team and did a great job, but we were short some.

Are we looking at a different strategy in the winter or when you potentially have those upset absolutely and.

And Cheniere I'll tell you the positions we have those swaps.

In February we are pretty small when you look at our overall position youre looking at less than 200 of day on the swaps, but obviously when prices run the four five $600. It could have a benefit but the average got the team. We're doing a lot of good lessons learned I am sure a lot of companies are doing that coming off of the euro. It was the six Sigma event, but I do think youll see some.

And policy shifts and some different strategies that will deploy next winter for sure.

Alright, perfect that does it for me thank you very much and.

Enjoy the rest of the day.

Thanks.

Your next question comes from Chris Tillett with Barclays.

Hey, guys. Good morning, Thanks for taking my call just I guess the follow up on <unk> question there.

And there at the end.

Are you able to I.

And I guess as you've done a postmortem.

After the storm are you able to elaborate at all on kind of any of the financial or operational changes.

That either have already been implemented or that youre looking at.

I can hit a couple of vouchers got the team I mean, hindsight's always 2020, but there are.

A couple of things.

Keep in mind, the assets ran well so the.

Eight plus score we were ready to run the only had the volume has been there and that's that's backed of average comments on the ESG that was a massive win for the company and then we had no safety incidences that was the big win in terms of looking back.

I think there's a couple of things and I mentioned, one we probably and some of these winter events Winter storm periods would may be dialed down a little bit the swap position those are by the way those are plain vanilla pretty standard positions and the risk. They are trying to take risk off we're trying to take gas daily daily risk off, but obviously with 90%.

And on some days of your volumes don't show up it can be a pretty tough thing another area that.

And that the companies looking at us obviously gas storage.

And really nice hedge and a lot of companies, including DCP those storage assets performed quite well.

The nothing eminent but we are looking at and we have the ability to expand some of our storage assets.

Pretty low capital opportunity is pretty easy to do so we may look at that too because it worked as a really really nice hedge against periods, where you get shortage other gas theres a few other things around contracts that we may look at but by and large.

The portfolio was fairly balanced so we're looking at may be enhancing some areas like storage and maybe.

Pulling back a little bit on some of the swap strategies that we use.

Yes, Chris maybe I think Sean.

95% of it I think in general just to.

Our focus has been on making sure that we get the asset back right and everything is going well and there will be a.

<unk> significant amount of time spent here too.

And to make sure that everything that we do within the business is optimized and Tim.

If there are any learnings from this either from a dial risk and a different way or are there different commercial opportunities too.

Look at the upside to this as well all of those are being looked at.

Great guys. Thanks for all of the detail there thats very helpful.

And then I guess just quickly from me here again.

Is there anything through kind of the next several quarters.

And that we should be aware of in terms of impacts or adjustments that need to be made and by that I mean.

Power credits or contract changes or any anything.

Small like that so.

That's a great question and a.

Couple of stats I want to put out there.

Obviously during that period with elevated pricing receivables and settlements went up.

Chris we collected over 90% of.

And what was due to the west there is as you know there are still some disputes that are out there and but we are working.

And then thats, a little bit of cabinets of little bit of working capital timing. So I think through the remainder of the year Youll see the company, obviously work to close out that remaining less and 10% of the receivable. So that's one thing that could hanging out there.

Over the remaining quarters, but kudos to our credit team kudos to our legal team. We are we've collected the majority of our money and.

And I'm very very impressed with the diminishing really was a small impact on working capital and Q1, but thats price something to keep an eye on for the remaining quarters as we go and try and collect the remaining 10%, which we feel very strongly and our ability to do.

Got it.

Okay. That's it from me thank you both.

Thank you growth.

Your next question comes from Tristan Richardson with true Securities.

Hey, good morning, guys. Congrats on the managing of disruptive quarter I guess, just one question on the ethane side I think you noted in the prepared comments being kind of <unk> dynamics seemingly being incremental vs <unk>, particularly in the Permian.

Can you talk about dynamics youre seeing today and <unk> as we go through the year.

And I guess, both in the Permian, but also in the north and and should we still think of that has the potential tailwind and 21.

I can start I think I think you should see it has the potential tailwind we're seeing some pretty good fundamentals across the board both on the capacity to take more ethane both on the demand side with the plastic shortages and demand coming back. So we're seeing a relatively constructive environment and thats why interest and you are.

Starting to see third parties I mean, we've been our economics of always has and recovery for quite a while now all of the all of Q1 all of Q4 of Q3, but we're starting to see the ability for third parties now to go into recovery. That's very very good sign and then with some of the volume increases and a couple of our key.

Areas, we're seeing volumes go up as well so the demand seems to be there for the products and.

And the supply obviously is responding accordingly, so hopefully on the trend basis as I sit here right now I see that as a tailwind and I agree.

And I appreciate it's Sean and then I guess, maybe at the risk of anchoring to some scale of comments you guys made in the past I think just noting that $50 million to $90 million of potential upside that you guys talked about obviously this was pre storm, but with the reset of your commodity assumptions is it fair to say that.

And that sort of band you are capturing today and your assumptions.

Yes, I think I think on our guidance, we did a couple of things because obviously the deck Wouter did a good job of talking about the process of how we set our earnings deck.

You are coming into the year I think what we told you guys at that time and nothing has changed significantly is that if you took the forward. When we gave guidance that was worth $50 million. If you kept spot prices, where they were at that time that was worth of closer to 90, I think the way youre thinking about it right as we now sit here in May we've been able to realize.

A portion of that and hence.

Pretty solid Q1 and outlook into Q2.

If that continues that uplift is still there interest and so.

The forward hangs in there are some uplift if spot stays where it's at and we ended up staying at those prices should be of really strong year.

Just one thing to add to that I think overall and we always talk about the commodity can be very fragile and we have seen.

Especially over the last 14 months.

I never thought I would have seen minus $38 of crude and $400 natural gas all of what's in.

12 months, so it's a great thing, it's the tailwind we like it but at the same time.

Hartzell always bank on that and assumed and it's going to stay exactly the way. It is here for the next day months quarters. So.

Right now it does create a bit of upside, which is which is of great thing and.

The capture it and run the assets really really well and state and stay focused on our cost.

Great powder of Sean. Thank you guys very much thanks true.

Once again, ladies and gentlemen of you would like to ask a question. Please press star one on your telephone keypad. Your next question comes from Spiro <unk> with credit Suisse.

Hey, good morning, everybody and congrats to Mike and Sara on the new role.

Just a few clean up questions from me one.

And I wanted to start with a follow up on Jeremy's last quarter. You guys had provided some high level G&P volume assumptions by base and I believe <unk>, Dave has guided up 5% to 10% Permian flat would come down slightly and the E&S and our Eagle Ford down about 10 of 20% just curious from your response to him I guess are you, saying that things are tracking better than some of those underlying.

Buying assumptions and have you provide a little more granularity around the Eagle Ford and the contracts that are rolling there.

Okay, Yes.

So I was doing a lot of trending and so let me know gauge back to Youre talking about the original assumptions. So I think.

Permian was started off of.

And again tied to our original assumptions a little bit slower than we thought, but we I think youre seeing the catch up so I would say that on a trend basis, it's improving in relation to where we probably would've earlier, it's getting where we thought.

At the moment, so that's where I would think about the DJ has been pretty much on line with our original assumptions and I think there could be.

A little bit of upside there and potentially let's see out of the year progresses, but we like what we're seeing there Eagle Ford's right and again all of this is taking the storm out Eagle Ford contracts pulled off that was contractual we saw that.

And I would say Eagle Ford right on par with what we would've assumed coming into this year and we're hanging in there mid continent, which is interesting.

We had base declines that we've seen of kind of hang in there flat. So I don't know I don't know that we believe that carries out through the year, but so far that's actually been slightly better than our original guidance, but I would put that to neutral to slightly better from the the guidance, we talked about having said that again trending off of Q1.

And we're seeing everything getting if there was some laggards youre getting back to where we thought and maybe maybe some potential upside and.

And the DJ and last thing I would say is that we were definitely lagging on the pipelines and Q1, because we were still and rejection again now youre seeing that get right back on and we're in recovery mode. Much stronger so right back to the original assumptions that we had.

And as we went into the year, so things are kind of getting back and level of eyes and closer to our original guidance.

Got it let's get the year and and then just on the Eagle Ford contracts as they roll throughout the year and.

The other quarter thats going to see that more than the others not sure what else you can provide on that front.

The majority of it was paid one day to day.

Basically it rolled January one.

Okay. So that's out of the way that and great.

Follow up question, just thinking about bigger picture and kind of longer term route or you guys are kind of one of the early one thing and let's pull the range back on Capex and.

And obviously with the rate move and in hindsight and at some point just wondering if you think it's ever going to make sense to get.

Aggressive again, maybe not to the extent of what it used to be in terms of the capital spending, but I'm just curious what's going to make you invest that incremental dollar and of large sort of project at some point, what do you need to see and the market and when do you think you'll actually ever see an opportunity like that come again.

It's a great question and I have.

So all of my team here and keep telling it and say hey, I am really looking forward to that day, but.

You are right. We came out in 2019, and we said we believe the market is starting to feel overbuilt too frothy.

And Thats why we came up with our supply long capacity short strategy and just for everyone kind of what that means is from I gave us cheaper for us to ramp the capacity and to build new capacity because you don't want to owned at the last pipeline that the last processing plant and this and this business. So.

At that time I don't think that was the deeply shared strategy with a lot of people, but I think the team most of 110% of right on it obviously COVID-19 accelerated things, but if you look in general I think of lot of areas and as industry are built for 14, and 15 million barrels a day of crude.

Oil production and we're quite a ways away from that so.

<unk> potentially opportunities on a fairly niche basis, where you can go out and say you know up theres, a bottleneck here and we find the way to Debottleneck things and create an opportunity to put some accretive growth and.

Yes, we'll absolutely look at that but I think that's.

And that's fairly niche.

And I think right now if we would see very significant producer growth and let's say prices would hang with us and most of the areas, where we play I think we can still find.

Plans are pipeline capacity that I can rent and there is a lot of people that have built systems.

And with a very very bullish outlook that are either sitting empty now or does it sort of partially empty and.

They would they would welcome us to put volume and there so.

I think this is kind of.

The low growth.

Environment is definitely going to stay with US I would say for the last next 18 months or so and what I mean with no growth, but low growth capital environment is definitely going to stay with us for the <unk>.

Next 18 months or so outside of that difficult to see where things are going and welcome obviously growth, but at the same time I also think it's tremendously important for this industry to have credibility.

And get credibility back with investors and as industries kind of stay around for a long long time natural gas is a tremendously important part of the energy infrastructure in this country in the world.

And we.

And we need to show to investors and to everyone. Because we can run the business.

Sponsored <unk> from an operational point of view, but also responsibly from a financial point of view and Thats why we are tremendously focused on.

Great that's helpful music.

The music to the years of many I'm sure. It's all I had today guys. Thanks again, thanks sure. Thank you.

Your next question comes from Michael Blum with Wells Fargo.

Hi, good morning, everyone.

And Michael.

Maybe I wanted to stay on this topic.

I'm wondering so clearly I think everyone on this call knows that you've been front and center in terms of.

Capital discipline asset rationalization.

Do you think the industry and get together and.

And do this whether it's on an asset level or corporate level or kind of along the lines of what you were just talking about do you think the view out there and as production is eventually going to catch up to all of this excess capacity. So there's really no reason to rationalize anything at this point.

Well, that's a really good question, Michael Thanks for that Bob.

Let me try to unpack that a little bit.

I think theres two parts of this there is a part of broad corporate M&A to this which I believe needs to happen absolutely needs to happen.

Normal and flag if you look at every industrial type of business and the industrial cycle and once you get into an overcapacity situation normally companies come together and that's why he is part of our digital transformation as part of our supply of loan capacity short strategy. We also had the strategy of creating a lean manufacturing model taking a lot.

Of course stop because hey, if you get into consolidation cycle than the once that can take cost out that can run lean to the can run reliable and safely are the ones that have an advantage and that's what we were trying to do because I do believe the industry needs to consolidate we also thought from 2015 and 16 that those kind of happen.

I think there's a bit of a difference between 15 and 16 and today I think the overcapacity situation is more significant today than it was in the 15 and 16.

Tiberius, but there continues to be hurdles to getting companies together and make their social hurdles that our governance hurdles.

There are hurdles around balance sheet tomorrow, and there's not a lot of cash buyers and as industry. So.

I hope, it's going to happen and I think it should happen and I think it would be good and general for the industry. If this happens but it's it's.

Okay.

Got to happen at the 64000 dollar question and I'd.

Probably cannot answer I think the second part of your question is around our we got our people staying disciplined.

Kind of what I think I hear you ask as well.

Nearly here from us and yes, we want to stay disciplined.

Clearly hear from.

The larger producers and it goes back to the question Jeremy asked early on.

I definitely see them, saying guys. We've got to stay within free cash flow, we've got to make sure that we delever and if we return capital to shareholders that were good financial stewards of the business and the earn some credibility back and whenever I hear that I think that is music to my ears. Some people may say, hey, why don't you just.

And that your producers are blowing and going the <unk>.

With that obviously is the volume to be flooding the market. So.

The big discrepancy there, though between the private operators that are probably looking at hey, how can I crank it up really hard and maybe flipped the company out versus the versus the public ones. So so far I'm pleased.

But what I'm seeing Michael to the broader can the industry consolidate.

I hope so because otherwise what we're doing is we're competing on the variable cost and that is not going to be a good thing and a business like ours that is fairly capital intensive.

Great. Thank you very much.

Thanks, Michael.

Your next question comes from James Carreker with U S capital markets.

Advisors and I'm sorry.

Alright, thanks, guys.

Just wanted to maybe ask a dumb question, but when you talked about commercial settlements being a negative impact on the quarter or are we really just talking about.

The swap hedges on the Guadalupe pipeline or is it more than that.

It's predominantly those settlements of it could be Guadalupe and <unk>, James So Thats, where you have swaps here that we were using swaps to manage risk oil and gas daily and obviously the gas didn't show up in some cases, and we have and settle those swaps. So that's that is the majority of what we're talking about there.

Okay.

And then I believe you mentioned you've collected over 90% of them.

Some of your outstanding receivables related to gas sales is there a is there a dollar amount of.

Associated with that that you could share.

I don't think we have I mean.

Here's the interesting thing with the the.

The event happened normally 90 normally 10% James is pretty small right because you don't have $150.

But with gas with some of those settlements that are and dispute and you can imagine obviously the ones that are or that are potentially lagging.

There is multiple reasons by the way something and some cases people need some time to come up with the liquidity and so forth, but it's.

Haven't given the huge number but I think it's some of that I'll give you a range of its price below $50 million to the company. So.

It's not gigantic but at the end of the and comparison to maybe some others, but but having said that I am very pleased that we are confident that we'll get that recover the those dollars and the fact that the team was over 90% very quickly.

And it's pretty impressive so kudos to the credit team.

Yes, that's helpful. Because yes, I mean, 10% normally nothing but if.

The 10% of 400 dollar and and gas.

Could be more substantial I guess that and then on my last question you mentioned that the need for for corporate M&A to happen.

Any thoughts.

Now you would participate potentially net.

Either as a buyer or seller of your openness to together.

Volume.

Probably.

Too deep into that but.

Here's the here's the way I would look at it and I'm like we've done everything to sub DCP midstream up to be a consolidator.

And we're on the forefront of digital transformation and we are and our 50 years of our digital transformation journey and.

And what we've done around the cost once we've done around safety and what we've done around operational excellence and what we've done around creating a lean manufacturing kind of profile.

Not doing around reducing our emissions and things like that and like this team has.

I think knows how to execute and execute pretty pretty darn well so with that said.

I do believe that DCP can be a consolidator of her but we also know that.

And there are all kinds of structural things are all kinds of things from a governance point of view and this market and what I kind of answered early to Michael's question that just makes.

And that makes consolidation difficult and as industry.

We believe it needs to happen and.

And the strategies that we have and.

Florida over the last number of years are all set up to be a winner in the cycle like that.

And even if the market doesn't consolidate they are still the right thing to do financially and operationally.

Okay. Thank you.

Your final question comes from Michael Cusimano with Heineken.

Hey, good morning, Thanks for taking my questions.

Going back to the mid con volumes were stronger than what we expected and I believe you attributed early and the call to lower declines youre seeing but.

And I was hoping you could talk maybe about the increased rig activity that we're seeing there and how it's affecting your footprint or.

Possibly how conversations with producers.

Evolved over the last few months.

Yes, I think with some of the larger producers, it's very similar to what bauder said, but the.

We're in a pretty constructive commodity environment.

And I still think we don't expect.

Michael the see growth there, but definitely has hung in.

Again, the the volumes have been more flat versus declining.

And that's typically what we were expecting might got still tells me coming out of the year, we're probably down versus the the entrance rate, but I'll take it I mean, I think I think you've got you've got crude.

North of $60 <unk> got.

Gas pretty strong and you've got liquids and hanging in there. So it's been it's been a slight surprise I'll remind you that the biggest areas where the company and we've talked about this before makes the majority of our our returns is going to be the DJ and the Permian, we'd like the mid continent.

With the great area, obviously, a lot of those assets speed Southern hills, but I wouldn't consider the huge driver, but it's a slight positive trend and we'll take it.

Sure Yeah that makes sense, one more if I can more of just like a modeling question.

When I look at the Q4 to Q1 build up the <unk>.

$60 million from Winter Storm Uri does that include like.

Like the net benefits from pricing realizations, and maybe like cost realizations or would that be included in the I think of as the 69 million cost.

Depreciation and quarter to quarter.

So it would not include the cost benefits of separate it actually includes if you think about that it's going to include some cost hits right. We talked about electricity and obviously, we had that runs a lot of crews.

And over time on the pricing, it's a mixed bag, there's some pricing netted against that number where we can directly tie it to the storm, but then theres some pricing the.

Honest that affected the DJ and there was some pricing the continued past the exact days of the storm year, we didn't get that precise but of course, the good guy on courses and the cost line and some of the negatives are and the 60 on price. There is some of the good guy and price and that 60 offsetting some of the negatives and then there is some of the good guy.

And our normal business.

Okay.

And that's really helpful. I'll stop there. Thank you.

Thanks, Michael.

At this time I would like to turn the conference back to Mike Feldman Director of Investor Relations.

Thank you all for joining US today, if you have any additional follow up questions. Please feel free to get the vehicle a rig and.

With that thank you and have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

Okay.

And.

[music].

And then.

Yeah.

And.

[music].

And.