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Edited Transcript of ENLC earnings conference call or presentation 8-May-20 1:00pm GMT

Q1 2020 EnLink Midstream LLC Earnings Call

DALLAS May 9, 2020 (Thomson StreetEvents) -- Edited Transcript of EnLink Midstream LLC earnings conference call or presentation Friday, May 8, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Barry E. Davis

EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC

* Benjamin D. Lamb

EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC

* Eric David Batchelder

EnLink Midstream, LLC - Executive VP & CFO of EnLink Midstream Manager LLC

* Kate Walsh

EnLink Midstream, LLC - VP of IR & Tax

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Conference Call Participants

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* Colton Westbrooke Bean

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research

* Gabriel Philip Moreen

Mizuho Securities USA LLC, Research Division - MD of Americas Research

* Jeremy Bryan Tonet

JP Morgan Chase & Co, Research Division - Senior Analyst

* Shneur Z. Gershuni

UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst

* Torrey Joseph Schultz

RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to EnLink Midstream's First Quarter of 2020 Earnings Call. (Operator Instructions) Please note that this call is being recorded today, Friday, May 8, 2020, at 9 a.m. Eastern Time.

I would now like to turn the meeting over to Kate Walsh, Vice President of Investor Relations and Tax. Please go ahead.

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Kate Walsh, EnLink Midstream, LLC - VP of IR & Tax [2]

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Thank you, and good morning, everyone. Welcome to EnLink's First Quarter of 2020 Earnings Call. Participating on the call today are Barry Davis, Chairman and Chief Executive Officer; Ben Lamb, Executive Vice President and Chief Operating Officer; and Eric Batchelder, Executive Vice President and Chief Financial Officer.

We issued our earnings release and presentation after the markets closed yesterday, and those materials are on our website at www.enlink.com. A replay of today's call will also be made available on our website.

Today's discussion will include forward-looking statements, including expectations and predictions within the meaning of the federal securities laws. The forward-looking statements speak only as of the date of this call, and we undertake no obligation to update or revise. Actual results may differ materially from our projections and a discussion of factors that could cause actual results to differ can be found in our press release, presentation and SEC filings.

This call also includes discussion pertaining to certain non-GAAP financial measures. Definitions of these measures as well as reconciliations of comparable GAAP measures are available in our press release and the appendix of our presentation. We encourage you to review the cautionary statements and other disclosures made in our press release and our SEC filings, including those under the heading Risk Factors.

We'll start the call today with a set of brief prepared remarks by Barry, Ben and Eric, and leave the remainder of the call open for questions and answers.

With that, I would now like to turn the call over to Barry Davis.

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [3]

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Thank you, Kate, and good morning, everyone. Thank you for joining us today to discuss our first quarter 2020 results. We will also discuss the operating environment around us and a revised outlook for our business for the remainder of the year. On behalf of EnLink, we hope you, your families and your colleagues are healthy as we all navigate the uncertainty surrounding life with COVID-19. I want to personally thank those on the front lines, including medical personnel and first responders for all of the great work they're doing. I would also like to thank all of EnLink employees for their hard work and dedication in ensuring we deliver essential energy services safely and reliably. To date, EnLink has had no known cases of the virus among our employees and no business interruptions. We continue to take seriously our corporate responsibility to ensure compliance with government recommendations and are adhering to strict health and safety practices across our organization.

In the midst of a challenging environment, EnLink reported solid results for the first quarter. We achieved adjusted EBITDA of $260 million, which includes a $6 million expense related to severance as part of our workforce reduction, and we generated $44 million of excess free cash flow.

As we look forward to the rest of 2020, everyone knows that the pandemic has caused tremendous demand disruption for energy products. The recent oil price collapse has spurred a very sharp pullback in crude oil production across the United States, and that will have a material impact on the volumes across our systems and in turn, the revenue that EnLink generates this year and likely next year.

The range of possible outcomes that could unfold for EnLink during 2020 is wide. As we progress forward through these uncharted waters towards a new normal state, it is impractical for us to provide clarity with regards to volume and segment profit expectations. Later, Ben will discuss a few of the cases that we've evaluated along with high level impacts those cases could have on our segments.

What I can share is that we're currently seeing adjusted EBITDA being in the range of $950 million to $1.025 billion for the full year. Given the assumptions and scenarios that we've evaluated and knowing what we know today, this level of EBITDA, coupled with capital expenditure and distribution reductions we have made to date, would generate significant excess free cash flow in the range of $260 million to $280 million.

With our asset platform generating strong excess free cash flow, we have the ability to effectively manage our leverage and expect to be below our key financial covenant metric which is 5.0x debt to adjusted EBITDA as calculated by our credit facility.

As we navigate through the days ahead, our execution plan has 4 priorities. Number one is to maintain financial strength. We took a number of decisive steps during the first quarter to execute on this priority. We reduced our common unit distribution by 67%. We believe the distribution is at a sustainable level, given what we know about our current operating environment. We reduced our capital expenditures program by 40% as compared to our original budget, and we'll be spending 66% less this year as compared to 2019. We'll continue to evaluate every dollar we're spending and could potentially reduce CapEx by an incremental $50 million depending on producer activity. We took significant steps to drive out expenses in our business and expect to save $100 million in operating and G&A expenses versus 2019 levels. The combination of these actions results in EnLink retaining roughly $600 million of cash during 2020, which we will use to ensure we have adequate liquidity to run our business and effectively manage leverage.

Our second priority is to drive organizational efficiency. Our teams are doing a phenomenal job of incorporating technology in new ways and streamlining our internal processes to adapt to the new business climate.

The third priority for us is to optimize the profitability of our existing business. We are challenging how we run our business in every possible way and are turning over every stone to find incremental operational efficiencies and savings.

And the fourth priority for us is to position EnLink for the future. We have our eyes squarely on what lies ahead for EnLink as global economies recover and the new energy landscape comes into view. We will leverage our leading positions in key producing basins and in Louisiana Gulf Coast market. We are seeing an increased level of engagement on a number of low-cost, high-return projects, primarily targeting efficiencies around our asset footprint, and we continue to see compelling long-term opportunities in Louisiana.

This is a defining moment for energy companies, and EnLink has successfully endured challenging economic cycles before. With the ongoing dedication of our employees and the diversity of our asset platform, we believe EnLink will effectively manage through this period, taking advantage of unique opportunities this operating environment offers, and we will emerge stronger than ever.

With that, I'll turn it over to Ben to discuss the details of our operations.

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [4]

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Thanks, Barry, and good morning, everyone. As Barry mentioned, EnLink had a solid first quarter. All 4 segments performed well with our Permian natural gas volumes increasing over 20% from this time last year, and our NGL volumes in Louisiana increasing by approximately 15% from this time last year.

As Barry also touched on, it is difficult to accurately predict how our operations will be impacted by the evolving market dynamics. We are in constant contact with our customers and have taken into consideration a range of volume assumptions related to the activity in order to develop a revised view of 2020.

As I discuss our first quarter 2020 segment results, I'll also give color on how we are looking at each segment for the rest of the year.

In the Permian, we experienced strong natural gas volume growth year-over-year due to fairly consistent drilling and completion activity over the last 12 months on both the Delaware and Midland sides of the basin. Conversely, we experienced a decline in crude oil volumes gathered year-over-year as we are exiting the first purchase business in the Permian and expect no longer to be in that business by the end of the second quarter. We are choosing to step away from crude first purchase operations due to the sheer competitiveness of that line of business and the inability to earn the returns we can elsewhere.

Despite strong natural gas volumes during the first quarter of 2020, our Permian segment profit decreased 16% year-over-year. Net profit was negatively impacted by lower natural gas and NGL prices but was partially offset by approximately $2.5 million of realized hedging gains that are reported in our corporate segment.

Our Tiger plant becomes operational as planned during the second half of 2020. Our Tiger operations are underpinned by Exxon's Coral Canyon development, and our customer has reaffirmed that the Coral Canyon plans have not changed as a result of the market environment. That said, we expect to see significantly lower well connect activity in both the Delaware and Midland basins. Virtually all upstream companies in the basin have reduced or deferred activity in response to the market.

Like many operators in the field, we expect the second quarter of 2020 to be the trough of the cycle. It's unknown what the pace of recovery will be, and we anticipate producer drilling and completion schedules to be relatively fluid for a number of months to come.

Turning now to Louisiana, we had a strong quarter for NGL volumes through our system, averaging slightly over 190,000 barrels a day, which is a record for us and is 15% higher than this time last year. Average natural gas gathering and transportation volumes held up well through the quarter and were roughly flat compared to the first quarter of 2019. Average natural gas processing volumes for the quarter were significantly lower year-over-year as a significant part of our processing operation in Louisiana is opportunistic in nature and depending on commodity prices to incentivize processing. Attractive economics for processing the fairly lean gas we see in Louisiana were not present during the first quarter compared to this time last year.

Our operations in the Ohio River Valley had a good quarter, with volumes increasing 16% year-over-year. Although volumes for the most part were strong in the first quarter of 2020, segment profit for Louisiana declined by approximately 5% year-over-year. Financial results were pressured in particular by NGL mark-to-market impacts but were partially offset by approximately $3 million of realized hedging gains reported in our corporate segment. We anticipate a reduction in NGL equity barrels flowing from our Permian and Oklahoma operations for the rest of 2020, and we are focused on optimizing the value created by our fractionation assets in a variety of volume scenarios. We expect our activities in the Ohio River Valley to be significantly impacted by the reduction in refinery runs happening in that area. As a result of those market dynamics, we booked $168 million noncash asset impairment related to our ORV assets during the first quarter of 2020.

In the gas business, our Venture Global project is on track, and we expect to be ready to provide service to Venture Global's Calcasieu Pass LNG facility by the end of this year. All in all, we expect Louisiana activity to be lower, and we'll have further clarity in the coming months as to the related financial impact.

Turning now to Oklahoma, we experienced slightly lower natural gas gathering volumes year-over-year, and processing volumes year-over-year were down 5 -- about 6%. Crude volumes experienced a strong 25% increase year-over-year, but we've seen rig activity drop off our crude footprint, and we are forecasting declining volumes throughout the rest of 2020. Segment profit for Oklahoma decreased 6% year-over-year which was primarily driven by a reduction in natural gas volumes.

When we step back and look at 2020, we expect producer activity to be very limited for the remainder of the year. We have cash flow support to insulate some of the volume decline with minimum volume deficiency payments expected in the range of $60 million to $65 million. Also, Devon mentioned on their earnings call that they expect their joint venture with Dow will defer drilling activity, which defers any activity for us as well. We are not expecting any cash flow to result during 2020 from this JV in our original guidance.

Wrapping up with North Texas, we experienced year-over-year natural gas volume declines in the 4% to 6% range as expected. In comparison, segment profit year-over-year was down by approximately 2% as the team continues to do an outstanding job focusing on operational efficiencies and cost control. As we think about the rest of 2020 for North Texas, we don't expect any drilling activity. We may also see mild volume impacts as producers defer investments like workovers in the current price environment. We also know that Devon's sale to BKV has been delayed to the end of the year, but Devon continues to expect that deal will close in the fourth quarter of 2020.

With that, I'll pass it on to Eric to discuss our financial update.

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Eric David Batchelder, EnLink Midstream, LLC - Executive VP & CFO of EnLink Midstream Manager LLC [5]

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Thank you, Ben, and good morning, everyone. As Barry and Ben have both mentioned, EnLink delivered a solid first quarter of 2020, achieving $260 million of adjusted EBITDA, which includes approximately $6 million of severance costs associated with a reduction in our workforce. EnLink also achieved $44 million of excess free cash flow, which we define as distributable cash flow less growth capital expenditures net to EnLink and distributions to our common unitholders.

Adjusted EBITDA for the first quarter of 2020 declined slightly by 3% from the same period last year, primarily due to 3 key factors. First, lower natural gas and NGL prices impacted segment profit in the Permian and Louisiana segments. Second, we experienced lower volumes in Oklahoma due to reduced producer activity and deferral of well completions. And third, the severance costs previous mentioned.

Debt to adjusted EBITDA for the first quarter of 2020 was 4.6x as calculated by our credit facility. However, it is important to note that we exited the quarter with $195 million of cash net to EnLink on our balance sheet. When accounting for this cash on hand, debt to adjusted EBITDA is 4.4x for the first quarter of 2020.

It is a top priority for EnLink to manage leverage and preserve liquidity, especially in this environment. As Barry mentioned, we have taken significant steps over the course of the last 4 months to preserve roughly $600 million during 2020 to ensure we maintain a strong balance sheet that will allow us to sustainably run our business.

First, we have reduced our common unit distribution by 67%. Second, we have reduced our total capital expenditures by 66% as compared to 2019 and have the ability to further reduce capital by up to $50 million depending on producer activity levels. And third, we have reduced operating expenses as well as general and administrative expenses by approximately $100 million or 10% of adjusted EBITDA as compared to 2019 through significantly cutting costs at every level of the company. These $100 million of costs are comprised of approximately $50 million in cost savings announced in November which were a component of the $75 million of initiatives to increase adjusted EBITDA, plus an additional $50 million of cost savings that we have identified in the first quarter of 2020. We have made these difficult decisions to ensure that we manage our leverage below our bank covenant of 5.0x even if the operating environment worsens and the pace of economic recovery is slower than anticipated.

Taking a closer look at our total capital expenditures, our current outlook for 2020, inclusive of both growth and maintenance capital, is a range of $190 million to $250 million. As Ben noted, we expect to spend roughly $60 million this year to complete our Tiger natural gas processing plant in the Delaware Basin, which is expected to be operational in the second half of the year. In Louisiana, we expect to spend roughly $20 million on our Venture Global project to tie our Bridgeline system into their Calcasieu Pass LNG facility, which is currently under construction. We expect to spend approximately $30 million on maintenance activities this year across our platform. Most of the remaining capital is projected to be spent on well connections and gathering infrastructure.

For the first quarter of 2020, we invested approximately $90 million in the projects I just mentioned and expect our capital spending to step down each quarter for the rest of the year.

I'll now spend a minute addressing the strong credit quality of our customers and the fee-based nature of our business, 90% of our first quarter 2020 revenues were generated by counterparties with investment-grade ratings or parties who have provided security to us. Our top 10 counterparties represent 66% of our first quarter 2020 revenues, and 90% of those customers have investment-grade credit ratings with the remaining 10% having provided security to us. Finally, we have limited direct commodity price exposure as approximately 90% of our business is under fee-based contracts.

Next, I will discuss our view on liability management. Our debt horizon is favorable in that we do not have any near- or medium-term senior note maturities and approximately 35% of our senior notes mature in 20 years or beyond. Our next debt maturity is our $850 million term loan, which is due in December of 2021. We will continue to evaluate several options to refinance this loan. As a backstop, we expect to have sufficient financial flexibility under our revolving credit agreement to repay the term loan in its entirety which would have no impact to our leverage position.

We remain diligently focused on our financial strength which includes maintaining our strong balance sheet with adequate liquidity to sustainably operate our business and being disciplined with respect to our allocation of capital to the highest return opportunities.

With that, I'll turn the call back to Barry for closing remarks.

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [6]

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Thanks, Eric. Yesterday, we also published our 2019 sustainability report, which we expanded to provide more data, transparency and accountability. EnLink has been a sustainable company from day 1 as our core values have always ensured our commitment to providing safe, responsible and ethical operations that respect the environment, support employees and communities and deliver value for unitholders.

I am pleased to share our 2019 report with you which sets the stage for future sustainability momentum that we believe is supportive of our overall business success.

Before we open up the call for Q&A, I want to again thank our entire EnLink team for the hard work, innovation and endurance they have shown through this extraordinary time. We've continued to safely provide great services to our customers while making tough decisions and working long hours to accomplish what feels like a year's worth of work in only a few short months. To every stakeholder of EnLink, from employees to customers, from unitholders to bondholders, thank you.

With that, you may now open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Shneur Gershuni with UBS.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [2]

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Maybe to start off a little bit. You talked about the $50 million of flexibility in your CapEx budget currently right now. I guess my question here is that as it stands today, you would think the -- in the current environment, you'd want to be as free cash flow -- as highly free cash flow positive as possible. What are the odds that this actually gets spent as you speak to the current producers. And then in thinking about that, assuming it does not get spent and everybody runs at maintenance capital as far as the eye can see from a producer perspective, what is it due to your decline rate for your asset footprint? What is the decline rate in '21 if you've not invested any incremental capital at this point right now and your producers haven't neither?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [3]

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Hey, Shneur, it's Ben. I'll start and then others may want to expand. The $50 million of additional CapEx flexibility, that is substantially all well connect and compression capital. And so the question as to whether we'll spend it or not will be entirely driven by producer activity levels. So that's what we'll be looking to there. In terms of how does that read through to volumes, I'm going to stay away from getting into what 2021 is going to look like. But obviously, the less producer activity we see, the less capital we spend equally, the less volume that we'll see.

We've talked -- I know there's been interest in our Oklahoma volumes. We talked at the end of last year about some volumetric scenarios, including an extreme case, where we saw no activity in Oklahoma in 2020, and we said that, that would result in a high teens volumetric decline. Our view on that hasn't changed, so that gives you a sense in Oklahoma.

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [4]

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Yes, Shneur, this is Barry. And let me just add that part of that $50 million will be the management of our ongoing capital projects and the things that we can continue to do to actually deliver those projects at less cost or under cost that we're currently projecting. And there's a real opportunity for that in this environment. We're seeing costs come down. We're working extremely hard with our vendors, and our teams are doing a great job with that. So we'll continue to do that going forward. And hopefully, it not only speaks to the activity level, but also the way that we can deliver things at lower cost than we could have yesterday.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [5]

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I appreciate the color, guys. And I guess the -- my point of the question was that we are at that extreme scenario right now, unfortunately. And I assume that a lot of the flexibility was related to well connects, which was kind of the question. Maybe you can share with us the decline rates for the Permian as well too under what seemed like an extreme scenario a year ago but is becoming reality today?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [6]

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Yes, Shneur, I don't really have something I can share with you on that. I can point you back to what we talked about in Oklahoma that given all the uncertainty we're facing today, I can't go further on Permian volumes.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [7]

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Okay. Fair enough. Maybe on the...

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [8]

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One last thing, Shneur. I want to go back to your comment on the maintenance capital. Let me assure you and all of our stakeholders that we're doing what needs to be done from a maintenance capital standpoint to preserve the systems, to maintain the integrity of all of our facilities. That being said, in an environment like this, there are certain things that we can defer because we're just not seeing as running the equipment as hard, et cetera. So again, we have taken some of the costs out on what you would characterize as maintenance capital, and we'll continue to work extremely hard on that as we look to every possible way to preserve cash and to manage our balance sheet and liquidity going forward.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [9]

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Okay, great. And maybe on the flip side here, I mean, natural gas has been rallying and so forth. Are you seeing any activity in your dry gas exposure at all or at least some conversations?

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [10]

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Yes, sure. Let me start that, and I'll say that we're -- maybe for the first time in some time, we feel really good about the concentration that we have in the more gassy areas. And certainly, as we look out at the strip pricing going forward, there is something to be optimistic about with gas prices above $3 when you get into the winter of -- the coming winter, 2021.

We also are -- when we look at the supply/demand scenario for natural gas versus crude oil, what we see is less dramatic impact on the gas side, and in fact, a quick recovery. We think we'll get back to something that looks like a normalized 2019 kind of demand. And we are going to expect to see some supply declines on the gas side with associated production -- with associated gas production with crude oil. So we're optimistic about the gas supply/demand scenarios and what that could mean for our North Texas and Oklahoma as well as our markets in Louisiana.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [11]

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Okay. And maybe one final question. Eric, you brought up the '21 term loan and the options you're looking at. You also bought back a little bit of debt during the quarter, but not really that much. Just trying to understand kind of what the strategy is right now. Do you have to deal with the '21? And that keeps you out of the market for buying debt because your debt is trading fairly discounted at this point right now. Just trying to understand the options that you're thinking about and how you're weighing kind of dealing with liquidity versus the fact that you can pretty much pick off a lot of your debt in the low teens in terms of yield to worst right now?

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Eric David Batchelder, EnLink Midstream, LLC - Executive VP & CFO of EnLink Midstream Manager LLC [12]

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Yes, Shneur, thanks. It's a great question. And obviously, you've hit on kind of all the levers that we're thinking about and things that we're managing. But if you look at the pace of our CapEx and the free cash flow generation of the business, we're wrapping up the Tiger program spend. And so the cash flow for the first part of the year, the first quarter was about $44 million, and we were able to take advantage of some of the market conditions at the time and repurchase a small amount of debt. As we generate more cash flow throughout the year, we'll be evaluating all the opportunities to use that and allocate that to highest return while managing liquidity. I think when we think about the 2 pieces of the balance sheet that are most important right now, it's certainly leverage and liquidity. And the steps that we've taken to create a significant amount of cash in the next 3 quarters will help us manage all of that. And some of that may include opportunistic debt repurchases and also just managing through the cycle in a way that we can continue to run the business.

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Shneur Z. Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [13]

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Have you done any debt repurchases since the quarter ended?

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Eric David Batchelder, EnLink Midstream, LLC - Executive VP & CFO of EnLink Midstream Manager LLC [14]

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We have done a little bit, yes.

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Operator [15]

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Our next question comes from Colton Bean with Tudor.

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Colton Westbrooke Bean, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research [16]

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On the $100 million of expected full year cost savings, can you just update us on where you are in the process today? Maybe to what degree Q1 saw benefits from reductions thus far?

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [17]

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Yes, Colton, this is Barry. Let me start that and basically acknowledge, again, the great work that we've done. When you look at our cost structure across the company, we've taken about 20% of the total cost from operating expense and G&A. On an overhead basis, it's even greater than that. When you look at that as a percentage of EBITDA, we've taken approximately 10% of our EBITDA and added that back as cost reduction. So terrific work, painful work, but we've done what we needed to do. We think that we've seen the benefit of that -- much of that in the first quarter. And so as you think about the run rate going forward, it will increase slightly as far as the net effect of that through the second quarter and forward. But certainly, we got a lot of it out in the first quarter. You can see that in the financials in the OpEx and the G&A.

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Colton Westbrooke Bean, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research [18]

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Got it. And then I understand the difficulty here, but with the Dow, Devon JV being deferred and the MVC set to expire at the end of the year, do you have any preliminary thoughts on the Oklahoma earnings trajectory next year?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [19]

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Yes, Colton, it's Ben. We're going to stay away from getting into 2021 other than to acknowledge that we peg the MVC at between $60 million and $65 million and we -- just to remind everyone, we never expected a contribution in 2020 from the Devon, Dow JV. So no change in this year.

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [20]

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The only thing I'd take it up a little bit and just say that I think Devon and Dow both would be optimistic about the potential for that joint venture seeing the additional strength even since the time as they signed that. When you look at longer term gas prices, I don't see any lack of conviction on their part to do this in time.

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Colton Westbrooke Bean, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Midstream Research [21]

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Understood. And just a final one. It sounds like the updated guidance assumes a pretty sharp drop in ORV activity. Historically, I think that business was tied to Antero, and they've said that they have not had to shut-in to date. So is the assumed drop, is that associated more with base declines? Or are you guys assuming a degree of curtailment there as well?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [22]

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Yes, Colton, it's Ben. So Antero is certainly a piece of it, but by no means the majority. So in that business, we have gas compression customers, Antero and one other. We have condensate stabilization, again, Antero and one other. We have the pipeline. We have the first purchase business. We have a terminal business on the river. And the simple fact is we make money as product moves in that basin. And given that's a fairly small refining market that has been hit harder by run cuts faster than most others, we expect to see less product moving in that area. Having said that, it's only about $10 million of segment profit. So it's a small business for us. But I would say of all of our businesses, it was the one that felt the impact of the market conditions the fastest.

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Operator [23]

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Our next question comes from TJ Schultz with RBC Capital Markets.

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Torrey Joseph Schultz, RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise [24]

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Just first, what level of curtailments and shut-ins? And for what duration are you assuming in the low end and high end of your new EBITDA guidance range?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [25]

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Yes. TJ, I'm not going to talk necessarily about the both ends, but what I would say is within the range that we've provided, we've allowed for something greater than what we are seeing today. So I were to go around the horn and say, what are we seeing today, in Oklahoma, we're seeing a curtailment that approaches 10% on a volume basis. In West Texas on the gas systems, we've been fairly fortunate we have not seen a 10% curtailment in field gas. It's more like 5%. We've seen some additional curtailment though in West Texas from our midstream onload customers as opposed to wellhead gas, which is just a secondary impact as they see less volume, they want to send us less. And we've seen a bit more pronounced impact on the Chickadee system, crude gathering systems. It's more like in the 20% to 30% range.

We could see a curtailment of that scale continue for a number of months and still be within the range. So we feel like the range incorporates an appropriate level of conservatism given everything that we know today.

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Torrey Joseph Schultz, RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise [26]

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Okay. And then lower equity NGL barrels flowing into the fracs, you mentioned ways to optimize your capacity. Just what are some of the options available that you are considering?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [27]

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Yes, TJ, so as we've said for a while now, remind folks that we are not entirely dependent upon equity barrels for NGL supply. So we have a portfolio of supply, both our plants in Oklahoma and the Permian and even to some extent in North Texas and third-party supply, which is a variety of customers. At the same time, downstream, we have a range of frac options. So we have the fracs that we own, wholly own in Louisiana. We have our 50,000 barrels of space in Gulf Coast Fractionators. That's a joint venture. We also have a couple of term fractionation deals with other midstream companies.

So what we do on a month-to-month and really now a day-to-day basis is we assess where do we make the most money by sending those barrels. In general, sending the barrels to Louisiana and keeping the Louisiana fracs relatively full, that's usually the answer, not always. But what we will do every month, every day is make sure that we have the right recipe for maximizing margin on the day. And that may mean taking our third-party frac deals to contractual minimums. It may mean preferring Louisiana over GCF. It will be dictated to some extent by the strength of purity markets in the relative -- in the different geographies.

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Torrey Joseph Schultz, RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise [28]

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Okay. Got it. Just lastly, a follow-up on some of the discussion around the optimism on the gas side. Just generally, has that materialized through to any more kind of recent discussions with customers in the stack? And do you have any expectation that the Dow JV would spud this year?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [29]

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Yes. TJ, it's Ben. I don't think that Dow JV will spud this year because I think that Devon, like every other upstream company in the space, is really focused on managing capital and liquidity through 2020, so I don't expect to see that. More broadly, though, I agree with Barry that I think the commodity price environment, as you look out in time a bit, is more supportive today of that kind of activity than it was -- frankly, than it was precrisis. And I think that there are other companies in the stack as they consider their opportunity set in the stack versus their opportunity set in perhaps some oilier basins. I do believe that people are considering what the -- a range of scenarios for what future commodity prices could hold. And what that might mean for activity. In some cases, it could mean some activity coming back to the stack.

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Operator [30]

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(Operator Instructions) Our next question comes from Gabe Moreen with Mizuho.

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Gabriel Philip Moreen, Mizuho Securities USA LLC, Research Division - MD of Americas Research [31]

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Two-fold question on the Permian. One, in terms of the crude gathering exit, can you just remind us in terms of what the expected impact is on profitability? Will that start showing up maybe in the back half of the year in terms of the additional margin? And is there also any working capital benefit there?

And then I'm just curious in terms of the Tiger plant, just what the expected utilization there? Are there wells behind that plant waiting to be completed, kind of waiting on that plant at this point? So I'm just curious, what the outlook is for utilization upfront?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [32]

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Gabe, it's Ben. So on the Permian, we've already seen the impact in profitability from our pending exit of the first purchase business. It's gotten so competitive in this environment that it got to the point we really weren't making money. And so when you look at the segment profit for crude, you've already had that impact. I'd also go ahead and take the opportunity to point out that when you look at the sequential segment profit in Permian crude, in addition to that impact, there's also a $1 million to $2 million risk management transaction, where we realized the negative side of it in the first quarter, but we'll realize the positive side of it in Q2, so it's a bit artificially depressed in Permian crude.

Over on the Tiger plants, we don't have wells waiting on the plant. What we have is a customer with an active drilling program running 4 rigs today on our dedicated acreage. And we've received assurances from that customer that they don't have any intention to change their plans this year or next year on that dedicated acreage. And so that's why we have the confidence to continue going forward with the plant.

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Gabriel Philip Moreen, Mizuho Securities USA LLC, Research Division - MD of Americas Research [33]

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And then if I could ask a follow-up question on some of the elective processing in Louisiana on those straddle plants. Ethane has obviously been bouncing around a lot here. It seems like there's a viewpoint that additional ethane barrels will need to be extracted going forward here? Can you just talk about that and your Louisiana plants and whether anything is embedded in your guidance for that and the margin upside potential there, too, sorry.

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [34]

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Yes, Gabe. I would say there's not much embedded there on Louisiana processing. Today, you're right, live on the 8th of May, ethane is $0.20 or $0.21. Where at the end of last month, it was $0.11 or $0.12, and so the economics for processing have improved. And so as the year goes on, we may see some benefits from that, but we certainly, in developing our outlook, we're not counting on that to happen.

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Operator [35]

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Our next question comes from Jeremy Tonet with JP Morgan.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [36]

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Just wanted to start off with the corporate segment. The $19 million there was a bit higher than what we were expecting and what we've seen in recent quarters. And so I was just wondering if there's kind of hedge gains going through there? Or what was happening in that segment exactly?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [37]

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Yes. Let me start, Jeremy, and then Eric may want to expand on it. You're right. We recognize -- realized hedges in the corporate segment. And so if you look at Page 11 of the quarterly report and you look at the segments, I think I can help you understand the trajectory of some of that and the way it rolls through corporate. So one place I'm going to point you to is Permian gas, where you see a quarter-over-quarter 1Q '20 over 4Q '19 a slight decline in segment profit. That is driven by our exposure to POP contracts and the fact that we had weak NGL prices in the quarter. There is a $2.5 million realized hedge sitting in that corporate segment that you're talking about that offsets a portion of that. So if you were to add that $2.5 million back to the 1Q '20 Permian gas segment profit, it's line with 4Q '19 and that's just telling you that the volumetric increase we saw was offset by the unhedged portion of the commodity exposure.

Second thing I'd point you to is in Louisiana NGL. We had an $8 million noncash mark-to-market -- negative mark-to-market on NGL inventory that is embedded in that $49.1 million segment profit. And that was driven by the very rapid decline in NGL prices. So just as an example, natural gasoline at the end of 2019 was at $1.24 when we mark-to-market for the quarter, it was at $0.36.

Now there is some inventory hedging that we do against that, and there's a $3 million to $4 million realized derivative, again, sitting over in corporate that offsets a piece of that, but you don't see it here in the segment analysis.

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Eric David Batchelder, EnLink Midstream, LLC - Executive VP & CFO of EnLink Midstream Manager LLC [38]

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Yes, nothing to add. I think, Ben hit it. It's that realized activity that, for accounting purposes, goes through corporate.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [39]

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Got it. That's helpful. And I think the curtailment question has been asked a couple of different ways, but I'm not sure if you guys kind of talked about what level of duration of curtailments was kind of baked into the guide, the lower end or the upper end, or what you could say there?

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Benjamin D. Lamb, EnLink Midstream, LLC - Executive VP & COO of EnLink Midstream Manager LLC [40]

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Yes. I would describe it as we could see a level of curtailments similar to what we're seeing today, which we believe will be the trough. Recognizing there's plenty of uncertainty in the world, we believe this will be the trough. We could see this level of curtailment continue for a few months and still be within the range. So we feel like the range is appropriately conservative.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [41]

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Got it. That makes sense. And just a theoretical question here, I guess. I was looking at the stock comp expense and the $9 million there in just thinking at these share price levels versus where it's been before, kind of the dilution ticks up a bit more. Just wondering if there's any thought of changing that to cash or anything else on that. Just given the level of dilution with the current unit price?

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [42]

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Yes, Jeremy, this is Barry. And I think you're hitting on something that's important for maybe to take the opportunity to point out, and that is the exposure that we, as a team. And I think it's across the entire team of EnLink is very much compensated with stock-based comp. And for our executive team, roughly 80% of our compensation is tied to the performance of the business and the majority of that being in the form of stock-based compensation. So we think it's been appropriate for the past, and we'll continue to look at it. But that really speaks to the issue that you're pointing out.

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Jeremy Bryan Tonet, JP Morgan Chase & Co, Research Division - Senior Analyst [43]

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Okay. Just maybe a follow-up there. What are the key metrics it's tied to? Because it looks like it's remained relatively unchanged over the past 3 -- several quarters here.

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [44]

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Yes. The metrics that we use are, first of all, relative stock performance relative TSR for our long-term incentive and also distributable cash flow per unit, and we effectively have targets for distributable cash flow per unit that are tied into the LTI. On the short-term incentive, it is also a distributable cash flow per unit and an EBITDA performance. And so -- and then there are also various metrics throughout our operations that we have tied into the short-term incentive, so you should see fluctuations. Unfortunately, the way we accrue that in the stock-based comp is a little bit more consistent than what we're actually seeing in terms of the value that is accruing to the employees because the accrual is based on the original grant value.

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Operator [45]

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This concludes our question-and-answer session. I would like to turn the conference back over to Barry Davis for any closing remarks.

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Barry E. Davis, EnLink Midstream, LLC - Chairman & CEO of EnLink Midstream Manager, LLC [46]

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Thank you, Sarah, for facilitating the call this morning, and thank everyone for being on the call today and for your participation.

As always, we appreciate your continued interest and investment in EnLink, and we look forward to updating you with our second quarter results in August. We wish you all well and stay healthy. Have a great day.

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Operator [47]

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The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.