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Edited Transcript of ENLK earnings conference call or presentation 3-May-17 2:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 EnLink Midstream LLC and EnLink Midstream Partners LP Earnings Call

DALLAS May 5, 2017 (Thomson StreetEvents) -- Edited Transcript of EnLink Midstream Partners LP earnings conference call or presentation Wednesday, May 3, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Barry E. Davis

EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC

* Benjamin D. Lamb

EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC

* Kate Walsh

EnLink Midstream Partners, LP - VP of IR for Enlink Midstream GP LLC

* McMillan Hummel

EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Natural Gas Liquids & Crude - EnLink Midstream GP LLC

* Michael J. Garberding

EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC

* Steven John Hoppe

EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Gas Gathering, Processing & Transmission - EnLink Midstream GP LLC

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Conference Call Participants

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* Barrett Blaschke

MUFG Securities Americas Inc., Research Division - Research Analyst

* Brian Joseph Brungardt

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* Christopher Paul Sighinolfi

Jefferies LLC, Research Division - Senior Equity Research Analyst, Master Limited Partnerships

* Craig Kenneth Shere

Tuohy Brothers Investment Research, Inc. - Director of Research

* Darren Charles Horowitz

Raymond James & Associates, Inc., Research Division - Research Analyst

* David Meagher Amoss

Heikkinen Energy Advisors, LLC - Research Analyst

* Ethan Heyward Bellamy

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* John David Edwards

Crédit Suisse AG, Research Division - Director in United States Equities Research

* Matthew Joseph Phillips

Guggenheim Securities, LLC, Research Division - Senior Analyst

* Rahul Krotthapalli

JP Morgan Chase & Co, Research Division - Analyst

* Robert Francis Balsamo

FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst

* Shneur Gershuni

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

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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 First Quarter 2017 Earnings Call. (Operator Instructions) Please note that this call is being recorded today, Wednesday, May 3, 2017 at 10:00 a.m. Eastern time.

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

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Kate Walsh, EnLink Midstream Partners, LP - VP of IR for Enlink Midstream GP LLC [2]

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Thank you, and good morning, everyone. Thank you for joining us today to discuss EnLink Midstream's first quarter 2017 results. Participating on the call today are Barry Davis, Chairman and Chief Executive Officer; Mike Garberding, President and Chief Financial Officer; Steve Hoppe, President of the Gas Gathering, Processing and Transportation Business; Mac Hummel, President of the Natural Gas Liquids, Crude & Condensate Business; and Ben Lamb, Executive Vice President of Corporate Development.

As you saw, we issued our earnings release yesterday and filed our Form 10-K with the SEC earlier this morning. To accompany today's call, we have posted the earnings release and the operations report in the Investor Relations portion of our website. Shortly after today's call, we will also make available a webcast replay of this call on our website.

I will remind you that any statements made about the future, including our expectations or predictions, should be considered forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are subject to a number of assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements, and we undertake no obligation to update or revise any forward-looking statements.

We will discuss certain non-GAAP financial measures, and you will find definitions of these measures as well as reconciliations of these non-GAAP measures to comparable GAAP measures in our earnings release. We encourage you to review the cautionary statements and other disclosures made in our SEC filings, specifically those under the heading Risk Factors.

The structure of the call will be to start with prepared remarks by Barry Davis and Mike Garberding, and then leave the remainder of the call open for a question-and-answer period.

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

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Barry E. Davis, EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [3]

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Thank you, Kate, and good morning, everyone. Thank you all for joining us today. EnLink performed well in the first quarter, as we delivered solid financial results, signed new long-term fee-based contracts and brought online 3 large-scale organic projects in our core growth areas. Our success this quarter continues the momentum we had exiting 2016 and adds to the solid foundation we created for executing our long-term vision for EnLink. This long-term vision is centered on delivering results and driving growth by being in the right places, with the right partners and executing with excellence. We are working diligently to further develop our services across the commodity chain, including natural gas, natural gas liquids and crude oil, and working to expand our range of midstream services within each commodity. Our execution strategy is laser-focused on achieving these goals, all while maintaining our strong capital position and investment-grade profile. Maintaining a strong balance sheet is a priority for us, and we are pleased with the recent recognition from Moody's with their upgrade of our corporate family rating from Ba2 to Ba1, and the affirmation of a stable outlook.

As I think about all that is underway at EnLink today and the progress we've achieved, I see 3 main keys to our success. First, we are operating with size, scale and quality assets in the right places, including the top basins and markets in the U.S. Second, our network of producers and customers is second to none, in each of these basins and markets. What this means is we have the right partners. And third, our proven track record of driving growth and delivering results across our asset platform is integral to our success. At EnLink, we execute with excellence. And it's these 3 keys to success that, I believe, are important to take away from our discussion today, EnLink is in the right places with the right partners and is executing with excellence, all of which are critical for us to the deliver the results and drive the growth that we set out to achieve.

Now I'd like to expand a bit on each of these 3 points. It all starts with being in the right places. Today, EnLink is focused on 5 core areas, the STACK in Central Oklahoma, the Delaware and Midland basins of the Permian, Louisiana, and the Barnett Shale. We are fortunate to have a meaningful leading footprint in each of these areas and have an unwavering confidence that these are the right places for EnLink to be positioned, as we execute our growth plans and achieve our objectives. As a growing midstream service provider, it's critical to be where the activity is. And today, more than half of the total U.S. rigs are located in the STACK and Permian basins. In the core areas where we are positioned, oil-weighted breakeven prices are around $30 per barrel, making economics very attractive. At today's prices, the resulting rates of return are in the range of 80% to 100%. These attractive economics are driving drilling programs to areas that EnLink is positioned to serve.

Today, we have one of the best positions in the STACK, both in terms of our infrastructure, and diverse and active customer base. Key producers in the area are benefiting from successful delineation work resulting in an expanding resource base. Leading producers in the STACK are testing spacing profiles in the multiple landing zones of the Meramec and Woodford formations as well as evaluating the Osage, Oswego and Sycamore formations. These facing tests as well as exploratory work outside of core STACK counties, has resulted in multi-decade drilling inventories on acreage dedicated to EnLink. Development of this acreage continues to accelerate and has been impressive to date. Rigs have doubled on EnLink's acreage from 11 one year ago to 22 rigs today.

In Louisiana, EnLink has a leading natural gas infrastructure footprint, proven by the strong throughput volumes we handle and the amount of pipeline and storage we own and operate. While rig count growth supports the spectrum of opportunity in Central Oklahoma and the Permian, the scale of the LNG capacity in industrial consumption provides gas-related opportunities in Louisiana. We are uniquely positioned to serve the growing demand given our strategic asset base that stretches along the Louisiana coast and includes [soft bone] storage and ownership and operation of the Henry Hub.

Additionally, with the redundancy of natural gas pipelines that we own in Louisiana, we have the unique opportunity for accretive conversions of pipe into alternative commodity services. Our Louisiana opportunity to extend into NGLs at approximately 1 quarter of total U.S. steam cracker capacity is currently operating in the state and that demand figure is growing. Our Cajun-Sibon system brings much needed NGL supplies into the region, and our expansive asset base serves these growing demand markets in customers. We are confident that we will continue to benefit as that market grows.

The second component of our success is teaming with the right partners. We have customers that are experts in the areas where they operate, are diversified and are financially strong such that they can manage and maintain activities throughout cycles. In Oklahoma, we team with over 20 producer customers, and we are one of the only midstream companies that has commercial agreements in place with the vast majority of major producers. This truly differentiates us in the market and provides us with an incredible growth trajectory in Central Oklahoma. In the Barnett Shale, we have the largest midstream infrastructure positioned in the basin, including more than 4,000 miles of pipe and an excessive 1 Bcf a day of processing capacity. We are encouraged by Devon's announcement to invest approximately $50 million to apply advanced completion technology to a basin that has yet to benefit from many of the current drilling and completion methods being applied elsewhere. The potential here extends beyond just Devon and also to the many other operators with assets in the region. Devon recently announced the potential divestiture of certain properties in Johnson County, an area that was not competing well for ongoing capital investments in their portfolio. From an EnLink perspective, we could benefit from a transition of those assets from Devon to a producer who is committed to developing the area over the long term.

Finally, the third key to success is that we are executing with excellence. Year-to-date, we successfully brought into full operations 3 large-scale organic projects. We brought our Greater Chickadee Crude Oil Gathering system fully online in the Midland Basin and signed 3 new long-term fee-based contracts, which will add to our sustainable volumes on the system. We brought our Chisholm II gas plant into service, increasing processing capacity by 200 million cubic feet a day in the STACK and added incremental customers and contracts to our expanding business there. And we brought the extension pipeline online in Southeastern Louisiana, which enhances NGL surface offerings in the area.

In summary, EnLink is in the right places, operating with the right partners and executing with excellence. All 3 keys enable us to deliver results and deliver what we promised; sustainable, long-term growth for the company. Our near-term vision is to continue to do what we have always done by continuing to build and operate great infrastructure in the best basins in the country. Longer term, we will pursue strategic opportunities, expanding across commodities and across the value chain, ultimately, connecting all of our facilities through pipe in contracts, and link our assets to supply basins and premiered demand markets. Our goal is to be the trusted energy company. And we'll do that by being devoted to our people, our partners and performance excellence.

With that, I'll turn the call over to Mike.

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [4]

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Thanks, Barry, and good morning, everyone. As Barry highlighted, EnLink delivered solid results this quarter, and we are on track and in line with where we expected to be at this time of the year. As you recall in our last earnings call, we told you that the first quarter 2017 would look a lot like fourth quarter 2016 and that's right about where we landed. Adjusted EBITDA net to EnLink totaled $207.6 million for the first quarter representing about 6.5% growth year-over-year and over the fourth quarter 2016. Included in EnLink's adjusted EBITDA for the first quarter is a $17.5 million gain related to a one-time item that we discussed more fully in our Forms 10-Q. It is also important to recall the comparative adjusted EBITDA results for the 2016 quarterly performance include contributions from noncore assets that have been subsequently sold.

Our results reported for the first quarter 2016 included approximately $10 million in contributions related to those divested noncore assets and thus did not benefit our results for the first quarter of 2017. ENLC achieved cash available for distribution this quarter $51 million, in line with our expectations and up 5% from this time last year. We expect that the majority of ENLC's cash available for distribution growth in 2017, we waited to the second half of the year, in large part driven by segment profit growth on our Oklahoma footprint. Volume growth in Oklahoma footprint for the first quarter was in line with expectations with average gathering, transmission and processing volume throughput up by approximately 11% for the quarter. With the majority of rig additions occurring in the past 4 months, volume growth is expected to be weighted more towards the second half of the year.

In the first quarter, a large percentage of the volume growth in Oklahoma was driven by volumes around our Cana facility. Because this facility was operating below its minimum volume commitments, the volume growth did not produce corresponding margin growth this quarter. We continue to expect the majority of growth in Oklahoma to be back and weighted in 2017, driven by the natural time lag of volumes associated with drilling activity, the connection of multi-well pad source system, and the completion of previously drilled, but uncompleted wells. However, the producer's results continue to get better each quarter as they move toward full field development. For example, Devon's Meramec wells completed during the first quarter in the cores of STACK average 1900 BOE per day.

This expected growth in our system allows us to reaffirm our financial guidance for ENLK and ENLC for 2017. These expectations continue to support the opportunity considered growing distributions of ENLK during 2018. And as we've stated previously, we do have the opportunity to commence distribution growth at ENLC prior to ENLK.

One last item I'd like to highlight is the recent upgrade by Moody's Investor Service of ENLK's corporate family rating of Ba2 to Ba1 with a stable outlook. We view this as a very positive development and believe that it validates the financial strength we continue to prioritize mainly. We are committed to financial discipline, and have strategically focused on lower risk, high-return organic growth projects in our core areas. We remain committed to potential M&A, but we'll only do so where it makes solid accretive sense. You've seen us participate in the market, but we will continue to approach opportunities with an unwavering commitment to financial prudence as we manage our opportunities set between potential acquisitions and the number of lower-risk, high-return organic growth projects available within our footprint today.

I will now turn the call back to Barry for concluding remarks. Barry?

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Barry E. Davis, EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [5]

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Thank you, Mike. As you've heard, we continue to focus on delivering results with operational excellence, which is at the center of everything we do. We believe that's how we differentiate ourselves, by continuing to drive excellence through execution and being the best in the basins in which we operate. I'll close with touching on our greatest assets, our people. Our employees have the right drive and heart, what I call heart ownership of EnLink. Heart ownership means that our teams have a strong ownership mentality, treating business decisions at every level as an owner would. But they do it with the devotion to who we do it with and for. This is our way to operate. Because of this team, I have no doubt in what we can accomplish. EnLink continues to raise the bar on what we can achieve as an organization. And we will keep building and operating best-in-class infrastructure in the best places in the country.

With that, you may open the lines for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question will come from Darren Horowitz with Raymond James .

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Darren Charles Horowitz, Raymond James & Associates, Inc., Research Division - Research Analyst [2]

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First question for me. As you guys are thinking about the STACK, and I know we talked about this recently, but how do you guys continue to think about doing a plant on the other side of that high-pressure header to have bidirectional capability? And then taking that a step further, maybe an update with regard to how you see the evolution of what's going to be downstream of everything that you're doing in the STACK?

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [3]

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Good morning, Darren, this is Ben. Take those in pieces -- I think, to expand a little bit on your question. I think the first question about bidirectional flow capability, what you're talking about there is the way our STACK system is configured, our high pressure gathering frontline generally gathers from the west towards the Chisholm plant in the east. And I think what we've talked about before is the potential to cite a plant further to the west, which would effectively give you the ability to go both ways bidirectionally on the high-pressure system. Answer to your question broadly is the location of the next plant is something that we don't have to decide today. We just brought online the Chisholm II plant at the -- basically, the 1st of April. We have that Chisholm III plant coming online after that. And so we're not at a point today where we need to decide where the next plant would go, whether it's in the Chisholm area or whether it's back further to the west. Some of the things that we will think about though, in citing that next plant, really gets to the second part of your question, which is what's downstream of those plants. Over the course of the quarter, you saw Cheniere announced their midshift pipeline project. That will be connecting to both our Cana and our Chisholm complexes. And so I expect our customers will want to have access to that pipeline, wherever we put our next plant, so that will go into our calculus. And on the NGL side, we are not today announcing a resolution of the question of how we handle our Oklahoma NGLs. We're continuing to work on that and getting closer day-by-day to that answer. But I think we need to have that answer as well before we can decide further the site of the next plant.

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Darren Charles Horowitz, Raymond James & Associates, Inc., Research Division - Research Analyst [4]

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If the answer to that then includes getting those NGLs down in Mont Belvieu and ultimately, hooking it into Cajun, like you guys have talked about, how do you view current capacity on Cajun, maybe the opportunity incrementally to expand it? And how you would think about scoping that project as volumes theoretically could grow meaningfully into that line and move further east?

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [5]

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Well I'm going to start, Darren, and just say to be clear, there is no question that the solution for NGLs in Oklahoma involves connecting them to Cajun-Sibon. The only question is what's the most economical way to do that. Whether it's through a third-party infrastructure or through a project that we developed either on our own or with partners. And then, I'll let Mac comment on the Cajun-Sibon side of it.

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McMillan Hummel, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Natural Gas Liquids & Crude - EnLink Midstream GP LLC [6]

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Yes, Darren, good morning. The evaluation that we will undertake as we look at that is whether it's best for us to deal with those NGLs in Mont Belvieu or if it's best for us to deal with those NGLs in Louisiana. So we'll simply make an evaluation of where we think the most economic place for us is from a facility perspective and from a strategic perspective, in the context of what the market conditions look like. To the extent that it makes sense for us to look at moving those barrels into Louisiana, one of the things we would look at, of course, is the looping of the Cajun-Sibon pipeline. The other thing we would look at is, we've talked about our ability to take underutilized gas assets and turn them into liquids assets. Whether those are crude -- whether those would move crude or whether those would move NGLs. So we would also evaluate our ability to do that.

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Darren Charles Horowitz, Raymond James & Associates, Inc., Research Division - Research Analyst [7]

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Okay. I appreciate the color. And then the last question for me more housekeeping. Mike, is the $17.5 million gain on litigation settlement that benefited adjusted EBITDA this quarter? Is that included in your full year 2017 EBITDA guidance?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [8]

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Good question. So when you think about our guidance when you put that out, that gain was not included. And when you break apart that gain you can think of it in 2 term -- 2 pieces, right? You can think of an EBITDA piece and the DCF. On the DCF standpoint, of the $17.5 million, only $5 million ran through DCF. And how we thought about that was really allocating between what was margin and what was property. What drove this, ultimately, is again it's a gain on settlement of litigation. It's something that's historical and still ongoing, but, again, we have a confidentiality around it. So, again, I'd point you to the 10-Q for more information.

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Operator [9]

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The next question will come from Jeremy Tonet with JP Morgan.

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Rahul Krotthapalli, JP Morgan Chase & Co, Research Division - Analyst [10]

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This is Rahul on for Jeremy actually. So first -- the first one, so one of your competitors has announced gas takeaway solution out of STACK this morning. I would like to share your comments on that and what -- do you see the need for additional solutions of such sort in the basin, given you guys are major players to that?

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [11]

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Good morning, Rahul. It's Ben. Yes, we did see that -- that announcement this morning from Enable about their rich gas takeaway solution from Anadarko. And I understand the question what does it mean for us? And the short answer is it really doesn't mean anything for us. Our system is distinct from Enable system. Our customer base is distinct from their customer base. And so the question that we have to answer is where do our particular producers want their products, both residue and NGLs. And similar to the way that I addressed Darren's question, we don't have perfect clarity on that where we are today. One thing we need to resolve is our NGL solution in Oklahoma so that we understand what our downstream picture in Oklahoma looks like versus our downstream picture in North Texas. So a rich gas connection between Oklahoma and North Texas is something that we're still considering. And we still think that there is ample scope in the market for us to build that project, if it's what makes sense. And if it doesn't make sense, then instead we will build processing in Central Oklahoma.

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Rahul Krotthapalli, JP Morgan Chase & Co, Research Division - Analyst [12]

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Got you. That's really helpful color, Ben. And one other question here. I think on the Permian side, like we have seen like high levels of M&A activity recently. So is it possible for you to discuss what, if anything, you're seeing anything -- opportunities coming your way or like it's anything -- or if there's anything worth pursuing at this point? Your thoughts there.

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Barry E. Davis, EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [13]

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Thank you, Rahul. This is Barry. First of all, let me just assure you that we are very involved and very informed as to all of the M&A that you've seen and you referred to in the Permian and elsewhere, quite frankly. What we would say is that this is a very escalated market from a valuation standpoint. We see a ton of capital, of different source, quite frankly, than what we've seen in the past. And so we think for a project to make sense, you've got to have a lot of synergy and a lot of vision as far as what you're going to do with it longer term. And I think that's the nature of the deals that you've seen recently. Let me just say that we're going to continue to be disciplined. We're going to continue to be active. And we're going to stay focused on the projects that we have. And let me just ask Ben if he has some additional comments specifically on that.

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [14]

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Yes. I agree completely with what Barry said. And without getting into the specifics of any particular deal, I would say that the valuation that we have seen over the last couple of quarters have been very robust for M&A. And I think that what that reflects is a growing conviction in the marketplace, that there are a very small number of places that you want to be as a midstream services provider. If the Permian, if the STACK, to some extent maybe the Boston neighborhood, is a very small number of basins. And what you were seeing is scarcity value in the market, for the small number of transactions that were available in those basins. We are fortunate because we went into the downturn all the way back in the fall of 2014. Intentionally, repositioning the company through the downturn in the best basins in the country, using the downturn and the less competitive M&A environment that was present at that time, as a way to do that. And so through that downturn and a series of transactions, we built our West Texas platform, and we built our Oklahoma platform. So we are fortunate that we've already done what others are now trying to do, which is to reposition in the very best basins in North America.

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Operator [15]

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The next question will come from David Amoss with HEA.

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David Meagher Amoss, Heikkinen Energy Advisors, LLC - Research Analyst [16]

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Appreciate your commentary on Permian M&A. And just thinking about how you've been able to grow organically there. Can you talk about the processing footprint that you have currently, what the expansion capacity would be and how much CapEx? Like you announced the 30 million a day expansion today for $10 million, which looks like a great deal. How long can you do that for before you have to spend another order of magnitude on the CapEx side?

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Steven John Hoppe, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Gas Gathering, Processing & Transmission - EnLink Midstream GP LLC [17]

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Hey David, this is Steve. So let me kind of just walk you through in the Delaware basin where your -- we've had the recent expansion announcements, where we are at there. We started out with an (inaudible) acquisition with the 35 million a day plant. We've installed a 60 million a day plant that was the Lobo II facility. That is the next expansion we'll do. We'll take that facility up to 120 million a day. That will be done this year. And then we've got another step -- another addition to that of 30 million. What that will do is take that facility up to 150 million a day in addition to Lobo I, which was 35 million. That will put us at 185 million a day. So when you look at those steps, that's the sequence of capacity that we'll add this year. So we'll have it in by the end of the year. And then we're looking at the next phase right now of planning for a Lobo III facility. And we're trying to project the timing and the needs of that right now. But what we're thinking on that is an order of magnitude very similar to what we did like a Riptide, where we add a facility that is 100 million initially, but expandable to 200 million. So we're managing the capital very efficiently by adding the capacity and putting in facilities that are easy to expand as the volume starts to materialize. And that's the progression that you're going to see in the Delaware Basin. Where we're at in the Midland Basin today? We've got the Riptide that came on last year. That put us at approximately 400 million of processing capacity. Our next step is to take Riptide to a 200 million a day plant. That would be about a $30 million spend and that would add another 100 million. And that right now we've got -- we're in a great place with our processing capacity. And we don't have plans on that this year, but we'll start to look at that here probably in the fourth quarter as we see developments occur and start that playing for next year.

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David Meagher Amoss, Heikkinen Energy Advisors, LLC - Research Analyst [18]

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Okay, that's really helpful. Back to the Delaware, just one last one for me. Do you think so to the degree that you sanctioned Lobo III, with 100 million a day, additional expandable to 200 million. Can the customer base that you have signed up today take you that high? Or do you need to sign additional commercial contracts or potentially look at some form of M&A to get there?

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Steven John Hoppe, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Gas Gathering, Processing & Transmission - EnLink Midstream GP LLC [19]

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So when we are looking at the projections, I think what's important to understand is that the development itself is -- the scale of the development is pretty impressive. And you'll start to see the results that our producers are seeing out there. It seems like every quarter they're upgrading their tight curves and they're showing a much better spacing, much more denser spacing. And when you take that into account, we think that we've got the opportunity to justify those phases with not only our existing customers, but with a small incremental opportunity. So when you look at where we started, we were at 11,000 acres with the Matador acquisition. We've added 33,000 acres in the last 18 months and 4 new customers. And in addition to that, we've got a minimum volume commitment of 45 million a day. And there's going to be opportunities that we see near term for bolt-ons and expansions that we're working on with our existing customers to add more capacity. So I think it's really, David, it's a combination of both of those, which is why when we look at our planning we're sequencing that capital and that capacity in incremental steps to accommodate how we see development occurring on both our existing customers and our new potential opportunities.

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Operator [20]

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The next question will come from Brian Brungardt with Stifel.

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Brian Joseph Brungardt, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [21]

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To start off your -- just modeling question here. Regarding the plans to redeem the 2022 notes in June. How should we be thinking of that? Do you plan to expand the ATM? Or do you anticipate effectively refinancing it given the current interest rate environment?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [22]

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Yes, Brian. This is Mike. It's good question. So -- as you noted, we have put a notice in to redeem those notes. Those are 7 and 8 notes where we have a right to call them. What our expectation is, is to refinance those into the current rate environment. So, again, our ATM plan for the year remains unchanged, which is that $40 million to $50 million per quarter for 2017.

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Brian Joseph Brungardt, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [23]

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Got you. And then, just switching to the MVCs and appreciate the color on the operations. I guess first just to confirm, the approximate $12 million recorded this quarter in Texas. Is that primarily related to Devon's activity there in the Barnett?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [24]

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Yes, this is Mike again. So, again, you're referring to the MVC table in the 10-Q, and you're referring specifically to the MVC's related party, which is the Devon piece. And so the $12 million relates to all the different MVC contracts we have in North Texas.

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Brian Joseph Brungardt, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [25]

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Got you. And then, how should we be thinking of the increase in MVCs from last quarter and from 2016? Is it primarily driven by the underlying production volumes? Or more of the view that the customer doesn't execute on the make upright positions?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [26]

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So this is Mike again. So there's -- again, you pointed out 2 pieces to it. So there a one quarter makeup with regards to the Devon MVCs, which is factored ultimately into the numbers you see. But each of the MVCs is a little different on how to think about them. And I'll use Cana as an example because of the road drilling -- Devon's drilling, you will see the Oklahoma-related party go to where they are in a deficiency for a period of time. But once that row is completed and on, which is Hobson Row and that's expected in the second quarter. You'll see that plan come back above MVCs. VEX is another one where you saw that below, and you've seen the volumes come up on the crude side too. So I would say that each is a little different when you think about those MVCs on how to project those forward.

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Brian Joseph Brungardt, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [27]

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Okay. And then -- okay, just last thing here. Given your comments, Devon maybe monetizing a portion of its Barnett acreage, any impact to the MVCs? And do you anticipate maintaining existing contracts if there were to be a change of ownership?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [28]

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This is Mike. Yes, so, no there is not any anticipated changes to the contract. We disclosed really that the East Johnson has about a 7% piece of total North Texas revenues. So it is a small piece and that piece is covered by one of the Devon contracts. Today, they are operating at or about the MVCs so there would be very little impact on that.

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Operator [29]

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The next question comes from Robert Balsamo with FBR.

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Robert Francis Balsamo, FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst [30]

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Wondering if you could go into any more detail on the contracts. You got a number of new contracts announced. If you can give us any color on the magnitude or timing, kind of any ways to quantify some of them moving forward you are thinking about maybe additions to CapEx opportunities.

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [31]

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Yes. Brian. Probably -- this is Ben. There's probably a few of us who want to comment on that. I'll start from the perspective of Oklahoma. And the first thing I'm going to do is to start off where Barry ended his prepared remarks and talked about the quality of our team. I think the commercial success that we have had in Oklahoma really speaks to the quality of our team, commercial operations and engineering. And our ability to attract business, provide a great service, provide a cost competitive service and to do what we say we're going to do. And that has been manifested in continued commercial momentum in Central Oklahoma. What we announced this quarter with the signing of a group of 5 contracts, each of which was with the producer that is new to us, new customer on our system. And those contracts added about 20,000 gross operated acres. If you go back to February, we made 2 announcements, one was our Cedar Cove joint venture with Kinder Morgan, which behind it has 40,000 to 50,000 gross operated acres from one of the largest producers in the STACK. And also, an expansion of our relationship with Newfield, who is an existing customer, but who dedicated additional acreage to us. Across all of those contracts, just since the fourth quarter of last year, we've added somewhere between 80,000 and 100, 000 acres in the STACK, and companies get started off of less than that. So very, very happy to see that continued commercial momentum. Those are overwhelmingly long-term fee-based contracts in rate areas with great partners. Steve may want to comment from the Permian.

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Steven John Hoppe, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Gas Gathering, Processing & Transmission - EnLink Midstream GP LLC [32]

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Yes, Robert. I'll start in the Delaware. We kind of -- I'll just reiterate what I said earlier about the Delaware. Really within the last 18 months, we've added 4 new contract customers and that's added 33,000 acres of commitments. Primarily, it's fee-based contracts. There's a little bit of DOE contract in our mix. But it also has 45 million of volume commitments. So as Ben said, I'll reiterate, the team has done a great job and when you think about in just a short amount of time, having entry into that basin and seeing success. And we see a lot insight going forward into not only bolt-on opportunities now that we've got a good footprint in the Delaware, but also some step out in expansion opportunities that we're working on. The capital is really to the Delaware is the project that I just laid out in the incremental expansions that we have planned. When you look at the Midland Basin, in the quarter we added 5 customers and 6 deals that made up about 15,000 acres. And overall, we consider our Midland Basin area to be in -- our position to be in the core of the basin. And you think about that addition that now has taken us up to 340,000 acres in the Midland Basin in that core area. So again, we feel really good about not only our base position, but the expansion opportunities that we have seen this quarter and the ones that we're working on currently and see additional opportunities. All of the capital associated in the Midland Basin is already built in to our current forecast and to the numbers you already have. So there won't be any incremental capital associated with that. So if it fits in well with our broken expansion plans there. Mac, you had some crude oil on Chickadee that you wanted to discuss as well.

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McMillan Hummel, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Natural Gas Liquids & Crude - EnLink Midstream GP LLC [33]

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Robert, this is Mac. And I did want to just mention about the new Chickadee contracts we entered into. But before I just wanted to step back and just make sure that I give credit to the team with regards to the tremendous work they've done getting Chickadee not only off the ground, but literally in service and only for our customers. The strategy on the crude side planned just like we expected it to -- we entered with LPC, we said that was a platform and that platform will now allow us to lever in the opportunities to put more pipe in the ground and move more crude by ground -- by pipe over time, and that's exactly what's happening. The 3 contracts we entered into were a mix of new customers as well as deepening relationships with existing customers on Chickadee. So I think what we're seeing is we're seeing repeat business with existing customers, which I think is a great testament to the value they see in Chickadee and our ability to execute. We're now up to around 100,000 total acres committed to Chickadee on a long-term basis and those are all fee-based contracts.

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Barry E. Davis, EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [34]

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Robert, there may be one element to your question that we didn't touch on across the 3 of us and that's timing. And I would say it's different in different places. In the Oklahoma set of contracts of the 5 we signed -- one of them is with the public company but 4 of them were private equity backed company. And so inherently the timing is a little bit uncertain because what those companies tend to do is to appraise their acreage and then they may explore a sale. And if they are sold, then they are likely sold to someone who ramps production very quickly. Or if they stay private and perhaps look at an IPO path, then that's a different production profile. So I think it's just a good opportunity to remind everyone of what we've been telling you for a couple of quarters now that in Oklahoma, in particular, our growth is going to be more in stair steps, as acreage changes hands and its producers shift to full field development that will come on in bigger chunks at a time.

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Robert Francis Balsamo, FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst [35]

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Great. That's all really helpful, guys. I appreciate all the color. Just a quick housekeeping item. I noticed the unit base comp was up. I understand the contracts and then looking at just cash costs that were left, I know, that was impacted by year-over-year versus there was some acquisition costs last -- 1Q '16. Anything else in there that might have been impacting the SG&A? Are we looking at a decent run rate moving forward?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [36]

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Yes. This is Mike. I think you're look at a decent run rate. You will see some issues with first quarter, you just mentioned the comp especially, where because of year-end stuff, it's a little bit higher in the first quarter than will be for the year. But overall, from an SG&A, we have a pretty good run rate. I will mention from an OpEx standpoint, you do see a little bit elevated OpEx in first quarter, mainly because of all of the projects that came online that necessarily didn't mean we also got gross margin because of the timing that came online. And so that will even out really over the second and third quarter.

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Operator [37]

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The next question will be from Matthew Phillips of from Guggenheim Partners.

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Matthew Joseph Phillips, Guggenheim Securities, LLC, Research Division - Senior Analyst [38]

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Touching on CapEx a bit more. The first quarter run rate was pretty high, but the full year estimate didn't move up very much. Could you discuss a bit more the quarterly roadmap over the course of this year on CapEx? And how you expect that to flow through the cash flow guidance for this year and next year?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [39]

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Yes, Matthew, this is Mike. Good question. So let me level set first as far as where we're at, then I'll walk you through sort of how you can see the rest of the year. But you know Q1 spend on a gross basis was just south of $250 million, and the big driver there was all the projects we've talked about, right? Which was Chisholm I, which was Chickadee and extension. So we had 3 big projects all come on in the quarter right in line with what we expected. So great execution and that's what this year is about. When you look on a growth standpoint, what our CapEx guidance was for the year was $610 million to $770 million. And again I'm making the difference between gross and net because of Marathon partnership with Ascension, NGP partnership with Delaware and then just the Central Oklahoma capitals between ENLC and ENLK. So then gross versus net. So what you see for the rest of the year really is going to be driven by again some other big project we've talked about, which is Chisholm III in Oklahoma, which is the Lobo II continued expansion that Steve talked about in the Delaware, and other base businesses that we're seeing. So I think what you'll see is sort of an average ramp through the year on CapEx. I do believe that we have a lot of great capital opportunities that Steve, Mac and Ben have been talking about. So we see that we have these continued capital opportunities and feel great about that. But overall, right in line with the range we gave you at the beginning of the year for capital.

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Matthew Joseph Phillips, Guggenheim Securities, LLC, Research Division - Senior Analyst [40]

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Great. Thanks for the color there. Going back to Oklahoma, appreciate the color on the MVCs on Cana. As it relates to Tall Oak though, I mean it looks like the portion flowing the ENLC was a little bit below the expectation. So could you comment there at all? I mean, I know it's more of a new age story, but -- how do you expect 2Q to play out?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [41]

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Yes, this is Mike again. It's good question. So what you're referring to is the 16% that ENLC owns and so what we tried to do is we put some footnotes in the earnings release to give some additional color, because there is some other items that you have to take in consideration when you look quarter-over-quarter. There is allocated G&A expense to that number, and so we did footnote that. So if you gross those numbers up for that allocated G&A Q4 to Q1, you're about in the same place as the way to look at really from that piece of the Tall Oak, which is in line with what we expected for the year. So with the growth, Ben talked about, which is first half and with the growth we expect which is more second half loaded. You will see that continue to increase through the year.

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Operator [42]

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Our next question comes from Shneur Gershuni with UBS.

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Shneur Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [43]

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Thank you for all the color and details. Most of my questions have been asked and answered. But I was wondering if we could just go back to 2 comments you made earlier, just one with respect to -- with M&A appetite and so forth. I definitely recognize you were active in 2015 and that public valuations are much higher today. Do you have the same view with respect to private assets? Because there seems to be a bunch of private assets that are owned, for example in the Permian and so forth. Is that an area of interest? Or do you feel that valuations are pretty high there as well too?

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [44]

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Yes. Shneur, it's Ben. My comment, and I think Barry's comment earlier too, really does apply to private assets. If you look at some of these deals that have been done recently, our view is they were very fully valued and they were very fully valued because of the basins that they are in. That as Barry said, we participate in most every asset that gets sold. What we have that may be different than others is good positions in great basins already in place and so we feel perhaps a little bit less of this strategic imperative to get a deal done than perhaps some others may. And so we have the luxury of being able to be more disciplined, because we've already done a series of deals to position ourselves in those basins.

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Barry E. Davis, EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [45]

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And Shneur, the only thing I would add to that is, it really is kind of a tension between we're already there and so we don't have to do things, but the positive of that is because we're there, we do have synergy, we do have opportunities to improve economics over time with execution. And so those -- both of those things come into play, and we'll continue to work with discipline.

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Shneur Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [46]

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Great. As a follow-up question, about the Enable announcement this morning. It certainly seems like an elegant solution in terms of some of the issues that producers are facing and so forth and being able to react quickly. If memory serves me correct, I believe you've been talking about some similar solutions in the past. Can you give us an update with respect to you are with pursuing something of -- with similar characteristics?

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [47]

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Yes, Shneur. It's Ben again. You're right, connecting our Oklahoma gathering and processing assets with our North Texas gathering and processing assets is something that we have looked to do for a while now. But really the question is where do our particular customers want their residue gas? Where does it make sense for us and our customers to have our NGLs? And with the dynamics that we are seeing in Central Oklahoma, specifically in STACK, in Blaine, Canadian and Kingfisher Counties, we have not yet had clarity that would say that the right solution is to connect the basins. We see the potential for that, but we need to see what our NGL solution is going to look like out of Oklahoma, and we need to have the residue market develop a little bit with the Cheniere announcement and some other announcements that have happened in Oklahoma for us to have that clarity. Fortunately, with Chisholm II having just come online and with Chisholm III coming online later this year, we are not at a decision point right now for what the next tranche of processing capacity needs to look like in Oklahoma.

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Shneur Gershuni, UBS Investment Bank, Research Division - Executive Director in the Energy Group and Analyst [48]

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Okay. And just sort of thinking a little bit further here because if this sort of trend -- if it trends into a trend develops, would the NGL takeaway resolutions really need to be in Texas rather than out of the SCOOP STACK area basically. I mean is that really what we're effectively doing, is moving the unprocessed hydrocarbons further down?

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [49]

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That's right. You're just placing the hydrocarbons, both residue gas and NGL out of Oklahoma and into Texas. And you would only do that if you believe that the hydrocarbons are going to be more valuable in North Texas in an amount that justifies the excess capital that it takes to build a pipeline versus building processing in Oklahoma. There is ample NGL takeaway from North Texas today, just as it is in Oklahoma and so really the question is relative value to products in those 2 places.

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Operator [50]

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Next up is Ethan Bellamy with Baird.

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Ethan Heyward Bellamy, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [51]

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The sinkhole settlement was a nice little piece of found money in the quarter. How much further do you guys have to go on recovering those costs incurred on that? And is there any probability we'll see that in the balance of the year?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [52]

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Ethan, this is Mike. Nice reading. So for us, again, it's a confidential settlement. It's something that is still ongoing, and we really can't give any color on where that will end. We're happy it continues to be favorable for us. And so that's probably the easiest way to answer.

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Ethan Heyward Bellamy, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [53]

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Have you previously quantified the costs of that somewhere?

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [54]

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We talked about it originally when it occurred, which would be years ago, but have not since then.

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Operator [55]

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The next question will come from Chris Sighinolfi with Jefferies .

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Christopher Paul Sighinolfi, Jefferies LLC, Research Division - Senior Equity Research Analyst, Master Limited Partnerships [56]

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Barry, you had mentioned in prepared remarks, and I just want to circle back on it, the strength in Louisiana volumes. Just a question, I know your -- the guidance you had put forth, I think, originally in January and updated with fourth quarter showed or indicated maybe some decline in the GNP volumes in Louisiana. Obviously, we had sequential increase here in the first quarter. I think it's the highest quarter you guys have recorded. So just curious, any change in outlook or things that made the impact in 1Q that we should pay attention to for the balance of the year?

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McMillan Hummel, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Natural Gas Liquids & Crude - EnLink Midstream GP LLC [57]

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Chris, this is Mac. Yes, we've had a very good continuation of volume growth and volume performance in our Louisiana gas business. As you recall when we did our guidance for 2017, we mentioned the fact that we had seen some interruptible volumes come into the system in a very significant way. And when we put guidance together and plans together for 2017, we did not continue to include those in our 2017 numbers. I'm happy to say that the team continues to execute very well on capturing both new demand that's just been created in Louisiana as well as lever ourselves in the existing demand that we weren't currently serving as well as continuing to have robust interruptible volumes mowing through our system. While I can't predict what's going to happen the balance of the year, I'm expectant of our team's continued success in keeping those volumes on our system.

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Christopher Paul Sighinolfi, Jefferies LLC, Research Division - Senior Equity Research Analyst, Master Limited Partnerships [58]

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Okay. Great. Thanks for the reminder on that. So it's still sort of an interruptible relative to what was guided, but not necessarily confidence to assume that continue, is that fair?

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McMillan Hummel, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Natural Gas Liquids & Crude - EnLink Midstream GP LLC [59]

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Yes. We see both. We see growth in long term committed volumes and -- of a firm nature, but the preponderance of the difference continues to be interruptible volumes that we just don't quite have the tenure with to forecast with great confidence.

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Christopher Paul Sighinolfi, Jefferies LLC, Research Division - Senior Equity Research Analyst, Master Limited Partnerships [60]

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Okay. That's fair. That's perfect. I guess, completely separately, Barry, I liked you phrase the escalated market that's out there now. And then I suppose some of the transactions, and I thought that you did a great job in sort of explaining the nature of why and when you guys had repositioned your asset base versus what's present in the market now. Just curious as it pertains to that. Are there -- I know you guys have divested some noncore assets, but does the market ever reach a point where there are aspects of your portfolio that you're not going to necessarily fill up on time profile that would make sense where a third-party might be willing to pay upfront significant sums for it. Is there anything that you'd entertain pruning at this point or are we too premature to think that way?

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Barry E. Davis, EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [61]

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Yes. Chris, this is Barry. And what I would say is we like where we are. We're in the right places, and I think, again, Ben did a great job of defining how we got there over the last 3 years. So those core areas will be places that we continue to grow. And so we are not contemplating, participating in what might be a seller's market, if you will, in those core areas that we described as 5 basic areas. Anything is outside of that, certainly is possible. Not unlike what we did last year. We'll continue to evaluate anything that's outside of that. We don't have much outside of that, but we certainly will continue to look at that. I will tell you though that I don't believe you see the same elevated valuations in areas outside of our core areas. Again, Ben described it very well. That's where people want to be and that's why you have elevated valuations there. And in other places, you really don't see that.

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Operator [62]

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The next question is from Craig Shere with Tuohy Brothers.

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Craig Kenneth Shere, Tuohy Brothers Investment Research, Inc. - Director of Research [63]

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Most questions already got answered. One clarification on all the questions around the options to connect wet gas from the STACK down to North Texas or just build out more processing in Oklahoma. Is that decision timing, something that you anticipate next year? Or because of the time it takes to really develop this especially if you're going to have a pipeline connection? Do you need to start thinking about it more in the second half of this year?

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Benjamin D. Lamb, EnLink Midstream Partners, LP - EVP of Corporate Development for EnLink Midstream GP LLC [64]

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Yes, Craig. You're right, it does take time to develop whether it's a pipeline project or is to construct a gas plant, those things do take time. And so I do expect that later this year, we will need to have more clarity on where we see the next tranche of processing capacity needing to be. I do think it's this year as opposed to next year.

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Operator [65]

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Our next question is from John Edwards of Crédit Suisse.

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John David Edwards, Crédit Suisse AG, Research Division - Director in United States Equities Research [66]

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You may have already covered this. Because I jumped -- I came on the call late, so I was just wondering on the litigation settlement. I mean, obviously, sinkhole-related and so on, but part of it you had a $17.5 million in EBITDA, but then backed out $12.3 million from DCF, leaving $5 million cash-related. And if you already talked about this, or you want to take it online because it's a pretty detailed, will be fine. But just if maybe preliminary answer on that or -- and I apologize if you already answered this.

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McMillan Hummel, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Natural Gas Liquids & Crude - EnLink Midstream GP LLC [67]

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John, it is fine. Real quick, it really is an allocation of margin versus property is what it is. But what we can do is follow up and walk you through further if you have further questions.

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John David Edwards, Crédit Suisse AG, Research Division - Director in United States Equities Research [68]

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Okay. And then, I guess the other issue is, obviously, one of your competitors announced this morning taking similar what you proposed, taking gas to spare processing in Texas -- and you had hinted at that sort of approach at your investor day. So I'm assuming that's something you're still looking at? And, again, apologies if you've already sort of talked about this.

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McMillan Hummel, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Natural Gas Liquids & Crude - EnLink Midstream GP LLC [69]

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Yes, John. This is Barry, and we did, I think, discussed that in depth and so we'd encourage you to maybe look back at that or we can talk to you off-line. The short answer is the third-party that announced the project has a unique system, unique to ours, unique producers, supplier they're dealing with, et cetera. We don't believe it has any impact on our project, and we still have the opportunity to do that if it makes sense. So further to that, why don't we talk off-line to discuss it further.

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Operator [70]

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The next question will come from Barrett Blaschke with MUFG Securities.

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Barrett Blaschke, MUFG Securities Americas Inc., Research Division - Research Analyst [71]

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Just on the new Delaware contract, so a detailed question. It says they're largely fee-based, is there another component that's volumetric or commodity-sensitive that's going to be a part of this contract? And can you tell us a little bit about sort of what you're seeing as far as contracting trends in the play?

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Steven John Hoppe, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Gas Gathering, Processing & Transmission - EnLink Midstream GP LLC [72]

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So, Barrett, good morning. This is Steve. Of those contracts, we have one that's POP contract, so it's got a little bit of commodity exposure to it. As you know, a POP contract is -- we get a percentage of the plant products, both the residue and the NGLs. Really your question about what are we seeing in trends? It really depends on the producer and how they're looking at their -- how they want to structure their deal. We see a lot of producers in the Midland Basin wanting to have a POP-type structure and have a share of the commodity risk with them. In the Delaware Basin, we're probably seeing them lean more to fee-based. We keep ourselves open to basically what we can do to serve the customer the best and manage our risks. So we're really looking at all types of contracts and contracting structure. And we're looking at what we can do to be competitive. So we're open to a broad range of opportunities in structuring our contracts. I think that's going to be key in the Delaware Basin going forward.

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Michael J. Garberding, EnLink Midstream Partners, LP - President of EnLink Midstream GP LLC and CFO of EnLink Midstream GP LLC [73]

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And, Barrett, this is Mike. I mean, if you look from a company standpoint, we're still tracking at about 95% fee-based. So still it's a very small piece of what we're doing on an overall business.

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Barrett Blaschke, MUFG Securities Americas Inc., Research Division - Research Analyst [74]

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Okay. And then just sort of looking at the Barnett and Devon rationalizing, it's ownership a little bit. Have you guys got any idea as to sort of who the potential buyers are? And how that could potentially impact volumes?

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Barry E. Davis, EnLink Midstream Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [75]

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Yes, Barrett, this is Barry. First of all, let me say that this was not a surprise to us. We spend a lot of time with Devon on the Barnett property. Our teams work very closely together. So this is something that we're very familiar with. We do have a feel for what that process will look like and who the potential buyers are. There are a few handful of operators who are trying to enter the Barnett. They see it as an opportunity for a place to develop -- versus someone like Devon, who has other places that are higher economic returns for them. So as we said in our prepared remarks, we believe that there is opportunity to the upside for us to see someone coming here and be active in an area that Devon is not and was not going to be active. So we really get the combination of a new operator plus Devon becoming more active to the -- in the northern part of the Barnett. So we're optimistic that we'll see some benefit from this.

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Barrett Blaschke, MUFG Securities Americas Inc., Research Division - Research Analyst [76]

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Is there an expectation that you would see new operators come in and do refrac? Or would it just be simply taking over the properties and trying to optimize what's there today?

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Steven John Hoppe, EnLink Midstream Partners, LP - EVP of EnLink Midstream GP LLC and President of Gas Gathering, Processing & Transmission - EnLink Midstream GP LLC [77]

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Barrett, this is Steve. I think Johnson County has got a lot of opportunity for not only refrac but for new location drills. And if you look at some of the other assets that have been sold recently in the Barnett, the people entering that are looking -- applying new drilling techniques, looking at new fracking techniques and putting those in to the Barnett to see what kind of results they can drive. And it's really going to be, from our perspective, a focus on how those producers -- how these assets fit in their portfolio. And we're very optimistic that when you apply those new techniques, you're going to see some great results from the wells. So I would say, both opportunities exist in Johnson County.

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Operator [78]

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Ladies and gentlemen, 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 Partners, LP - Chairman of EnLink Midstream GP LLC and CEO of EnLink Midstream GP LLC [79]

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Thank you. I would like to thank everyone who joined us on the call today. As you can tell, we've got a lot going on, and we look forward to our crossings of paths as we go through the days ahead and updating you on our second quarter results in early August. So thank you again, and have a great day.

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Operator [80]

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