U.S. Markets open in 8 hrs 3 mins

Edited Transcript of SHLX earnings conference call or presentation 23-Feb-17 4:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Shell Midstream Partners LP Earnings Call

HOUSTON Feb 23, 2017 (Thomson StreetEvents) -- Edited Transcript of Shell Midstream Partners LP earnings conference call or presentation Thursday, February 23, 2017 at 4:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Courtney Selinidis

Shell Midstream Partners, L.P. - IR Officer

* John Hollowell

Shell Midstream Partners, L.P. - CEO

* Susan Ward

Shell Midstream Partners, L.P. - CFO

* Kevin Nichols

Shell Midstream Partners, L.P. - VP of Commercial

================================================================================

Conference Call Participants

================================================================================

* Jeremy Tonet

JPMorgan - Analyst

* Brian Zarahn

Mizuho Securities Co., Ltd. - Analyst

* Anish Kapadia

Tudor, Pickering, Holt & Co. - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning my name is Latoya and I will be the conference operator today. At this time I would like to welcome everyone to the fourth-quarter 2016 Shell Midstream Partners earnings call.

(Operator Instructions)

I will now turn the call over to Courtney Selinidis, Investor Relations Officer. You may begin.

--------------------------------------------------------------------------------

Courtney Selinidis, Shell Midstream Partners, L.P. - IR Officer [2]

--------------------------------------------------------------------------------

Thank you. Welcome to the fourth-quarter earnings conference call for Shell Midstream Partners. With me today are John Hollowell, CEO, Shell Midstream Partners; Susan Ward, CFO; Shawn Carsten, CFO elect and Kevin Nichols, Vice President, Commercial.

The presentation materials shared this morning can be found on our website www.shellmidstreampartners.com under the events and conferences section.

Slide 2 contains our Safe Harbor statement. We will be making forward-looking statements related to future events and expectations during the presentation and Q&A session. Actual results may differ materially from such statements and factors that could cause actual results to be different are included here as well as in this morning's press release and under risk factors in our filings with the SEC.

Today's call also contains certain non-GAAP financial measures. Please refer to this morning's press release and appendix 1 of this presentation for important disclosures regarding such measures. Including reconciliations to the most comparable GAAP financial measures.

We will take questions at the end of the presentation. With that I will turn the call over to John Hollowell.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [3]

--------------------------------------------------------------------------------

Thank you Courtney and good morning everyone. Shell Midstream Partners generated $69.5 million of net income, up some $13 million or 23% from the third quarter. Total cash available for distribution was $82.7 million, an increase of 35% from the prior quarter.

Susan will discuss the financial sales later in the presentation. But for me, there are three key things that are important to highlight today.

We had a good quarter, both operationally and financially, which is a direct result of executing our strategy. In December, we made an acquisition that further supports our strategy in the Gulf of Mexico. And finally we are seeing the positive impacts of organic growth across our onshore and offshore portfolio.

As we get 2017 kicked off, I'd to like to reiterate our strategy and what we're focused on at Shell Midstream Partners, which has not changed. We have been busy building and growing a mainstream midstream portfolio of fee-based assets, with dependable cash flow.

We have done so with the full support and backing of our sponsor, Shell, who remains encouraged with the long-term potential of the MLP within the larger role of that Shell portfolio. My team and I continue to be focused on building the business through dropdowns, organic growth projects and third-party acquisitions.

Dropdowns from Shell will continue to be the primary vehicle for growth in the near term and Shell's size and scale affords us an unmatched runway of assets that can be dropped into Shell Midstream Partners. We have also undertaken organic growth projects directly at the Partnership level.

Today we are investing capital to optimize and improve the operational capabilities of our existing asset base. But there will be day when Shell Midstream Partners can take on larger scale growth projects that are currently happening at the sponsor level. Projects like the ethane supply system for the Pennsylvania Cracker and the Mattox pipeline, which is the export pipeline for Appomattox Field in the Gulf of Mexico.

And finally, third-party acquisitions also play a role in our growth strategy. The recent acquisition from BP is a great example of an opportunity that enhanced our portfolio and directly supported our strategy to own corridor pipelines offshore. Shell Midstream Partners purchased a 10% interest in the Endymion and Proteus pipelines in the Eastern Gulf of Mexico, which are currently connected to BP's Thunder Horse platform.

In the future, the Mattox pipeline, which is currently under construction by Shell Pipeline Company, will connect to these pipelines. This creates a strategic new corridor pipeline anchored by Shell's Appomattox Field and delivered into the caverns in Clovelly, Louisiana.

It is also important to note that Shell Pipeline intends to assume operatorship of Endymion and Proteus on behalf of Shell Midstream Partners. Now this is beneficial because as many as you know, Shell Pipeline Company already operates a large network across the Gulf of Mexico. And we can integrate Endymion and Proteus into our existing operations, which will create cost synergies for the new pipelines as well as our existing portfolio. We also see near-term growth on Endymion and Proteus, well ahead of the Appomattox Field reaching first oil.

At Thunder Horse, a new subsea project recently came online 11 months ahead of schedule. Two new wells are currently producing and two more wells are projected to be online in early 2018. Once all four are online, the project is expected to produce 50,000 barrels per day. So this transaction makes sense for a lot of reasons.

But again, the most important thing is that Endymion and Proteus support our corridor pipeline strategy, which is the cornerstone of our offshore footprint. This chart, which I have shown you before, demonstrates the resiliency of our corridor pipeline strategy. Our corridor pipelines attract new production from upstream development that is occurring in and around our footprint, even when the markets are difficult.

In 2016 alone, we benefited from production coming onto our systems from new fields like Julia, [Sela Camp] and Oddjob. As well as infield drilling at Tahiti, Jack St. Malo and Delta House.

In addition, anchor platforms already connected to our systems, also continued to increase production. A great example of this is Olympus. While first store was achieved back in 2014, the field hit a new peak production rate in 2016 at the end of the year, after bringing new wells online during the year.

As we look to this year and next year, we anticipate continued growth on our systems from new upstream projects that are slated to come online in the near term. We foresee significant growth coming from Mars as Stampede and Big Foot tie into Amberjack in 2017 and 2018. These tie ins to Amberjack ultimately connect into the Mars system.

We also anticipate continued growth on Odyssey and Delta which looks to be around 6% through 2018 from existing platforms like Delta House and future tie back opportunities like Horn Mountain Deep and Stonefly. And growth from our Auger system is projected to occur early in the next decade as projects like Tigress, North Platte and Shenandoah continues to progress and mature. So from a strategic viewpoint, it is clear that we own the right pipe, in the right place.

However, as you know, we are more than just an offshore story. I'm certainly proud of the impressive portfolio of assets we have built at Shell Midstream Partners. We now own all of our interest in 12 diversified midstream assets ranging from an onshore cruise system serving key markets on the Gulf coast, an expansive portfolio of offshore crude pipelines spanning all of the major production areas in the Gulf of Mexico. A crude oil terminal in the Midwest and two of the largest refined product systems in North America.

If I could bring your attention to the pie chart on the bottom of slide 5 here, the cash generated from our portfolio is well-balanced. Nearly 50/50 onshore versus offshore. This diversification is another important element of our growth strategy.

Now let's turn to the operational results of the quarter. Overall throughputs were higher in the fourth quarter as we added the Odyssey pipeline to our portfolio and saw increased spot volumes on the Zydeco System.

As you will recall, the Odyssey pipeline extended the offshore footprint into the active Eastern Gulf of Mexico. The pipeline has a capacity of 220,000 barrels per day, with connections to over 20 fields including Delta House, Horn Mountain and Petronius.

In October of last year, a new tie back to the Delta House platform came online. The log operated Oddjob field ramped up to 12,000 barrels per day at the end of the 2016 and continues to ramp up.

Increased volume from Odyssey and Zydeco was partially offset by lower volumes on Mars. Reported throughput volumes on Mars were lower by 65,000 barrels per day compared to the third quarter. That is a reflection of storage activity and not actual throughput on the pipeline. The bottom line is that Mars has seen material growth over the past two years, with underlying production hitting rates over 400,000 barrels per day, up more than 100,000 barrels per day from late 2014.

Now moving to the onshore. We saw increased spot volumes and higher cash invited for distribution related to Zydeco in the fourth quarter, primarily due to organic growth projects which were completed in late 2016. There's a lot of moving pieces on Zydeco. I think it is worthwhile spending just a bit of time going through each of these projects and how they've impacted operational and financial results.

In September, we completed the sub-connection in Nederland, allowing the system to handle an additional 95,000 barrels per day from Nederland into St. James and Clovelly and also allowing us to trigger the full commercial terms of one of our committed shippers.

Now as we signaled in the third quarter, we saw $11 million of deferred revenue credit spilled up in the fourth quarter, primarily due to the new connection. This amount will not be reflected in revenue and subsequently EBITDA until the credits are used or expired within the next 12 months.

A total of $8 million was added back to cash available for distribution in the fourth quarter; which is the $11 million of deferred revenue partially offset by previous credits that were used or expired during the fourth quarter. In addition to the Sun connection, we completed up raise to our Houma terminal to facilitate a joint tariff agreement with low cap, the moves Poseidon volumes for offshore into Houma and St. James. We call this movement the outer belt.

Prior to the outer belt movements, Zydeco was capacity constrained between Houma and St. James. The outer belt removed these constraints and in the fourth quarter offshore spot volumes into Houma reached an all-time high. These two projects are really good examples of where we have taken initiatives to grow the business.

The Sun connection and the outer belt movements have created a step change for Zydeco. While market dynamics and individual customer needs will continue to evolve, these two projects position Zydeco to attract and retain volume well into the future.

And with that, I will turn the call over to Susan to walk you through the financial results for the quarter. Susan?

--------------------------------------------------------------------------------

Susan Ward, Shell Midstream Partners, L.P. - CFO [4]

--------------------------------------------------------------------------------

Thanks John. Good morning everyone. Financial performance for the fourth quarter, as well as for the full year was strong.

We saw healthy bottom-line growth both from acquisitions, as well as organic growth on our base portfolio of assets. In the fourth quarter, net income attributable to the Partnership was up 24% from the third quarter, primarily driven by the October acquisition of interest in Mars and Odyssey and higher revenue recognized attributable to Zydeco.

Revenue for the period was $75.6 million, up $7.7 million from the prior quarter which was mainly due to increased committed shipper volumes on the Zydeco system. Increased committed shipper volumes were helped by an unexpected outage on third-party pipeline during the fourth quarter. As John mentioned earlier, several organic growth projects also came online in September and we are seeing the full impact of those projects in the fourth quarter.

Income from equity investments was $30.9 million compared to $21.4 million in the previous quarter. Dividend income was $4.5 million slightly above the prior quarter. In 2017, dividends from Colonial are expected to return to a normal run rate.

Adjusted EBITDA attributable to the Partnership was $84.3 million, up $16 million or 24% from the prior quarter. Total cash available for distributions was $82.7 million after adjustments for interest, fined deficiency payments and net maintenance capital expenditures.

The Partnership declared a distribution of $0.277 per LP unit for the fourth quarter. This was 5% increase over the prior quarter's distribution and 26% higher than the fourth-quarter of 2015, which is slightly above the 25% growth rate we targeted for the year. The resulting distribution coverage ratio for the quarter was 1.4 times. Based on our strong distribution growth, all of the Partnership's subordinated units automatically converted to common units on a one-for-one basis earlier this month.

And finally let me close, by spotlighting our liquidity and financial position. At the end of the fourth quarter, the Partnership had total cash -- cash equivalence of $122 million. Shell Midstream Partners had total debt outstanding of $686 million, which equates to a 2 times debt to fourth-quarter annualize adjusted EBITDA, which is well within the investment grade leverage ratios we are targeting.

Shell Midstream Partners is in the process of entering into a new five-year, $600 million, fixed rate debt facility with our sponsor. The last three acquisitions made by the Partnership were financed with debt and cash on hand.

Our balance sheet and financial position puts the MLP in a good position to execute on its growth strategy. On a pro forma basis, total credit facilities of the Partnership following the addition of the new facility and expiration of the 364-day facility, was $1.39 billion of which $686 million has been drawn down. And pro forma total available debt capacity remaining under the facilities, plus cash on hand would have equaled $826 million.

With that, I will hand the call back over to John for some closing remarks.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [5]

--------------------------------------------------------------------------------

Thanks Susan I appreciate it. Susan and I covered three important highlight from the quarter.

We delivered strong bottom line results, which is an outcome of doing what we said we were going to do and delivering on our strategy. We completed a third-party acquisition that deepened our core footprint and our strategic position in the Gulf of Mexico and lastly we continue to see the benefits of organic growth across our portfolio.

As I announced back in November, Susan is going to be stepping down as CFO of Shell Midstream Partners on March 1. To focus on her position as the Head of Mergers and Acquisitions for the America's, so this is our last chance, our last webcast with Susan.

I would be remiss if I didn't say on behalf of myself and on behalf of all of Shell Midstream Partners; Susan, we cannot thank you enough for your energy, your enthusiasm and most importantly your leadership to get Shell Midstream Partners where it is today. We would not be here without you and your leadership and I want you to know that.

I'm looking at Shawn Carsten who's got a smile on his face and he's chomping at the bit. He is ready to go. Shawn, I'm convinced that your experiences in your leadership, are exactly what we need as we continue to mature and grow our MLP into the future and I look forward to working with you to do that.

With that folks I'll turn the call over to you for your questions. Thanks.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions)

Jeremy Tonet, JPMorgan.

--------------------------------------------------------------------------------

Jeremy Tonet, JPMorgan - Analyst [2]

--------------------------------------------------------------------------------

Good morning.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [3]

--------------------------------------------------------------------------------

Morning, Jeremy.

--------------------------------------------------------------------------------

Jeremy Tonet, JPMorgan - Analyst [4]

--------------------------------------------------------------------------------

John, I was wondering if you could touch on a high level question as far as the Gulf of Mexico. What price levels are needed for producers to continue activity going out to the future, or what type economics they see in the current strip now? If you can give us some bigger thoughts there? That would be helpful.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [5]

--------------------------------------------------------------------------------

Jeremy, as we see the activity in the Gulf of Mexico, it really goes into three areas that the producers are pursuing. They're doing tiebacks -- and the bottom line on that, that could be as low as $25 per barrel breakeven up to $40 per barrel breakeven. Those are attractive opportunities that the producers continue to pursue.

They are also pursuing, fit-for-purpose type developments, which are more fit-for-purpose type platforms to tieback subsea fields, too, at a lower cost. We see producers saying they can do those in the $40 price range, per barrel. Finally, the megaprojects, like the Appomattox that Shell is doing, and others, the producers have done a good job of lowering cost over time. They've actually got those at least to $50 a barrel, if not lower, more approaching $45. All that tells me that the producers are finding ways to lower the breakeven cost of these projects to compete and be able to execute.

I think what is really important for us, though, is that most of these projects, with the exception of megaprojects, will tie into existing infrastructure, particularly tiebacks, where there is available ullage on big platforms offshore that subsidy projects -- the one I mentioned at Thunder Horse is a great example: full well, subsea, tieback to an existing platform. Good news for us is that our corridor pipelines are there to get that production, and it is a real good indicator of the strength of our corridor pipeline strategy.

--------------------------------------------------------------------------------

Jeremy Tonet, JPMorgan - Analyst [6]

--------------------------------------------------------------------------------

That is all very helpful. Thank you. Just following up as far as CapEx is concerned and organic at the partnership level. I was wondering if you could provide a little bit more color on what the 2017 organic CapEx might look like? When does Shell actually get big enough to take on more projects at its level -- as itself as opposed to upstairs? Is that kind of a near-term or is that still further off at this point?

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [7]

--------------------------------------------------------------------------------

It gets larger with time as we grow, Jeremy. We have to keep in mind the types of projects that we want to take on. Projects like the ethane supply system that I mentioned to you and Mattox Pipeline, those are further out in time when Shell Midstream Partners will be big enough to take those projects on. They are hundreds of millions of dollars. We do take on the smaller projects and being able to absorb them, like the ones I mentioned in the call around Houma and the Sun connection.

In 2017 in particular, to answer your question, $45 million of CapEx at the Partnership level, and it is roughly 50/50 between maintenance and growth. With the growth projects, we're going to build some tanks at Houma. That is where some of our growth -- to continue to expand the capability of the Zydeco system. That will give you a good idea what we plan in 2017 between growth and maintenance and about $45 million.

--------------------------------------------------------------------------------

Jeremy Tonet, JPMorgan - Analyst [8]

--------------------------------------------------------------------------------

That is all helpful. Thank you very much.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

Brian Zarahn, Mizuho.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [10]

--------------------------------------------------------------------------------

Hey, Brian.

--------------------------------------------------------------------------------

Brian Zarahn, Mizuho Securities Co., Ltd. - Analyst [11]

--------------------------------------------------------------------------------

Hi, John. I appreciate the color on the offshore outlook. Is your outlook consistent with what you have been seeing so far in the first quarter of this year?

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [12]

--------------------------------------------------------------------------------

In terms of what, Brian? The activity et cetera?

--------------------------------------------------------------------------------

Brian Zarahn, Mizuho Securities Co., Ltd. - Analyst [13]

--------------------------------------------------------------------------------

In terms of volume.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [14]

--------------------------------------------------------------------------------

I definitely think so. Several of the fields that came online towards the end of last year continue to ramp up this year. Independent, the looks at the Gulf of Mexico continues to support volume growth between 2017 and 2018. When you look at where that volume growth is, Brian, it is close and in the vicinity of our corridor pipelines which, again, we could capitalize on that with no CapEx. We remain encouraged by the activity that producers are showing us and the recent results of some of the new fields that have come online.

Some of the bigger fields are going to come online in 2017 and 2018. We talked about Stampede. We talked about others that will tie into Amberjack, which ultimately gets into Mars. The near term outlook, we remain encouraged as it relates to volume growth.

--------------------------------------------------------------------------------

Kevin Nichols, Shell Midstream Partners, L.P. - VP of Commercial [15]

--------------------------------------------------------------------------------

Brian, this is Kevin. I just might add one more thing. My commercial organization is as busy or busier responding to requests by producers out in the Gulf of Mexico looking at, what I would call, that near-term medium-term type opportunities for tiebacks et cetera. That has actually picked up a little bit for us.

--------------------------------------------------------------------------------

Brian Zarahn, Mizuho Securities Co., Ltd. - Analyst [16]

--------------------------------------------------------------------------------

Appreciate the color and will stay tuned on potential new announcements. Shifting gears a little bit to third-party acquisitions. Obviously, dropdowns will remain the key growth driver. Do you see other opportunities for some other potential bolt-on acquisitions, whether it is offshore or onshore?

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [17]

--------------------------------------------------------------------------------

Brian, I will start and then Kevin can pick up on it.

Again, our focus on third-party acquisitions are where we can find opportunities that fill a gap in our portfolio and are aligned with our strategy. I think the BP acquisition really speaks to that. That was one where, if we could find a way to connect Mattox Pipeline in the future with the existing pipeline and have strategic control of the asset all the way to the beach, that would be another corridor pipeline in a strategic area. As the Eastern Gulf of Mexico, in particular where Appomattox is, continues to be active with exploration and appraisal activity.

That was a good example, and it was the right price as well. We have to also be mindful, as Jeremy asked, how far can we grow? The price has to be right and that one really fit to our ticket, in terms of how we want to try to utilize third-party acquisitions to grow the business.

Kevin, you may have something to add to that.

--------------------------------------------------------------------------------

Kevin Nichols, Shell Midstream Partners, L.P. - VP of Commercial [18]

--------------------------------------------------------------------------------

I think it is fair. Bolt-ons, strategic where it complements our portfolio. My team continues to talk with customers and the market to see what they need in the future, and then we look at the best way to go about doing that. Sometimes it is going to be organic growth capital. Sometimes it might be partnership, like a solution like the outer belt. Sometimes it might actually be something more with an acquisition.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [19]

--------------------------------------------------------------------------------

Brian, as I think about a bit more, too. You rightly pointed out that dropdowns will continue to be the major part of our growth story, and it should be in that our sponsor has $3 billion to $3.5 billion of assets available for drop. We've got strong sponsor support from Shell. I think, we'll always have this balance.

Over the last two years, I think we have demonstrated that the balance. Where we have done organic growth projects on existing systems at the kind of level we can afford, it make sense at the partnership level. We have continued to exercise the massive runway we have at Shell to drop assets into the MLP with the sponsor -- with the support from our sponsor. Then when third-party acquisitions make sense, like Explorer or like the Endymion and Proteus acquisition, we will take advantage of those if it fits the portfolio and fills a need in our strategy.

--------------------------------------------------------------------------------

Brian Zarahn, Mizuho Securities Co., Ltd. - Analyst [20]

--------------------------------------------------------------------------------

I appreciate that. Last one for me. Given the many growth drivers available to Shell, any updated thoughts on how the IDRs structure may evolve as the MLP gets bigger?

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [21]

--------------------------------------------------------------------------------

Let me start and I'll ask Susan to fill in some blanks. Right now, the IDR impact is not significant to our cost of capital. We will continue to watch this. Sue, you may want to add a bit more color in how we look at IDRs and where they're headed.

--------------------------------------------------------------------------------

Susan Ward, Shell Midstream Partners, L.P. - CFO [22]

--------------------------------------------------------------------------------

In our lifecycle, we are early on. Our distributions on our IDRs was less than $10 million this past quarter. We'll continue to monitor our cost of capital and if it gets to be challenging, we have all of the options open to us. Our parent is very supportive.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [23]

--------------------------------------------------------------------------------

The sponsor is very supportive, Brian, of these methods if need be. That is always reassuring for us and provides us a great deal flexibility as we move forward.

--------------------------------------------------------------------------------

Brian Zarahn, Mizuho Securities Co., Ltd. - Analyst [24]

--------------------------------------------------------------------------------

Thank you. Susan, I know you will still be involved with the MLP, but best of luck.

--------------------------------------------------------------------------------

Susan Ward, Shell Midstream Partners, L.P. - CFO [25]

--------------------------------------------------------------------------------

Thanks, Brian.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

Anish Kapadia, TPH

--------------------------------------------------------------------------------

Anish Kapadia, Tudor, Pickering, Holt & Co. - Analyst [27]

--------------------------------------------------------------------------------

Hi. A question, first of all, on the offshore again. On slide 7, you are showing growth coming through in 2017 and 2018, which is for some new projects. Following this period into 2019 and 2020, I was wondering if you expect some decline in productions before you see the next wave of projects, FID, to come on stream? Also, if you can give some idea of what's the underlying decline rate that you're seeing on some of the existing fields with the managed drilling that is taking place? Have you seen any fall in infield drilling? Again, as we have seen that kind of substantial decrease in the rig count.

--------------------------------------------------------------------------------

Kevin Nichols, Shell Midstream Partners, L.P. - VP of Commercial [28]

--------------------------------------------------------------------------------

Yes, John, maybe I can take that one. This is Kevin. Great questions. You had a couple of questions in there. (laughter). Let me try to address each of those and then come back and if I missed one let me know.

Actually, we continue to be bullish in 2019, 2020 and beyond. Appomattox is an example of that. That is not expected to come on in the next two years, so we will have projects like that maturing. Don't forget that when Bigfoot and Stampede, those kind of platforms come online, they continue to mature and to season. If they are coming online at the end of 2017 and 2018, we expect those to continue to ramp up. As we have seen evidence by, like say Jack St. Malo, which came on in late 2014 and has continued to set new highs a year and a half going into the second year later.

With regards to the well, the clients it is -- it's always a difficult one for us to predict because it varies field by field and well by well.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [29]

--------------------------------------------------------------------------------

But, I think that speaks, Kevin, to the strength of our corridor pipeline strategy. In this, you ask about individual well declines. We don't actually watch that that much. We're looking at overall throughputs. As you know, several fields are connected and several platforms are connected to each of our corridor pipelines. The plot that you're looking at on slide 7, shows what happens with time. So as some fields go down, other fields come up that are new or they're doing redevelopment.

From an individual well perspective, we do not have a lot of deep insights in that, probably better to ask the upstream guys about that.

As far as the corridor pipelines go, whether the market is good or the market is not; we continue to see them sustain our grow their rate over time. I think that is important as it relates to our corridor pipeline strategy offshore.

--------------------------------------------------------------------------------

Kevin Nichols, Shell Midstream Partners, L.P. - VP of Commercial [30]

--------------------------------------------------------------------------------

Even though a well may decline, what we are seeing with existing fields and producers is that they add additional wells to offset that. That kind of goes to John's point. With regards to our pipelines, we don't necessarily see a well decline or field decline because they're doing some infield drilling and adding new wells as we go.

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [31]

--------------------------------------------------------------------------------

I think Kevin is also right one area. This is when you think about, out into the future, Appomattox, end of the decade kind of an event for coming online. As this near-term growth unwinds a bit, I think we're going to begin to see some of the bigger megaprojects that have been under development several years, begin to come online in its place. Overall, throughputs in the Gulf of Mexico, hard to tell, but I think we are starting to see how that comes about.

--------------------------------------------------------------------------------

Anish Kapadia, Tudor, Pickering, Holt & Co. - Analyst [32]

--------------------------------------------------------------------------------

Thanks. That about covers it. I had a second question on the onshore. I think one of the areas of interest in the market at the moment, one of the opportunities that people have been talking about is the Permian with regards to potential bolt-on [acts] and takeaway capacity. Is that an area that you are looking at getting involved with? Is it something that you can take advantage of with Shell's position in the Permian? Then, any potential for assets that could be dropped down?

--------------------------------------------------------------------------------

John Hollowell, Shell Midstream Partners, L.P. - CEO [33]

--------------------------------------------------------------------------------

Absolutely. We are working closely with our upstream colleagues. Greg Guidry and his group in the Permian asset. They've got a great position out there that provides us with the opportunity for growth. Absolutely, we are reviewing that and looking at the options that we may have to include midstream assets from that part of Shell's portfolio into the MLP.

--------------------------------------------------------------------------------

Anish Kapadia, Tudor, Pickering, Holt & Co. - Analyst [34]

--------------------------------------------------------------------------------

Great. Thanks very much.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

(Operator Instructions)

We have no further questions in the queue. I would now turn the call back over to Courtney Selinidis. You may begin.

--------------------------------------------------------------------------------

Courtney Selinidis, Shell Midstream Partners, L.P. - IR Officer [36]

--------------------------------------------------------------------------------

Thank you very much for your interest in Shell Midstream Partners. For additional follow-up questions, please call me directly. My contact information can be found on the presentation materials as well as on our website shellmidstreampartners.com.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, this conclude today's conference. You may now disconnect. Good day.