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EnLink Midstream LLC (ENLC) Q1 2019 Earnings Call Transcript

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EnLink Midstream LLC  (NYSE: ENLC)
Q1 2019 Earnings Call
May. 01, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to EnLink Midstream First Quarter Earnings Call. All participants will be in listen only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question you may press star then one on your telephone keypad. To withdraw your question please press star then two. Please note that this call is being recorded today, Wednesday May 1st 2019 at 9 a.m. Eastern time. I would now like to turn the meeting over to Kate Walsh, Vice President of Investor Relations. Please go ahead.

Kate Walsh -- Vice President of Investor Relations.

Thank you, and good morning, everyone. Thank you for joining us today to discuss EnLink Midstream's first quarter of 2019 earnings. Participating on the call today are Barry Davis, executive chairman; Mike Garberding, President and Chief Executive Officer; Eric Batchelder, Executive Vice President and Chief Financial Officer, and Ben Lamb, Executive Vice President and Chief Operating Officer. To accompany today's call, we have posted our earnings press release and operations report to the Investor Relations portion of our website. Shortly after today's call, we will also make available a webcast replay on our website.

I will remind you that statements made during this conference call about the future including our expectations or predictions should be considered forward-looking statements within the meaning of the federal securities laws. Actual results may differ materially from what is described in these forward-looking statements. Forward-looking statements speak only as of the date of this call and we undertake no obligation to update or revise any forward-looking statements. Additional information on factors that could cause actual results to differ from what is described in these forward-looking statements and sources for certain statements we make here-in are available in the earnings press release and the operations report accompanying this call located at enlink.com and in our SEC filings.

This call also includes certain non-GAAP financial measures, definitions of these measures, as well as reconciliations of comparable GAAP measures are available in our earnings press release and our operations report on enlink.com. We encourage you to review the cautionary statements and other disclosures made in our earnings press release in our SEC filings including those under the heading 'Risk Factors'.

As a quick reminder we modified our segment reporting to better align with how we are running our business. Any comparisons between 2019 and 2018 at a segment level are done using 2018 segment results recast into the 2019 segment reporting methodology. The structure of the call will be to start with prepared remarks by Barry, Mike and Eric and then leave the remainder of the call open for question-and-answer period. With that, I would now like to turn the call over to Barry Davis.

Barry Davis -- Executive Chairman

Thank you, Kate and good morning, everyone. Thank you all for joining us today as we report our first quarter and discuss our outlook as a newly simplified EnLink. As with our corporate structure, we've been very intentional with building EnLink's large integrated asset platform in premier supply basins and key demand centers. That purposeful approach is paying off with the business generating strong cash flows and our ability to repeatedly both on highly accretive projects.

As I stand back and look at the business we have built together, three things stand out for me. First, our differentiated asset platform is performing very well with cash flows from our diversified operations exceeding not only our expectations but the market's expectations as well. We are on track to achieve our company level 2019 and long-term financial objectives. Second, we continue to execute with excellence and place highly accretive projects in the service. We recently completed our logo three natural gas processing plant expansion and with increased producer activity on our footprint, the volume ramp will now exceed original expectations.

We also recently completed our Cajun-Sibon NGL pipeline expansion which will be able to transport 105,000 barrels of NGLs from the Mont Belvieu hub to our fractionators in Louisiana. And the third thing that stands out to me is that the combination of our strong customer relationships and our growing asset platform continues to drive new high return opportunities for us. We recently announced plans to accelerate our pace of growth in the Permian with a new 200 million a day natural gas processing plant in the Delaware Basin and a project to access additional capacity to our Riptide facility in the Midland Basin. EnLink is operating in an increasingly constructive environment and on the supply side we see some attractive macro trends emerging.

Number one, we have a supportive oil price environment; Number two we have a producer community even more focused on capital allocation, living within free cash flow and ensuring sustainable growth over the long term and number three, we have continued drilling advances driving capital efficiencies, enhancing returns and bolstering financial strength. One of the key areas of growing capital efficiencies for producers relates to drilling multi zone large scale developments. As producers transition from the exploration phase to the full field development phase, drilling cycle time significantly shorten leading to more wells being drilled with fewer rigs. Specifically for EnLink, we have seen strong rig consistency over the past few years across our growth basins. Looking ahead we expect to see rig count naturally come down throughout 2019 as rig efficiency ramps. Ben will likely give you more color on this during the Q and A portion. As producers evolve their development strategies, we believe integrated midstream companies positioned key areas, like us, will be the beneficiaries of their optimized well productivity, their increasingly focused capital allocation plans and ultimately, their improved development returns. In terms of attractive macro trends on the demand side, exports of all commodities are on the rise and our assets in Louisiana position us perfectly to play a meaningful role in that growth. We have a number of projects that our team is developing, vetting and in the advanced stages of negotiating and all with attractive returns. At the end of the day, returns are what create value for energy companies and returns are certainly at the heart of the decisions we make everyday at EnLink. We are making return based decisions every day to drive value creation and to return value to all stakeholders over the long term. With that I'll turn it over to Mike.

Mike .J. Garberding -- President and Chief Executive Officer

Thanks, Barry and good morning, everyone. I think Barry summed up very nicely where we are. The business is performing very well with strong diversified cash flows being generated from our four operating segments. We continue to execute with excellence and both on highly creative projects to our differentiated Midstream platform and our deep customer relationships are driving incremental high return projects. A great example of deep relationships driving opportunities is the expansion of the Delaware Basin we announced yesterday. EnLink has a long-standing relationship with XTO a subsidiary of ExxonMobil who is one of the most active operators and one of our key customers in the Permian Basin.

XTO recently upsized their growth plans in the Permian. EnLink is honored to be a key service provider developing a required infrastructure to support XTO's production plans and we'll be growing right along with them. Our updated outlook forecasts that our local natural gas processing complex will be nearing full capacity in 2020 requiring additional processing capacity to be added over the next 18 months.

As a result, we plan to construct the new 200 million cubic feet per day gas processing plant in the Delaware Basin. We estimate that to develop the plant and associated compression and gathering infrastructure we'll invest around $240 million over the project period. Since this project is part of EnLink Delaware joint venture, we'll share this investment with our partner NGP with the net cost to EnLink of approximately $120 million including around $60 million expected to be spent during 2019.

The project Adjusted EBITDA multiple is expected to be around five to six times and demonstrates our commitment to highly accretive expansions. And we're doing all this with no changes to our net 2019 growth capital expenditure range through effective capital allocation among our growing asset areas. Turning now to Oklahoma. First and foremost, we have an unwavering belief in the long term growth in Oklahoma and it's tax position as a top tier growth play. Not all STACK is the same, but we believe we have some of the best acreage where the three counties come together; Canadian, Blaine and Kingfisher.

This area is very consistent with the Midland based on economics. Back in. The Oklahoma segment is still on transition. Devon continues to optimize its drilling completion strategy which it is executing on today and Cana continues to integrate and establish its plans for the Newfield acquisition, and Ron adapts to being a newly public and independent company. The sequentially lower volumes we saw in the first quarter of 2019 as compared to the fourth quarter of 2018, were primarily driven by these customer transitions as well as other transitory factors such as weather. While some aspects of this transition have taken a bit longer than we anticipated, we still have a great confidence in Oklahoma being a meaningful contributor to our growth in the quarters and years ahead and we believe we have one of the best positions in the STACK. Overall, we expect to see volume growth of 10% to 15% in 2019 as compared to 2018.

We are already seeing volume growth in the Oklahoma segment with April gas volumes approximately 5% higher than average first quarter volumes and April crude volumes almost double the average we realized during the first quarter. In the first quarter, we saw fewer than 20% of the total number of wells we expect for the year to be placed on line and many of those came on line at the end of the quarter. Other remaining wells we expect to see on line for the balance of the year approximately 90% are known locations on producer provided schedules.

From a capital expenditures perspective, we expect Oklahoma program to scale up and down with volume growth as a majority of spend is now on gathering and compression infrastructure. The STACK is undoubtedly a top tier supply play with very competitive economics and it will continue to be a core growth asset for us this year and for many years to come. Because of the strength and diversity of our business and the growth we're seeing in Oklahoma, we're maintaining our company wide outlook for 2019 including Adjusted EBITDA of $1.13 billion at the midpoint and our long term financial outlook for 2019 through 2021.

Now turning to North Texas. Our Barnett position continues to be a strong contributor to our diversified cash flows. Recently we made a relatively small acquisition less than $25 million to consolidate a competitor's operations on the southwest side of our footprint. The acquisition has an Adjusted EBITDA multiple of approximately five to six times and is a step forward in efficiently growing cash flows. Rounding out of four operational segments is Louisiana. Our Louisiana segment continues to be a steady growth area for us. We brought case front three on line recently, like Gary mentioned, and we'll be able to transport approximately 185,000 barrels of NGLs to our fractionation complex in Louisiana.

We continue to closely monitor the evolution of the NGL market, on a good place right now with the fractionation ph/fasty/ph- we have secured. We continue to see steady natural gas transmission volumes across our Louisiana network and we saw an uptick in processing volumes this quarter due to a positive commodity environment. Louisiana remains a tremendous source of opportunity for us. As Barry mentioned, there are some very favorable macro trends around exporting that play right into our asset platform strengths.

We are pursuing projects across all commodities and are very encouraged with how a number of these potential projects are developing. Stepping back now and taking a look at the total company, EnLink is right on plan. I could not be more confident in what our team is striving for and accomplishing. We are exactly where we need to be, executing on exactly what we set out to do, and most importantly we are achieving the returns we set out to achieve. With that, I'll now turn the call over to Eric to give us an update on financial performance and outlook.

Eric David Batchelder -- Executive Vice President and Chief Financial Officer

Thank you, Mike and good morning everyone. As Barry and Mike have highlighted, EnLink delivered strong cash flow results for the first quarter of 2019. We achieved Adjusted EBITDA of $268 million for the quarter which exceeded both company and Street expectations.

Our distributable cash flow of $185 million for the quarter also exceeded company and street expectations. Distribution coverage was 1.35 times for the quarter again exceeding both company and street expectations and in line with our long term targeted range of 1.3 times to 1.5 times. Our Permian business achieved over 100% growth in segment profit in the first quarter of 2019 when compared to the first quarter of 2018. Oklahoma segment profit increased over 15% when comparing first quarter 2019 to first quarter 2018, and Louisiana also reported solid segment profit growth.As expected segment profit for North Texas decreased by approximately 16% which was driven by the expiration of our minimum volume commitments with Devon Energy in the Barnett at the end of 2018.

However, as a result of our team's focus on expense management and optimization we exceeded cash flow expectations from the North Texas segment for the first quarter. Because of the strength and diversification of our cash flows from the business, EnLink continued to increase its quarterly distributions in the first quarter of 2019 with an annualized increase of approximately 6% when compared to the 2018 declared distributions. From a leverage perspective, we achieved a solid debt to adjusted EBITDA ratio of 3.7 times as calculated per our credit facility which is consistent with our long term financial goals. We continue to maintain a flexible liquidity position and exited the quarter with revolver availability of around $1.6 billion. We also closed a very successful $500 million senior notes offering in April which significantly reduces our need to access the capital markets.

From a capital allocation standpoint, our priorities remain to increasingly fund highly accretive projects with cash flow from the business and create and return value to our stakeholders while maintaining our key financial metrics. As we evaluate longer dated larger projects, we continue to view Global Infrastructure Partners as a potential partner to support future opportunities. One other item I would like to briefly address is the topic of asset sales because it comes up a lot in conversations. As we've discussed on prior calls, we have taken steps over the last few years to hydrate our asset base and don't have planned asset sales of any magnitude at this time. There may be a small asset here and there that we monetize but nothing significant at this time.

Our 2019 growth capital expenditure outlook for EnLink continues to be projected in the range of $565 million $to $725 million dollars net to EnLink. During the first quarter of 2019, we spent approximately $220 million on growth capital expenditures as most of our larger projects will be in service during the first half of the year.

We expect the incremental growth capital expenditures in the Permian related to our new plant expansions to be offset by contributions from our Delaware based and joint venture partner and reduced growth capital expenditures in other segments. We maintain our three year aggregate growth capital outlook of $1.2 billion dollars to $1.5 billion with the expectation that project returns will be on average in the five to six times range. Building on what Mike said earlier about us being on track and unplanned for 2019, we have reaffirmed our company level financial 2019 guidance ranges presented in the materials released on February 19 with the exception of net income. Net income has been revised downward to a range of $18 million to $28 million for 2019 as a result of a goodwill impairment we recorded in connection with the closing of our simplification transaction on January 25th. Excluding this non-cash goodwill impact, our net income guidance is consistent with original guidance.

From the long term outlook outlook perspective, our financial tenants remain unchanged and we continue to target distributable cash flow per unit growth of 10+% from 2019 to 2021, long term distribution coverage of one point three times to one point five times, and debt to adjusted EBITDA of 3.5 times to four times as calculated by our credit facility. Our strong financial outlook supports our commitment to sustainably creating and returning value to stakeholders over the long term. With that, I'll now turn it back over to Mike.

Mike .J. Garberding -- President and Chief Executive Officer

Value creation is what we are focused on and executing highly creative projects is driving tremendous value creation for us. We have a talented team that wakes up each day thinking about how to make EnLink better and stronger and we have deep industry and customer relationships that continue to provide robust opportunities for us. 2019 is off to a great start and we are excited for all accomplishments to come. With that you may open the call up for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. To ask a question you may press star then one on your touchtone phone. If you are using a speaker phone please pick up your handset before pressing the keys. To withdraw your question please press star then two. At this time we will pause for a moment to assemble our roster. Our first question will come from Dennis Coleman of Bank of America, Merrill Lynch. Please go ahead.

Dennis Coleman -- Merrill Lynch -- Analyst

Yeah. Hi. Good morning everyone. Thanks for the call.

Eric David Batchelder -- Executive Vice President and Chief Financial Officer

Good morning Dennis.

Mike .J. Garberding -- President and Chief Executive Officer

Hey, Dennis.

Dennis Coleman -- Merrill Lynch -- Analyst

I wonder if we might start with with the guidance. Some numbers are a little bit confusing. It seems like there's lower volumes in Oklahoma that should, I guess, likely translate into some hit to EBITDA but the guidance remains the same for 2019. And so, I guess just to put that broad question out there if you can help us square that.

Mike .J. Garberding -- President and Chief Executive Officer

Now-- Dennis this is Mike. So let me start with this. we have great confidence in the business in the execution we're seeing and also in our 2019 company wide outlook. Like you have mentioned you know there's concerns or questions around which revisions to Oklahoma and what does that mean to guidance. I think the first thing you need to take away is again the diversified business is driving our results. And I think that's something that people may be missing. But if you start with the first quarter you can truly see that. So just look at EBITDA. EBITDA was around $268 Million for the quarter which was above company level and market expectations. So great execution. If you just break that apart look what's driving it.

North Texas performance, over performance for the quarter with that bolt on acquisition which is accretive. Louisiana performance, over performance for the quarter. Permian performance, over performance for the quarter with new contracts added that are accretive in really start up today. And as you mentioned, Oklahoma really relatively flat but still growing. And know something, Ben's going to address is part of this too is really the understanding of how you think about volume to margin because that's not a one for one or equal relationship on what we're seeing in Oklahoma today.

So then how do you take all that in consideration for guidance? So start again with the first quarter. So first quarter is $10 million ahead of market expectations from a cash flow standpoint. In the first half a year we have four big projects coming on. We have Lobo lll, we have Thunderbird, Avenger and Cajun-Sibon III. of that, Lobo lll and Cajun-Sibon III are already up and running. You know some new big drivers of cash flow. If you think about those three segments I talked about, the strength of those segments voiced on the first quarter and just use 2019 guidance as an example.

So if you look at the difference of those three segments between mid and high, that's again North Texas, Louisiana and Permian, that's about $40 million. If you look at the two new accreative things we're doing which is both the bolt on opportunities and the Permian, as well as the acquisition; that also is providing results to 2019. If you look at Oklahoma and you look at Oklahoma between mid and low, that's about $40 million. When we look at that growth in Oklahoma we see it somewhere around that low end and then we'll talk further on that.

So again when you add all that up and the drivers of that diversified cash flow that are driving the business today and over performing today that's what gives us the confidence. We feel great about what we're seeing from the business. But again it's a story of all those assets and Oklahoma is a piece of that story. So, Dennis, again we feel good about the structure of the business.

Dennis Coleman -- Merrill Lynch -- Analyst

That's great. Was Ben going to add something there on Oklahoma?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yes, Dennis. I think what's come through in the couple of research notes that came out last night is people wanting to better understand the change in Oklahoma, and there's really three factors there. The first factor is timing and well count as a result of those customer transitions that Mike talked about in his prepared remarks. So we had fewer than expected wells turned to sales in the first quarter. You know really just delays. We also had some updates from producers for the balance of the year for some of them have paired some activity levels and we've trued that up in the 10% to 15% revision that we came out with this morning. The second thing is really around production strategy. We've seen some of the producers more aggressively choke the wells early in their lives. We understand they're doing that because they think that that will improve the EUR over time by resulting in lower decline rates. What we've done in our new estimate for Oklahoma growth is we've reflected lower IP rates but at this point we have not reflected lower decline rates. And the third thing was weather. We had three fairly significant freezing events in the Mid-Continent that all hit in the late winter.

And so, when you look at those that was 20,000 to 25000 MMBtus a day. And so the quarter really came together differently than we expected. We saw our highest volumes in January, lower volumes in February, lower volumes still in March and that's how we got to the first quarter result. But as Mike said, April is looking great. We're already 5% above our Q1 result on gas volumes in the month of April. So again the important thing to remember the 10% to 15% range that we've given you accounts for all three of those factors that we've talked about.

We're seeing the results come to fruition in April and as Mike said about 90% of the wells we expect for the year, the remainder of the year, are already on producer provided schedules with a handful of exceptions being some of the smaller guys who maybe don't give us data out to the end of the year. And on the margin point, Mike said that that the volume change doesn't necessarily translate one to one into a margin change and that's because the quality of our team in Oklahoma we've been able to capture a little bit higher margins per unit than we expected to, and that's through better recoveries at the plants, it's through optimizing our fuel burn and other factors like that. So it would be maybe not the best assumption to assume that because volume is down by x% that margin is necessarily down by that same percentage

Dennis Coleman -- Merrill Lynch -- Analyst

Okay. That's super helpful. Thanks for all that detail. I guess just to make sure I'm hearing it correctly. So Oklahoma may be toward the low end of the range. Do you still think you'll hit the low end of the range or could it be a little bit below?

Mike .J. Garberding -- President and Chief Executive Officer

Dennis, this is Mike. I think as far as where we sit today, again as we're in early innings, we sit around the low end of the range. As Ben said, there's just -- there's a lot of things that we can do to continue to optimize that business. And as we said, we're really in a transition period for a lot of our key producer customers, Devon and Encana. Encana had a call yesterday and talked again about their initial successes of what they are doing there, but they disclosed their transaction in the first quarter. And so look, we have a strong belief in the long-term productivity of what we're seeing in Oklahoma and love what we're seeing, but again this quarter really represents a transition. So when you get back to how do we think about it for the year, we sit around the low side of guidance. But the statement you need to hear is from a company standpoint, that diversification of business is driving the cash flow of the business that you closed in the first quarter.

Dennis Coleman -- Merrill Lynch -- Analyst

Okay. Okay. That's great Mike thanks. Thanks for that. I will step out and let the others ask.

Operator

Our next question will come from TJ Schultz of RBC Capital Markets. Please go ahead.

TJ Schultz -- RBC Capital Markets -- Analyst

Hey, good morning. The $1.2 to $1.5 billion of growth CapEx through 2021. So the bulk of that, still for wells connect, and I understand displacing some of that in 2019 with the plants. Just given the producer plans in the stack. But are you changing any assumptions on well connect capital in the STACK in 2020 and 2021 or do you expect activity to kind of return to levels that were previously on the guide.

Eric David Batchelder -- Executive Vice President and Chief Financial Officer

Hey, TJ, it's Eric. Good morning, thanks for the question. Thanks for participating today. We have not changed the 1 2 to 1 5 like you said, the mix changes a little bit because of the processing plant. And as you note as well this year's mix and guidance hasn't changed which represents some of the flights that Mike referred to in his prepared remarks in terms of going up and down with activity. But I think, as Ben outlined and as Mike mentioned, we still have strong confidence in the STACK and what's going to happen over the next few years, and that's all incorporated into that 1.2 to 1.5 as we continue to build out the quick cash laterals, compression and things like that, will continue to be part of that overall spend.

Mike .J. Garberding -- President and Chief Executive Officer

Yeah. As I said, TJ this is Mike, and I think a lot like you're alluding to is-- it's really some level of timing like we talked about. And for us it's optimization of our platform which was truly done in first quarter and we'll continue to do and then because of the quick to cash and the timing of capital we have the capability to do that and still be flat capital for 2019. I think that's incredibly important for people to hear, is our capability to shift between that but still have accretive projects filling in around and still have that growth platform in Oklahoma too.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay, thanks. And then just lastly the trajectory out of Oklahoma now, what does that just mean for utilization downstream and your needs for frac capacity over the next couple of year?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Hey, TJ, its Ben. it's been doesn't really mean anything for frac volumes in 2019 because we have multiple ways of filling those fractionators. We fill them not only with the Oklahoma business but also with our West Texas volumes, and now a portion of our North Texas volumes in addition to the NGLs from the opportunity processing that we do in Louisiana. So I don't see any change to our outlook for the fractionators being full in the second half of the year as far as the longer term frac outlook that really hasn't changed either. When you combine our equity fractionators with the capacity at GCF that we expect to have in 2020 and the third party frac deal that we talked about in the last quarterly call, that also comes on at the beginning of 2020 we think we are well-positioned on frac capacity through late 2021 and that gives us the luxury of seeing how the frac market develops since we have so many projects that are already in flight in Mont Belvieu.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay, Great. Thank you.

Operator

Our next question will come from Jeremy Tonet of J.P. Morgan. Please go ahead.

Jeremy Tonet -- J.P. Morgan -- Analyst

Hi, good morning

Eric David Batchelder -- Executive Vice President and Chief Financial Officer

Good Morning Jeremy.

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Good morning.

Jeremy Tonet -- J.P. Morgan -- Analyst

Just want to maybe start with Louisiana. I think noted there was incremental opportunity processing events that helped out in the quarter. Just wondering if you could explain that a little bit more and do you see those kind of recurring over the balance of the year?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yeah, Jeremy. It's Ben. It's a couple of things. One is we were successful in being able to direct to the processing plants some streams of gas that was processable. It's lean gas, but it's processing coming off of interstate pipelines. Sometimes that happens because you see ethane rejection in the northeast, and so the ethane ends up coming to Louisiana and the pipeline that accrues to our benefit. We've also seen some of our neighboring facilities in Louisiana unable to handle their volumes because they've had operational issues. And so, we've been able to capitalize on that as well. So, certainly wouldn't wouldn't expect necessarily for those neighboring operational issues to continue throughout the year. But for the opportunity gas coming off of the interstate pipelines, yeah that is a possibility and really what what will control that through the balance of the year is whether we have a home for the NGLs. And with the fractionators now expanded where capacity is about 193,000. It's obviously composition dependent that we expect to be able to handle some of that opportunity gas for the balance of the year.

Mike .J. Garberding -- President and Chief Executive Officer

Yeah. I think Jeremy when you look at it too and you look at the history of Louisiana says exactly that. And you can see that over the last 12 to 18 months the capability of that system really for opportunities because we have so much product moving into that market and opportunity processing is one of those you saw on the gas side the continued growth in the gas market. So we feel really good about what we're seeing in Louisiana as far as those additional opportunities.

Jeremy Tonet -- J.P. Morgan -- Analyst

Maybe just peeling (ph) in a little more. How much would you say is the frac spread from the strata plants versus kind of the new projects coming on line versus maybe some of those one time events or possibly one time event because Louisiana results this quarter were kind of the strongest that we've seen in a very long time and so I was just trying to figure what kind of a ratable number to think about going forward.

Mike .J. Garberding -- President and Chief Executive Officer

Yeah. I'd hesitate to give you a ratable number, Jeremy. I mean, in either case whichever way the opportunity gas gets to us it's lean gas right. It's not like field gas from the Permian or the mid-continent. It's primarily ethane and propane and we've all seen that the ethane and the propane market are in a fairly low spot right now, probably $0.24 to $0.25 cents on ethane. And so the frac spread is thin. But since we own the fractionators and all it costs us to fractionate the marginal barrel barrel is operating cost. It's great -- great business for us when we get it.

Eric David Batchelder -- Executive Vice President and Chief Financial Officer

But Ben alluded to it. It is lower margin business as compared to the other.

Jeremy Tonet -- J.P. Morgan -- Analyst

Got you. And one -- just last one on Louisiana if I could. Was there any uplift as far as Parview. Any kind of a basis spread around there that helped out in the quarter or is everything Louisiana gas really just kind of based there.

Mike .J. Garberding -- President and Chief Executive Officer

No, that's not really a factor for us. A factor that is you're trying to understand the great performance that we've seen in Louisiana gas. One factor is we saw good load in our kind of urban markets that we normally see more in the summer when it's hot outside and everyone has their air conditioners on. We've actually seen it last through the winter and in the spring which was stronger than what we expected to see.

Jeremy Tonet -- J.P. Morgan -- Analyst

Great. And just last one if I could. With the goodwill impairment, could you explain that a little bit more what was happening there? I just want to make sure we're clear of top there. Thanks.

Mike .J. Garberding -- President and Chief Executive Officer

Yeah, sure. Thanks Jeremy. Look, when EnLink was formed in 2014 there was goodwill that was created and it gets allocated to the IDRs that were owned by eNLC. So when we closed the simplification in January, those IDRs were canceled and GAAP requires that that previously corporate level goodwill gets allocated out to the operating segments. And so first you have to calculate the relative value of each of the segments and then the overall market value of the business is effectively the ceiling, and then the goodwill gets allocated out to that to each segment and then compared to the book value of each segment. And so that led to a difference between the book and the fair market value for the Louisiana segment. It's really a GAAP driven analysis that you know it's part of, like I said, sort of the IDRs going away and corporate level goodwill that they require you to push down and move around across the segments.

Jeremy Tonet -- J.P. Morgan -- Analyst

That's helpful. Thanks so much for taking my questions.

Operator

The next question will come from Shneur Gershuni of UBS. Please go ahead.

Shneur Gershuni -- UBS -- Analyst

All right. Good morning, guys. I'm just starting off with the guidance again sorry to have eleven questions on it today. But in some of your responses you talked about the fact that there's a margin pickup in crude that we may be under appreciating. I was wondering if you can give us a little bit more color around the margin on the crude side with respect to margins as well as contract mix and at the same time, if you can contrast that against the theoretical EBITDA impact of the reduced volumes that you had on guidance. If we can sort of get the pieces of what's taking it up, what's the offset versus, what's the negative impact of taking the Oklahoma volumes down?

Mike .J. Garberding -- President and Chief Executive Officer

Hey Shneur, its mike. I will start it and then pass it to Ben. But just to level set on crude, I think how he talked about crude more is from the standpoint of projects coming into play because you've had three big projects or two in Oklahoma and then avenger and the Delaware come in really over the past six months or so. So for us it's been more of a game of volume growth that you'll continue to see over time. So for crude on margins I think margins have been decently stable. We've seen some good stability in ORV, for example, as far as volumes do. So stable plus growing there and then I'll turn it over to Ben.

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Hey, Shneur. And maybe I need to clarify some of what I said. On the margin side in Oklahoma I was not speaking solely of crude, I was talking about the entire segment. So when you think about the fact that we have been forecasting a certain volume level in Oklahoma now we're forecasting a lower volume level. All I'm trying to say is we're seeing stronger margin performance across the Oklahoma business than we expected to see. And while we're not providing an update in segment profit range for Oklahoma today, we're saying that you shouldn't just assume that if growth is down shifted in volumes by X percentage that you should necessarily shift out of segment probably by the same percentage because we are making up a piece of that on margin. And again that's driven by things like better recoveries, it's driven by things like lower fuel burn, It's driven by things like product marketing. It's all the things that our team does so well day in and day out.

Shneur Gershuni -- UBS -- Analyst

No, I think we get that and we know that you've been adding projects and so forth. It just sort of, I guess what we, the collective we I guess, the real question is are we overestimating the gas side and underestimating the crude side. And so, kind of my question about what was the theoretical impact EBITDA guidance for taking down the volumes may help us better understand that there's more value on one side versus the other, so that we can square away the fact that the guidance effectively stays the same.

And I understand your point about margin across the board being better but I guess trying to better understand the impact of the gas side versus the crude side and maybe we are overestimating the impact on the gas side and that's why you've had so many surprising questions about -- surprising and trying to understand it today. And if you can clarify that is think that gas volumes would have cost us $20 million but the margin gives us $20 million. It's some details around that I think would really be helpful for your listeners today.

Mike .J. Garberding -- President and Chief Executive Officer

Yeah, Shneur. This is Mike again. It's a good question. I think that's exactly what's happening. Again, Aha! I think you can't hear enough from us. You know, again the confidence we have and what we're seeing in Oklahoma and again we're talking about a transition here not a longer term point of view. And so when you say, "How do you think about the margin?" Ben walked through the gas side and I commented for the Oklahoma segment, that we'd be around the low end when you think about the Adama (ph). And so what I think what people have been doing again is using basically them the change in volume to do an absolute change in margin for Oklahoma on a percentage basis.

And there's two pieces to that which I think that people are overestimating the impact. One is, as Ben walk through, is the gas margin is our capability to continue to provide margin opportunities and get a greater overall gas margin. And the second is what you're saying is really the crude piece and we talked in our script the prepared comments about crude volumes and the growth that we're seeing in crude volumes. It's starting from a smaller point, but it is a very growing piece of our business. So I think that all combined gets to the point you're making and helps give us confidence of what we're seeing. But most importantly it is a diversified business. We have a lot of good things happening across our platform that are driving opportunities that give us confidence of where we are in guidance.

Shneur Gershuni -- UBS -- Analyst

Okay, fair enough. Just sort of digging in on the volume guidance for Oklahoma and then you gave some great color to some of the prior questions in terms of well counts and so forth. You and I actually had a back and forth during the fourth quarter call specifically about this, and you talked about why we couldn't look at Devon's guidance because of net revenue interest and so forth and that are really two different numbers and so forth. But now we've got volumes down. It sort of seems to be following Devon's trend. Can we look to what the ENPs are doing or are you still thinking about it as it's two different numbers and how should we think about this volume trend as we sort of think about 2020?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yes, Shneur. So it's certainly 2 different numbers because of all those things that you and I talked about in the last call, which is that really the gross versus net. We -- what matters to us from Devon or any producer is their gross production and what matters to them is their net production and so in their numbers they're taking into account their net revenue interests and they're taking into account their percentage interest in other producers' operated production that accounts for their working interest. Certainly you can look to our producers as a group and you can look to what Devon is saying about the play, you can look to what in Encana is saying about the play, Marathon, Roan and the others but I would still caution you against tying too closely anyone's comments about their net production to what we see which is the gross, the gross production.

With Devon in this particular quarter, as I outlined the three factors that we saw in the quarter; the timing, the production strategy, and the weather. We had a little bit of timing impact around Devon, but really the production strategy is a big part of what we saw in the first quarter. We just saw the wells come on with lower IPs than we previously expected and we think that's because they're doing something different managing the reservoir. In the fullness of time, we think that that should result in higher EURs. What we've done today though is we've lowered our IP expectations in resetting our guidance for 10% to 15% growth. We have not yet accounted for any benefit from lower decline rates over time. That's what we expect to see since we don't actually have data on it yet or enough aid to make a judgment we have to factor that into our thinking yet.

Shneur Gershuni -- UBS -- Analyst

Okay. If fair enough, just leaving the whole guidance discussion for a little bit here. I was wondering if you could talk about the Exxon opportunity for potential growth in cap ex. Did they have takeaway capacity for gas and NGLs? Will you be handling that, will Exxon be handling that? I was just wondering, If you can give us a little bit more color on that?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yes Shneur, we are happy to talk about that. I think a lot of people follow Exxon's Investor Day given how big a part they play in our industry but just in case anyone didn't, their 2018 communication was that they were going to grow to 600,000 BOEs a day by 2025. What they said in 2019 was now that a million BOEs a day by 2024. So close to doubling within a shorter time period. And we're fortunate that we're going to be beneficiaries of that because Exxio is one of our longest standing customers in the basin. And so that increase in Exxio's Exxon's focus includes our acreage. As far as the downstream arrangements, they handle all of that for themselves and as they have a number of infrastructure projects that they've invested in themselves to make sure that they have takeaway for their gas and their crude. So we're focused on gathering compression and processing of that volume and that's what underpins our announcement today of the new cryogenic facility in the Delaware.

Shneur Gershuni -- UBS -- Analyst

All right. Great. Thank you very much guys. We really appreciate the calling today. Thank you.

Mike .J. Garberding -- President and Chief Executive Officer

Thanks Shneur.

Operator

The next question will come from Colton Bean of Tudor, Pickering, Holt.. Please go ahead.

Colton Westbrooke Bean -- Tudor, Pickering, Holt -- Analyst

Morning. Just to go back to TJ's question there on the CapEx spend. I think you guys provided the reconciliation of your prior 2019 look and updated. I think the CapEx flex bucket was around $60 million and included in that was the North Texas acquisition and the Riptide Spencer. The implication from that that Oklahoma came down by $90 million. And if so, how do we think about that again in context of that 1.2 to 1.5 because it seems like the 5% production for Oklahoma over that 3 year timeframe is effectively all accounted for or maybe even modestly over accounted for just in 2019. So any thoughts there would be helpful.

Eric David Batchelder -- Executive Vice President and Chief Financial Officer

Yeah. I would say, first of all, I wouldn't go directly to say that it's all Oklahoma. There's other segments and other things going on. There's a lot of diversification across the platform that has ebbs and flows and as we sit here today one quarter into the next three years there's a lot of things that whether it's direct adjustments related to activity or things that come in at a different cost as we move further along looking at certain things that has an impact on some of that flex. And so, that's why when we look out over a broad period we think we're going to have an ebb and flow across various time periods in the short term which gets back to some of the solitude nature of the business as a whole. But I think Ben has referenced in the past. But when we look over the entirety of the three year period that we still expect to be in that 1.2 to 1.5 range overall.

Colton Westbrooke Bean -- Tudor, Pickering, Holt -- Analyst

And then, just like it relates to Oklahoma, it sounds like based on that and the prior commentary that the expectations are flat or even potential for those to move slightly higher for 2020 and 2021.

Mike .J. Garberding -- President and Chief Executive Officer

Yes, so this is Mike. So when you think about what we're doing in Oklahoma, and other areas it's really a shifting of capital to the highest short term project and how we think about things and so we again have that capability to do that. So when you think about Oklahoma, Ben mentioned that we're seeing 5% growth in volumes you know starting in April and we'll continue to see that buying growth over the year. That buying growth will continue and we'll continue to have capital. So I think the right way for you to think about it again is some shifting of capital between the periods, but you also have to go to what Eric said is that capital also changed. I use the Riptide expansion as an example. Over that three year period when we talked about Riptide in the past, we talked about it at a number about three times of what we're executing on a little bit smaller volume than we thought. But you have to take things like that a consideration on how we're spending capital more efficient in the broader whole. So I think those couple pieces are driving it.

Colton Westbrooke Bean -- Tudor, Pickering, Holt -- Analyst

And just briefly on Louisiana, I think on the Q4 call you all noted you had a contract roll off there in the gathering division. Given the Q1 results are we effectively through that re contracting phase or anything still to to watch out for over the course of the year?

Mike .J. Garberding -- President and Chief Executive Officer

Yeah. What you're talking about is transportation contracts in North lake. And we have had some roll off. We do still have a little bit of that business that will roll off over the course of this year, but all of that was already accounted for in the Louisiana segment guidance that we gave you earlier in the year so there are certainly no surprises coming up in that regard.

Colton Westbrooke Bean -- Tudor, Pickering, Holt -- Analyst

I think that's helpful. Thank you.

Operator

The next question will come from Mirek Zack of Citi. Please go ahead.

Mirek Zack -- Citi Group -- Analyst

Hi, good morning everyone. Can you provide some more color on the customer and contract mix around the reduction in the Oklahoma volumes? And also, what are your expectations of if those specific rigs or producer activity are expected to come back as the producers rework the play or have you seen those producers more permanently moved elsewhere perhaps to the SCOOP or STACK acreage not dedicated to EnLink. Any color you can provide around that would be helpful.

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yeah, we're happy to talk a little bit about that. So when we go through the three factors we actually saw a number of producers have impacts in that first bucket of timing and well count. That was not you know not isolated to any one producer and as Mike said in his prepared remarks, we have a number of producers that are going through one or other form of transition. With Devon it's their strategy around the play, with EnCana It's integrating the new field acquisition, with Roan they're transitioning into a public company and we could add others on that list. So it was certainly not any one you any one producer. In terms of long term expectations now there's no one who's picked up their toys and gone home. That's not the case at all.

For all of our big significant producers, the STACK is either their number one or their number two funded asset in the portfolio and we don't see that changing. So while it's way too early to speculate about 2020 activity, we won't know about that until we get into the fall and the producer budget cycle. What we do know is that we have a lot of confidence around this asset growing in the future. And while the 10% to 15% guidance that we've given you today is lower than what we'd hoped for 2019, it's still a very large number against an asset that today is gathering north of 1.2 million MMBtus to use a day.

Mike .J. Garberding -- President and Chief Executive Officer

Yes, Mirek, this is Mike again. I think you can use Devon as a great example on that transition. They have a slide in their ops report which talks about the continued development around the four to six wells and what they're seeing on those wells and that transition has really been happening over the last three to six months. And so, it's not necessarily to your point of rigs picking up it's them continuing to work through the transition to that new development which they're having success on. You can look to EnCana the same thing and Roan the same thing. So for us again it's a transition. We still have great confidence what we're seeing in the STACK and that long term growth of what we're going to see in the STACK but 10% to 15 percent this year is what we're seeing today that is going to continue to lead to that longer term growth.

Mirek Zack -- Citi Group -- Analyst

Okay. Got it. And thoughts around your Delaware processing outlook maybe and how XTO volumes are involved there. Meaning, is the new plant fully committed to XTO or were there additional third party commitments here and would this plant suffice for the growth plans you expect to see out of XTO over the next few years? And also if you can give us an idea of how many rigs XTO actually has on your Permian acreage at this point.

Mike .J. Garberding -- President and Chief Executive Officer

Yes, so Mirek, in terms of whether it's fully committed to XTO, it is not. It will be just like the Lobo complex; it will serve all of our producers. But the increase in activity from XTO relative to our expectation at the first of the year is what led us to make this announcement now. So now we have near-term line of sight, the Lobo complex being full in 2020 and the change from our original expectation today is largely driven by the increase in activity with XTO.

As far as activity on the footprint today, off the top of my head I don't know that answer. They've had some activity honest this year. I don't know the rig count at this red hot minute. But since we're looking at a 2020, 2021, 2022 plan from XTO, it's too early to say there's been a significant ramp in drilling activity. That's a company they plan, as we all know, very far ahead and they are relatively insensitive to market changes which is another thing we like about having them as a customer.

Mirek Zack -- Citi Group -- Analyst

Okay great. Thank you. that's all for me.

Operator

The next question will come from Praneeth Satish with Wells Fargo.

Praneeth Satish -- Wells Fargo Securities, LLC, Research Division -- Analyst

Hi, Good morning. On the potential LPG export project, can you may be just talking about the competitive advantages EnLink would have versus other incumbents in the area? It seems like competition is picking up there.

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yes, Praneeth. So the big picture and it's not just on LPG export, it's broader than that, is that we have a commanding position on the Louisiana Gulf Coast and just like our fractionation business was really built in being an alternative to Mont Belvieu, a nice diversification for producers who previously had all their rigs in one basket in Mont Belvieu and now they can have the rigs in 2 baskets, Belvieu and in Louisiana. We think that Louisiana offers the same thing for LPG and for that matter for crude exports. And so the strategic advantage potentially is offering some diversification away from the Houston Ship Channel and the fact that today most of our North American export capacity for LPG is in that one spot and there obviously are some logistical and operational challenges that come with that.

Praneeth Satish -- Wells Fargo Securities, LLC, Research Division -- Analyst

Okay, thanks. And then I guess just sticking to Louisiana, can you just talk about maybe how much available capacity you have on the gas system there? I guess in the event that one of the new LNG export projects gets FID'ed, how much capacity there do you have that could support one of those projects?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

So there's a couple of layers there. First, the capacity of the Louisiana system is not easy to put into a pity (ph) bullet. We have, I think it's over 60 receipt points over 50 market deliveries, not counting deliveries into other pipelines. The fellow who runs that business for us likes to refer to it as a reticulated system. It has a lot of capacity from a lot of points to a lot of other points. And so it's hard to say we just have extra capacity available.

But we do have capacity available with very little capital to serve some of that LNG load. We've done some of that on uninterruptible basis and we are looking at opportunities to affirm some of that up. But the bigger picture than that is we have the ability to add capacity to that system in a very capital efficient way by adding compression or a little bit of line looping or a little bit of line extension. That's the benefit of having a couple thousand miles of pipeline already in the ground and much of it large diameter pipe.

Praneeth Satish -- Wells Fargo Securities, LLC, Research Division -- Analyst

Got it. And then just last question from me. I guess with the Encana moving to cube development in the STACK, can you just touch on how that impacts you guys? Meaning, are there any efficiencies there on either the operating cost or well connect CapEx side?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yes, and I won't even limit it just to Encana. Certainly Encana is a market leader in efficiency and I talked a lot about that yesterday in their call. I'd encourage everybody to go look back at what they said. But it's really across the basin. And Encana specifically made a comment yesterday saying that they intend to run a 4-rig level loaded program and they expect to be able to drill and complete almost as many wells as new field was doing with an 11-rig program. Not quite, but almost.

And similarly in the last call we talked about Devon and the comparison of their rig efficiency between the Delaware Basin and the STACK. But really what you're getting at is as the STACK matures, it take fewer rigs and for that matter fewer producer capital dollars to drill and complete the same number of wells as they realize efficiencies from drilling the wells on multi-well pads and generally in smaller focus areas than they were at the time when they were delineating the play and they were moving all around their acreage.

Unidentified Participant -- -- Analyst

Thank you.

Operator

Our next question will come from Spiro Dounis from Credit Suisse. Please go ahead.

Spiro Dounis -- Credit Suisse AG -- Analyst

Hey good morning guys. You mentioned earlier in the call just increasingly seeing GIP as a partner on growth projects. And so I was wondering if you brought a little more color there, specifically is that I guess what's making you say that now that you're sort of increasingly seeing that as a partner and then more broadly what form does that take? Is it a JV on a project or is it directly through the (inaudible) equity?

Mike .J. Garberding -- President and Chief Executive Officer

Spiro, it's Mike. So this is something we've been very focused on. It all starts with our platform. We think we have a perfect platform and business to grow from. We also think that you've seen a shift in the overall market that represent opportunities for us. One of the big things that really differentiate parties in this market is access to capital. And what we've seen with GIP is a capability to do and willingness to do based on the past history of what they've done in their investments.

And so for us, what we see is a capability to be very thoughtful, selective to continue to build out our platforms in and around the basins with them as a partner. And so we think it's a great position to be in. We think it's quite different than others. It's not structured financing coming in, it's a partner that owns a large position that's building up the platform with you. So for us, again we couldn't be at a better position because it again starts with our great platform and then we think the market is going to give us capabilities to build around that.

Spiro Dounis -- Credit Suisse AG -- Analyst

Okay. I appreciate the color. And then just to clarify, would that be on incremental projects from here or could we see them come in and partner up on current projects in your CapEx budget now?

Mike .J. Garberding -- President and Chief Executive Officer

I think you could see any of the above because again for us it's, as Ben alluded to in Louisiana, Louisiana is something that had a small allocation of capital and are $1.3 billion to $1.5 billion. Yet we have a lot of opportunities among all of the commodities in Louisiana. So we see some things there that can be pretty interesting. So it could be at that level, it could be straight away M&A, it can be all of those. And again, but we're going to be very disciplined on how we do things and it's going to be around our core platform.

Spiro Dounis -- Credit Suisse AG -- Analyst

Got it. One last one from me, I believe it's quick. Ben, I think it was your comment just around expecting rigs to naturally come down in Oklahoma, but that obviously being offset by some of the well efficiencies. I guess I was curious, has that been proven out or do you risk yet on either a smaller or larger scale by the producer or customers, and have you risked your guidance from your customers beyond just not accounting for the slower decline rates?

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

Yes, so first part of your question, has it been de-risked as to the efficiency gains? That answer is yes. You can just look at what Devon's doing in terms of their well count this year versus last year. This year it's 85 to 95 wells turn to sales, I think there's about 80 spuds. That's down a little bit from last year. But this year they're running 4 to 5 rigs whereas last year they ran 8 for most of the year. So I think we can say that that is happening in the real world. And I'd also point you to again to what Newfield said yesterday in their call and for the second time I won't repeat it all.

As far as risking Oklahoma volumes the rest of the year, I'd just reiterate that when we build up our volume for Oklahoma, that informs our 10% to 15% growth guidance '19 over 2018. 90% of those wells are on schedule as the producer has given us generally with the rig name and lat-long on it. So that's as real as it gets. I mean we're not in the business of writing guarantees because the world can always change, but it's hard to see how we could be any more sure of that activity at this point than we are with the communication that we've been provided.

Spiro Dounis -- Credit Suisse AG -- Analyst

Got it. Appreciate the color. Thanks guys.

Operator

Ladies and gentlemen, this will conclude our question and answer session. At this time, I'd like to turn the conference back over to Michael Garberding for any closing remarks..

Mike .J. Garberding -- President and Chief Executive Officer

Thank you, Allison, for still doing our call this morning and for everyone on the call today. Thank you for your participation and for your support. We look forward to updating you with our second quarter results in August.

Operator

Thank you. The conference has now concluded. We thank everyone for attending today's presentation. You may now disconnect your lines.

Duration: 62 minutes

Call participants:

Kate Walsh -- Vice President of Investor Relations.

Barry Davis -- Executive Chairman

Mike .J. Garberding -- President and Chief Executive Officer

Eric David Batchelder -- Executive Vice President and Chief Financial Officer

Dennis Coleman -- Merrill Lynch -- Analyst

Benjamin D. Lamb -- Executive Vice President and Chief Operating Officer

TJ Schultz -- RBC Capital Markets -- Analyst

Jeremy Tonet -- J.P. Morgan -- Analyst

Shneur Gershuni -- UBS -- Analyst

Colton Westbrooke Bean -- Tudor, Pickering, Holt -- Analyst

Mirek Zack -- Citi Group -- Analyst

Praneeth Satish -- Wells Fargo Securities, LLC, Research Division -- Analyst

Unidentified Participant -- -- Analyst

Spiro Dounis -- Credit Suisse AG -- Analyst

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