Shell Midstream's Zydeco volumes volatile with third shipper contract expiration - CEO

HOUSTON (Reuters) - Shell Midstream Partners LP's Zydeco pipeline volumes fell 11 percent in the first quarter after two shipper contracts expired and will remain volatile following a third expiration in the second quarter, CEO Kevin Nichols said on Friday.

The Houston-based affiliate of Royal Dutch Shell PLC expects a $5 million (£3.8 million) to $10 million impact to its second quarter net income because of the expiration of the third shipper contract on its Zydeco pipeline in Texas and Louisiana.

Two of the four take-or-pay shipper contracts on the Zydeco pipeline expired at the end of last year. Shell Midstream said it would run the line on more spot shipments, making crude volumes more volatile.

"Volumes will be volatile," Nichols said in a conference call with analysts. "It will depend on what customers bring to us and it's hard for us to predict that."

Crude volumes on the Zydeco pipeline, which delivers crude to St. James and Clovelly, Louisiana, from terminals in Houston and Nederland, Texas, fell to 628,000 barrels per day (bpd) in the first quarter, down from 704,000 bpd in the previous quarter, the company said.

It recorded a $25 million impact to its first quarter net income in cash available for distribution.

Offshore, Shell Midstream's Mattox pipeline was completed ahead of schedule and under budget, and is ready to receive first oil from Royal Dutch Shell PLC's Appomattox platform in the Gulf of Mexico, once crude production there begins, Nichols said.

(Reporting by Collin Eaton; Editing by Phil Berlowitz)