BP Midstream Partners LP
Q1 2019 Earnings Call Transcript

Published: 9 May 2019

[Operator:]

Good morning, everyone and welcome to the BP Midstream Partners' First Quarter 2019 Results Conference Call and Webcast. All participants will be in a listen-only mode. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Brian Sullivan, Vice President of Investor Relations. Sir, please go ahead.

[Brian Sullivan:]

Welcome to BP Midstream Partners' first quarter 2019 results presentation. I'm Brian Sullivan, Vice President of Investor Relations and I'm here today with our Chief Financial Officer, Craig Coburn. As we start our second full year of operation and we find our rhythm for results reporting, we are moving to a model where our Chief Executive Officer, Rip Zinsmeister, joins our second and fourth quarter results calls, with Craig leading our first and third quarter calls, which are focused primarily on operational and financial results.

[Craig Coburn:]

Thanks, Brian. Good morning and thanks for joining our call today. You may be relieved to hear that I plan to keep our call today much shorter than our call last quarter. I'll share a few words with you first then take you through our first quarter results before taking your questions. We have made a solid start to 2019 with our high-quality asset portfolio continuing to perform well evidenced by our operating performance and financial results in the first quarter. There are no changes to our financial frame and we will address guidance later this year. You can find our financial frame slide, a slide that you have seen before, in the supplementary information section of this presentation. Regarding dropdowns and distribution growth, we still believe in the one dropdown a year cadence provided that market conditions and other factors permit the transaction to be done in a manner that furthers the interests of the partnership. As we indicated in our last call, we have not committed to a dropdown in 2019 and that remains the case. The equity markets remain challenged and we continue to look for opportunities should they become available. We continue to actively listen to our investors watching closely and learning from the evolution of the MLP environment. We do not take our active watching and listening as a sign that we are doing nothing. We are in action on how to navigate the transition that BPMP may need to make over time, a path that we will address proactively and pragmatically. Now turning to our results. As I mentioned, we have started 2019 by delivering solid operational and financial results. Our first quarter total pipeline gross throughput was around 1.6 million barrels of oil equivalent per day, slightly lower than the fourth quarter of 2018 reflecting significantly lower volumes on Proteus and Endymion due to turnaround and maintenance activities at the BP-operated Thunder Horse facility and the concurrent connection of the Mattox pipeline at South Pass Block 89 during the quarter.

[Operator:]

Ladies and gentlemen, at this time we will begin today's question-and-answer session. Our first question today comes from Jeremy Tonet from J.P. Morgan. Please go ahead with your question.

[Unidentified Analyst:]

Hi. This is Joe for Jeremy. First, I wanted to ask about how we should gauge volumes into the second quarter. Should we expect the Proteus and Endymion volumes to kind of recover now with turnaround activity completed? Or is there anything else we should kind of keep in mind for the second quarter or remainder of the year?

[Craig Coburn:]

Hello, Joe. Craig, here. Yes, we do anticipate that Proteus and Endymion will recover back to the normal levels. We came out of the turnaround in good shape and we're seeing that flow through coming through already in the second quarter, so that's what you should expect there. Also we expect slightly higher volumes coming from Mars coming into the second quarter as well. Yes, the second question – point to your question, Joe.

[Unidentified Analyst:]

Yes. And then I also wanted to ask some have kind of shifted towards from dropdowns more towards organic growth and have done organic growth projects. I was wondering if you guys would ever consider doing that or what you look at there?

[Craig Coburn:]

So, I mean, I think our guidance remains the same. I mean, we still believe in a cadence of one drop per year. And as you know, we've given our guidance at mid-teens distribution growth through 2020, 10% or so coming from inorganic and 5% to 6% coming from organic. I think we stick with that. I think that our 5% organic growth is, we have good visibility of that to 2019. And we feel positive about that for 2020 as well. And again, we'll be updating our guidance for 2020 and beyond later in the year. We are also looking at organic projects sort of within the BP portfolio, these are smaller projects. They're associated with the assets that we've already sort of dropped onshore. And we're looking at those and looking at the returns on those, the returns actually look quite good and the payback looks quite good. But these are smaller projects, but they would be additive to our EBITDA in the near-term. Did that help, Joe?

[Unidentified Analyst:]

Yes. That's helpful. That's really helpful. Thanks for that. That's all I had.

[Craig Coburn:]

Okay. Thanks, Joe.

[Operator:]

Our next question comes from Dennis Coleman from Bank of America. Please go ahead with your question.

[Derek Walker:]

This is Derek Walker on for Dennis. Just a quick volume question and maybe a broader strategy question. In the formal remarks, you mentioned the seasonality on some of the onshore pipes similar to Diamondback and that was above the MVCs. And I think there is kind of a longer term view that would may perhaps kind of return to the MVC level. Give a sense of just looking at Q-over-Q volumes, would that kind of trend closer to the MVC level or would you still see that being above MVCs in 2Q?

[Craig Coburn:]

Thanks for your question, Derek. I think we see it trending back towards MVC type levels, but we're seeing volumes that are slightly higher than that for 2Q. So conditions, I mean, I think we see the seasonality spills over a bit into the April timeframe. So I mean, I think we'd guide you back towards closer to MVC levels but a bit higher than that for 2Q.

[Derek Walker:]

Okay. That's helpful. And Craig, I think – appreciate the sort of higher level sort of thought process around the long-term growth strategy. You mentioned sort of taken a pragmatic and systematic sort of approach over time. And you continue to listen to kind of the market and sort of model of the markets. Can you just kind of take us sort of walk us through some of that thought process a little bit on, you kind of talked about guidance. For this year – so you need to do the drop and you mentioned in the prior questions for the 10%, 5% split. But just any color you kind of give us sort of how you're thinking about the long-term strategy.

[Craig Coburn:]

Yes. So I mean, I said as a management team, I think we're very pleased with the operational, financial and safety performance of BPMP since the IPO. I mean, this is our – actually our fifth quarter, I believe growing EBITDA in a row. So it's going as we predicted. But despite our strong performance, obviously the capital markets are not rewarding BPMP. We don't think in the way that they should. So I mean, we want to be proactive and we want to be looking at all of these options on a go-forward basis. We have a very good portfolio here. And that first drop in 2018 set us up well for 2019 and beyond. And so we're just going to look at the options during 2019 and assess the right way to go forward.

[Derek Walker:]

Got it. And – go ahead.

[Craig Coburn:]

No, I mean, it all depends on the equity markets, right. It all depends on where we are in the equity markets.

[Derek Walker:]

Yes, that's right. Okay. Thanks, Craig. Appreciate it.

[Operator:]

And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to conclude today's question-and-answer session and turn the conference call back over to Craig Coburn for any closing remarks.

[Craig Coburn:]

Thank you, Jamie. I'd like to thank everyone again for joining our earnings call today. BPMP assets continue to perform well operationally and financially. As I said earlier, this is the fifth quarter in a row we've grown our EBITDA, further building on our track record of strong performance. The capital markets remain challenging to support our traditional sponsored dropdown model, but we are in action and exploring the options available to us. So for those of you who are on our schedule, we look forward to seeing you next week in Las Vegas at the MLPA Conference. And finally, IR is available for any follow up questions you may have. Their contact information is available on our website. So thanks again, and this concludes our call today.

[Operator:]

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.