Energy Transfer LP
Q3 2017 Earnings Call Transcript

Published: 8 Nov 2017

[Operator:]

Greetings, and welcome to the Energy Transfer Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Long, Group CFO. Thank you, Mr. Long. You may begin.

[Thomas E. Long:]

Thank you, operator. Good morning, everyone, and welcome to the Energy Transfer's third quarter 2017 earnings call, and thank you for joining us today. I'm also joined today by Kelcy Warren, Mackie McCrea, Matt Ramsey, and John McReynolds and other members of the senior management team who are here to help answer your questions after our prepared remarks. I'll begin today with an overview of our sale of an interest in Rover, followed by a discussion of the latest developments on our Bakken, Rover, Permian Express 3, Mariner East 2 and other growth projects. Then, I'll turn our focus to a discussion of Energy Transfer Partners' third quarter results, followed by a CapEx discussion, liquidity and funding update, and lastly, a distribution discussion. As a reminder, we will be making forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934. These are based on our beliefs, as well as certain assumptions and information currently available to us. I will also refer to adjusted EBITDA and distributable cash flow, or DCF, both of which are non-GAAP financial measures. You'll find a reconciliation of our non-GAAP measures on our website. Before turning to recent developments and a growth project update, I just want to start by saying that we are pleased with Energy Transfer's very strong third quarter. ETP's adjusted EBITDA increased 25% and DCF increased by 27% over the third quarter of last year. I will provide more details later on in the call, but this increase is due to significantly higher results from the crude oil transportation and services segment, as well as higher results from the midstream, NGL and refined products segment. Now turning to our most recent announcement. On October 31, we announced that we closed on our sale of a 49.9% interest in ET Rover Pipeline, or HoldCo, to Blackstone Energy Partners. As a result of this closing, HoldCo is now owned 50.1% by Energy Transfer and 49.9% by Blackstone Energy Partners. The agreement with Blackstone required Blackstone to contribute at closing funds to be reimbursed, ETP for its pro rata share of the Rover construction cost incurred by ETP through the closing date, along with the payment of certain additional amounts. Immediately upon closing, we used the proceeds to pay down debt, therefore reducing our leverage and to help fund growth projects. ETP now owns 32.56% of Rover, Blackstone owns 32.44% and Traverse owns 35%. Energy Transfer remains the operator of Rover and we will continue to fully consolidate Rover results into our financials. Moving to our growth projects, where we have several projects completed and ramping up and others in the construction phase moving toward completion. As previously announced, our Bakken Pipeline project went into commercial service under the Committed Transportation Services Agreement (sic) [Committed Transportation Service Agreement] on June 1. The project has commitments, including shipper flexibility and walk-up for an initial capacity of approximately 470,000 barrels per day and a total committed capacity of approximately 525,000 barrels per day. We are very pleased to have this project online and our earnings are already seeing a significant increase as a result of the demand fees we're collecting. We're now delivering domestic crude production to refineries in the Midwest and along the Gulf Coast for the benefit of U.S. consumers. Now looking at an update on Rover, Phase 1A was placed into service on August 31, 2017, and on October 9, we received approval from FERC to begin operating three compressor units at our Mainline Compressor Station 1 in Carroll County, Ohio. We are pleased to say that Phase 1A of Rover is now transporting more than 1 Bcf per day of natural gas from Cadiz, Ohio to Defiance, Ohio, the majority of which are at full tariff rate. On October 31, FERC along with their third-party technical experts completed their review of our recommended alternative monitoring protocol and I'm pleased to say they approved our request. Yesterday, we also received the J.D. Hair reports from FERC for the remaining HDDs on Rover, which should allows us to resume construction on these drills in short order. Both of these developments provide us with more certainty in meeting our projected in-service dates. For Phase 1B, drilling operations on our remaining HDD are nearly complete. We expect this phase will be in service and that we will be collecting demand fees on all of Phase 1 before the end of this year. In addition, construction of Phase 2 continues and we feel confident the entire pipeline will be in service by the end of the first quarter of 2018. Now moving on to Mariner East 2, we continue to make progress on the construction of this project. Mainline construction of the pipeline will be 99% in the ground and buried by the end of this year. Regarding construction activity in West Goshen, the Pennsylvania Public Utilities Commission issued an order last week that resulted in suspension of our underground drilling efforts. The focus of this order was related to a valve that was proposed to be installed in this township. We're evaluating the relocation or elimination of this valve as well as other alternatives that we believe will allow us to move forward with this portion of the project in the near future. Additionally, we continue to work with the Pennsylvania Department of Environmental Protection to secure approvals in order to move our remaining HDDs forward. As a result of these delays, we believe that this will push our in-service timing for ME-2 to the second quarter of 2018. On our Revolution Project, construction is scheduled to be completed in the first quarter of 2018 and we'll be waiting to go into full service once Rover and ME-2 are in service. Now moving to West Texas, the 200 million cubic foot per day Arrowhead processing plant in Reeves County in the Delaware Basin came online early in the third quarter. This plant meets a critical need for additional processing capacity and is ramping up to max capacity more quickly than expected. The 200 million a day Rebel II processing plant in Midland Basin will go into service in the second quarter of 2018. Including the Panther Plant, which came online in December of last year, Rebel II is our third plant in the Midland Basin. We're nearing capacity in the Permian and we'll need Rebel II as soon as possible to meet growing producer demand in the region. The residue gas and NGL barrels for the Arrowhead, Panther and Rebel II plants will be delivered into ETP systems. Also, in West Texas, our Red Bluff pipeline will run through the heart of the Delaware Basin and will connect our Red Bluff and Orla plants, as well as multiple third-party plants, to the WAHA Oasis Header, providing residue gas takeaway. The pipe will be 80 miles of 30- and 42-inch pipe and will have a capacity of at least 1.4 Bcf per day with guaranteed fee-based long-term commitments supporting the project. Our anchor shipper is Anadarko, and Western Gas has an option to buy into this project. The project is currently expected to cost less than $300 million and should be online in the second quarter of 2018. On Permian Express 3, we completed a successful Open Season for Phase 1 and are moving forward to bring these volumes on around year-end. We have the ability to expand by a minimum of 200,000 barrels per day and will launch an Open Season once we have the commitments to support an expansion. Next, on Bayou Bridge, on the 30-inch segment from Nederland to Lake Charles, we transported an average of 147,000 barrels per day in the third quarter. On the 24-inch segment of Bayou Bridge from Lake Charles to St. James, construction is expected to commence this quarter, and we now expect commercial operation to begin in the second half of 2018. Lone Star's 120,000 barrels per day Frac V is fully subscribed by multiple long-term, fixed-fee contracts. This also includes NGL product infrastructure and a new 3 million barrel Y-grade cavern. It is expected to be in (9

[Operator:]

Thank you. Our first question comes from the line of Jeremy Tonet with JPMorgan. Please proceed with your question.

[Jeremy Bryan Tonet:]

Good morning. Seems like there was really strong results across segments, but I guess we were just a little surprised with midstream declining a little bit quarter-over-quarter here. Was just wondering if you could expound upon the drivers there a little bit more, especially with the equity NGLs coming down Q-over-Q? And if you could just refresh us as far as what you see for producer activity around the horn and if there's any kind of more lingering hurricane impact? Sounds like it's modest from what you were saying before.

[Thomas E. Long:]

Yeah. And Jeremy, that is a good question. I think on the last call, as you recall, we tried to call out, what we call, the one-times that occurred in Q2. So, this isn't really about – still a very strong Q3, but it was really more about the callout that we made with some one-time items. And they were really more of just kind of true-ups around some volumes and et cetera. But that's the reason we highlighted that in the second quarter. So, I guess what I would say is that we're obviously very excited with where third quarter has come out, volumes, et cetera, but it really is more of a Q2-type one-times that occurred. As you can see, quarter-over-quarter of last year, we're up quite a bit with the start-up of all the plants that you've seen us announce over the last year. So.

[Marshall S. McCrea:]

Jeremy, this is Mackie. Let me add one thing. Every quarter, we can't really do a lot about the one-time. There's a lot of MVC payments that come due or not. But if you look overall at just the midstream growth in South Texas, we're up 0.25 BCF quarter-to-quarter 2016 to 2017. In the Northeast, we're up 35% to over 800,000 barrels a day and actually moving over 1 billion today. Ark-la-Tex we're up. Permian Basin's up over 20%. So, really, our midstream volumes that, of course, feed into our processing and residue and everything is up and growing and looking better every quarter, especially with improving oil prices.

[Jeremy Bryan Tonet:]

So, you touched on a bunch of different regions there. Is pretty much every region in growth at this point or any other color you can provide there as far as producer activity?

[Marshall S. McCrea:]

Yeah. Other than – two areas, North Texas is relatively flat. As you know, we will be bringing in significant volumes in the second quarter of next year through our Enable projects. We're very excited about that, utilizing underutilized capacity, both pipeline and processing plant. And then, in the midcontinent, we are down slightly. However, we're seeing more drilling and we believe that will actually level out and start growing in future quarters with improved commodity prices. But, yes, everywhere else, there's either growth or significant growth across all of our regions where we're active.

[Jeremy Bryan Tonet:]

That's helpful. Thank you. And just want to touch on your comment as far as distribution growth is concerned. And it seems like in the marketplace, there's a growing consensus as far as a higher value ascribed to larger coverage in trying to minimize external funding to the extent possible. Just wondering if you could let us know your thoughts on how that kind of clear market preference plays into your calculus as far as distribution growth is concerned?

[Kelcy L. Warren:]

Yeah. Jeremy, this is Kelcy. We – and I think you know this, so sorry if I'm repeating myself. But, first of all, we focus with the rating agencies, the sentiment of the rating agencies. Tom Long does a fantastic job of communicating and understanding what we need to do so to remain investment grade. And I will tell you that that governs a lot to us. In fact, we just will not risk that. So, let's start with that. Then, we look at what we have, we have a little bit better crystal ball than what you have and that we know what's coming our way in terms of additional cash flow, distributable cash flow. And then, as you've heard us say before, we're committed to remaining above a 1 coverage ratio with both ETP and ETE going forward. And with those factors considered, we feel our responsibility and the whole industry used to feel this, it's odd to me that everybody has moved away from this, but we feel our responsibility to distribute a safe amount of cash flow to our unit holders. And that's exactly what we did this quarter and we'll continue to do.

[Jeremy Bryan Tonet:]

Okay. Makes sense. Fair enough. Thanks for taking my questions here.

[Kelcy L. Warren:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Brian Zarahn with Mizuho Securities. Please proceed with your question.

[Brian Joshua Zarahn:]

Good morning. Just following up on the distribution policy. Given that ETP's distribution yield's 13%, understanding a desire to return cash to unit holders, but does it really – given that you do have $3 billion of projects for next year, wouldn't a pause on the distribution make some sense, given where the equity is currently?

[Kelcy L. Warren:]

Well, as you've – and, Tom, I'd like for you to talk about this, too. We're not issuing equity and don't have plans to issue equity for the foreseeable future, so that's number one. We do think that our unit price will recover. I think at some point, there's got to be some sanity to come back into the market. So with those factors, we – if we were issuing a lot of equity over the next 12 to 18 months, then we might view this differently, but we're not. And, Tom, you want to talk about that?

[Thomas E. Long:]

Yeah. You bet. Brian, as you know, we've been very, very diligent on how we've navigated through all the funding of these projects as we've got to kind of the final phases. So, we've kept a balance. And like Kelcy's saying here right now, we kept a balance with the agencies also. And we're excited to see this EBITDA coming up because that's where our deleveraging is going to occur. So, as you see these projects come on and the EBITDA contribution, I think you'll see that even as we go through next year, we're standing firm that, like Kelcy's saying, no equity at least through the mid next year. And that's where – and as I walk through the funding and some of the remarks that I previously made there, you can see that we don't have a lot of funding for the remainder of this year, virtually none. And when you look out for even next year, we feel like we're in good shape. So I think as you also saw the announcement today, like I mentioned, so only perpetual preferred. So we've got ways to continue to fund in a very efficient way.

[Brian Joshua Zarahn:]

And then just to confirm, you expect no common equity issuance next year.

[Thomas E. Long:]

Right now, what we're saying, Brian, we said through mid next year is what we've put in the release and that's what we're still sticking with. We will update if we push that further. But right now, it's what we're saying. So...

[Brian Joshua Zarahn:]

And then related to that, any update on discussions on JV-ing Mariner East 2?

[Marshall S. McCrea:]

Really, no update. As Kelcy and as we've said in the past is that any of the assets that we have, our preference is to own them, they're accretive and to grow them by ourselves. However, it does make a lot of sense when you can get a premium from a potential partner. And more importantly, can bring a partner in to add substantial value by subscribing to a long-term fee-based commitment. So we're certainly still open minded, we're certainly still in discussions with different parties, both on the production side and the market side, and we'll continue to evaluate those opportunities.

[Brian Joshua Zarahn:]

Okay. Then last one for me and maybe this is coming back to the distribution policy and the IDR structure, reaffirm that you don't expect any type of potential simplification for another two years, but the market's been very impatient given – despite improvements in DCF and EBITDA and projects gradually making their way into service. So are you considering other alternatives to change ETP's IDR structure before the end of 2019?

[Kelcy L. Warren:]

No.

[Brian Joshua Zarahn:]

Thank you.

[Kelcy L. Warren:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Darren Horowitz with Raymond James. Please proceed with your question.

[Darren C. Horowitz:]

Mackie, with respect to what's going on in Pennsylvania with the EPA or the PUC around ME-2, what are the variables as you guys see it around meeting that 2Q 2018 in service from a timing perspective? And how do you think about, if that ends up slipping a little bit, that could shift 2018 volume ramp on Revolution? Is it a situation where you can get that residue gas connection with Rover like the NGL service in the market? So it's going to be impacted or how do you see that unfolding?

[Marshall S. McCrea:]

I guess, I'd answer that with, right now, we've got our heads down. The industry is kind of dealing with unprecedented challenges. We're certainly at the forefront of that because of all of our activity. But with Matt Ramsey and his team, we're doing everything we can to work with PADEP and to get all the HDDs completed and on time. As we have said, we do know now we'll probably slip into the second quarter. However, we're going to do everything we can to bring it online and in service sometime in the second quarter. As far as Revolution, yes, we need Mariner and we need Rover to fully put Revolution in service, and so we're pushing hard for that. As in our comments, we're highly confident that we're going to have Rover in Phase 1 into this year and Phase 2 sometime in the first quarter. And we're going to do everything we can to expedite work with the agencies and get Mariner 2 in as early in the second quarter as we possibly can.

[Darren C. Horowitz:]

Okay. And then, as a follow-up, just thinking about dry gas coming out of West Texas, how do you, guys, now think about that balance between supply growth and takeaway capacity out of WAHA? And more importantly, what do you think the impact on WAHA basis could be in light of an upsized Gulf Coast Express and the direction that that's taking incremental gas?

[Marshall S. McCrea:]

Yeah. We're probably – it's probably well known, but we're probably more well positioned than anybody. There's not a lot of capacity out of West Texas. Really, the only way out other than West is through our pipe to Mexico, which we still believe will be some time down the road before they're fully ramping up. So, getting volume growth out there is going to depend on either new project or existing capacity of which we have. So, we're extremely optimistic over the next 12 to 24 months that the basis will blow out, probably blow out materially. We're well positioned to take advantage of that. We're actually going to be feeding that with a lot of these projects that we're bringing on and ramping up with our processing plants and with our Red Bluff upstream intrastate. So, we continue to be believers, the industry does, the producers do. If you look at what's happened to oil prices and everything that's going in the Middle East, it points to nothing but significant volume growth out of the Permian Basin and a more significant need to move those volumes out. We certainly continue to evaluate other ways to more efficiently and inexpensively move volumes out by expanding systems that we have or using systems that we have in different manners. And so, we'll continue to evaluate that, and we do believe we'll play a part of that growth on the expansion out of the WAHA area. But in the meantime, we're pretty excited about what's going to happen as far as basis spread and how it benefits our assets over the next couple of years.

[Darren C. Horowitz:]

Thanks, Mackie.

[Matthew S. Ramsey:]

Hey, Darren, it's Matt Ramsey. Let me add one thing on ME-2 for just a second. I think it's important. With regard to our progress up there, we should be – by the end of the year, so in about 45, 50 days, we'll have 99% of our mainline pipe in the ground at ME-2. So, there's a lot in the paper about us starting and stopping and what's going on out there with the regulatory agencies. We're working closely with those guys and most of the holdup has come with regard to HDD drills out there. But we're working through that process. It's – it went through a court process, so we had certain time guidelines under the order and sometimes the PADEP uses their full time allotment to respond back to us that slows us down. But as far as the mainline construction of the pipe itself, about 99% of the pipe should be underground by the end of the year on the schedule we have right now.

[Darren C. Horowitz:]

Thanks, Matt.

[Operator:]

Thank you. Our next question comes from the line of Michael Blum with Wells Fargo Securities. Please proceed with your question.

[Michael Blum:]

Thanks. Good morning. Maybe just another couple of questions on ME-2 to start, just to clarify. So, ME-2 comes in, in the second quarter, does that include ME2X or is that later?

[Marshall S. McCrea:]

No. ME2X, of course, we're building it as soon as we complete a spread. We're following that up with 2X. But 2X is scheduled to come online in 2019, first quarter of 2019.

[Michael Blum:]

Okay. And that's probably a good lead into my second question, which is can you talk about the $3 billion you're planning to spend in 2018, kind of what are the big chunky pieces of that?

[Thomas E. Long:]

Well, Michael, I think you can probably appreciate from the projects right now that the chunky pieces of it are coming around the ME-2, ME2X is making up probably the largest pieces of it. We're not going to break that down by segment at this point, but I will say that you've also heard us talk about the frac today, Frac VI. So, it is the projects that we do have approved that are ongoing. And so, you can probably kind of walk through segment by segment of where that's really coming from. So...

[Michael Blum:]

Okay. And then just in the third quarter, it looks like the refined products and NGL segment, CapEx was about $1 billion in Q3. Was that mostly ME-2?

[Thomas E. Long:]

That's correct.

[Michael Blum:]

Okay, great. Thank you very much.

[Thomas E. Long:]

Thank you.

[Operator:]

Our next question comes from the line of Ted Durbin with Goldman Sachs. Please proceed with your question.

[Theodore Durbin:]

Thanks. I appreciate the comments on the distribution and the lack of equity. But I guess I'm wondering, as you're thinking next wave of projects relative to your cost of capital, do you feel like you're missing out on any projects that you might normally like to do just given where the ETP yield is and desire to not issue equity?

[Kelcy L. Warren:]

No, not really. I mean, this is a very odd market and I think all of our peers would agree with this. We lose out on projects routinely these days to private equity, not really to our peer group. And I think others would say that as well. So, our cost of capital is really not influencing our loss of access to projects, but rather there's just a lot of private equity that hires management teams and they're in for the short term. But it doesn't matter, they're winning and we're not. So, that's a – Mackie, would you agree with that? I mean, I'm not seeing much...

[Marshall S. McCrea:]

Well, I would add that they're winning, but they're also winning at rates that we don't think they're going to be profitable in some areas.

[Kelcy L. Warren:]

Yeah.

[Marshall S. McCrea:]

They're underestimating their cost. They're not experienced and some are very inexperienced teams. And it's just not an area that we're interested in getting into just to get a deal done to do a price under what it cost to build it.

[Theodore Durbin:]

Okay. That's helpful. And then coming back to the Mariner East, with the delays now on 2 and 2XL, how are you thinking about the returns on those projects based on the committed volumes that you have?

[Kelcy L. Warren:]

Once we get them in service, we couldn't be more excited about the returns. The way we talk about and the way we think we see it now out in the industry is that Mariner needs to come online. There is a tremendous amount of barrels that are there now and are going to be there in the future, and they're looking for a home, but we've got to get the project completed. We need to start flowing those barrels. We think Marcus Hook will be the best export and the largest in the country over the next two to three years with growth. We think it will be the premium market around the world both in Europe and Asia for propane, ethane and butane and also meet needs along the Eastern Gulf Coast, so – but we just need to get in line. And it's an accretive project today on the commitments that we have and we think there's a tremendous amount of volume growth and volumes that will reach out to us as we bring the system online.

[Theodore Durbin:]

All right, great. And then last one for me. Tom, this perpetual preferred, what have you sort of penciled it in terms of sizing there? I'm sure it'll be somewhat market dependent, but how do we think about that size of that raise?

[Thomas E. Long:]

Yeah. And listen, you can probably appreciate with the filing that we've made today, that's the detail that we can put out right now. But please keep in mind, as we kind of progress through the marketing over the next couple of days, you'll see more detail on that. But at this point, can't really talk about the rest of it. So.

[Theodore Durbin:]

Is it fair to say the pricing on that one – what other peers have done on that, you're looking to be roughly in line with pricing in terms of a yield basis?

[Thomas E. Long:]

Yeah. And listen, I think that's fair when you really kind of look at whether it would be a bond offering or anything else, you always try to look at kind of where peers and where's some of the other comps. Once again, that's probably as much as I can say right now, but...

[Theodore Durbin:]

Yeah, understood. I'll leave it at that. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Shneur Gershuni with UBS. Please proceed with your question.

[Shneur Z. Gershuni:]

Hi. Good morning, guys. I guess, first off, I wanted to focus on the perpetual preferred that you guys spoke about today. And I wanted to understand how to think about that. Are you thinking of it as the debt-like portion of funding CapEx where use internally generated cash as much as you can for the equity portion, and we should think of this more of the debt side? And I also wanted to ask about what's the driver of it as well, too. You issued $1 billion worth of equity in August, arguably more than we had thought that you had needed. Is this very rating agency-driven to get you to where your consolidated leverage needs to be? I'm just trying to understand sort of the motivations and how to be thinking about this preferred.

[Thomas E. Long:]

Yeah. And, listen, you probably brought up several of the pros to doing these. Clearly, getting at least 50% equity credit is obviously a benefit. And keep in mind that as we look out – I mean as you hear Mackie, keep hearing us talk about more projects, I mean, when you've got a fantastic commercial team like we have here, it's very important that you stay ahead of these projects, especially with this market the way we're looking at it right now on the equity side. So, we feel like this is very prudent thing to do. So, I don't know that I'd take it to looking at it from a debt or an equity when we look at it. I think it's as much as any. It's a very efficient cost of capital as you look out and funding a lot of good projects. But clearly, getting the equity credit is a plus on the plus side of this. So.

[Shneur Z. Gershuni:]

Okay. Fair enough. And then just continuing on the consolidated leverage theme here, I mean you have a backdrop where earnings are accelerating at ETP, which should definitely help you out. At the same time, you have a excess retained distributable cash flow at ETE. In your prepared remarks, you talked about how you've issued new notes in terms of pushing out the maturities at ETE. In the spirit of leverage reduction on a consolidated basis, what are the options that you're looking at with the excess retained cash flow at Energy Transfer Equity next year? Do you look at shared treasury services with ETP? Do you consider extending the waiver so that way you can effectively transfer cash flow from ETE where it's not being spent and into ETP where it is being spent? I'm trying to understand the levers that you have with respect to deploying the excess cash that will be at ETE.

[Thomas E. Long:]

Yeah. Listen, I think this one's probably a – I don't mean to make it quite so simple, but it really is just to continue to pay down the revolver. In other words, you're going to see any of the excess cash flow just to bring down the debt. But remember at ETE, as these IDR subsidies roll off, the leverage is going to drop significantly, the leverage metrics at ETE. So you can see what we've been laying out, all of our projections and how we've been communicating with the agencies. But I would look at that as nothing more than you see it paying down the revolver.

[Shneur Z. Gershuni:]

So there's still room on the revolver at ETE to pay down.

[Thomas E. Long:]

Yes, yes. We're probably about $1.19 billion drawn on that revolver. So, as you know, as part of the SUN transaction, likewise, we've got that preferred. So, that's $300 million you'll see paid down and then that still leaves you plenty of headroom to pay down on the revolver.

[Shneur Z. Gershuni:]

Okay. And then just transitioning to ME-2, I know that there's been a lot of, I guess, questions about why not JV it and so forth. But it would seem to me that, as I look at the potential of the Northeast that that would be a project that you would want to own in its own right and never share with anyone. It seems like over time, the volumes will come to you almost regardless because of the lack of other options. Does it really make sense to do a JV or is this something that you really should keep to yourself and earn the excess returns over time?

[Kelcy L. Warren:]

Yeah. I will say – by the way, I agree with you, however, with one exception. And if there was a customer that could have – it's very similar to what we did with the Dakota Access pipeline. You could find better customers to bring into that than the – I'm sorry, partners than the partners we have that they move barrels. And similarly, with Mariner East, we would only consider that type of a partnership. Your point – though, I hear your point, your point is that if it gets built, the barrels are going to come to us anyway. That's – we're not – I don't know, we're less tolerant of that risk, I guess, and so, we are open minded. If a party was bringing liquids, bringing value to the project, we would certainly consider that.

[Shneur Z. Gershuni:]

Okay. Fair enough. And just one last clean-up question. You've got the legacy facilities out there for SXL and for, I guess, legacy ETP. Do you combine them at some point? When do we sort of clean up all the facilities?

[Thomas E. Long:]

Yeah, absolutely. Listen, we're excited to be executing on what we said we would when we brought the two companies together. So, the current two facilities, of course, as you know, totaled $6.25 billion. And we are close to getting the new revolver racked up. It'll be a $5 billion facility. And so, all the debt will be pari passu by year-end like what we put in place when we did this transaction. So, you'll see that occur right toward the end of November, maybe December 1. So...

[Shneur Z. Gershuni:]

Perfect. Thank you very much, guys. I really appreciate the commentary.

[Thomas E. Long:]

You bet. Thank you.

[Kelcy L. Warren:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Tom Abrams with Morgan Stanley. Please proceed with your question.

[Tom Abrams:]

I wanted to ask a business question on re-contracting, which more people are talking about now, and you had some impact there with Tiger in the interstate segment. One of your peers, Boardwalk, had something in the Fayetteville they did recently. And I think Midcon Express is another one that some consultants are mentioning might have some re-contracting risk. So, you're doing a lot of things to mitigate these risks. Can you just talk about them a little bit and maybe order of magnitude what the headwind might be over the next year?

[Marshall S. McCrea:]

You bet. This is Mackie. Yes, we are continually not only trying to grow the company, but are also trying to retain as much value and assets and capacity that we own throughout all of our assets. Some of the contracts that are rolling off of some of our bigger pipeline projects over the next two or three years, we are addressing that. We're open minded as we were on Tiger to rearranging or reducing or shifting cost to help producers short term on shortfalls for additional business elsewhere. We continue to evaluate that. We also continue to evaluate different purposes for some of these pipelines and also different hydraulics on these pipelines on flowing the most efficient and profitable direction. So, it is something that, of course, we are looking ahead and concerned with in several areas, but it's not of immediate concern. And we certainly are engaging with any producer or any shipper who is looking to shift costs and to, I guess, remove some pain short term, but add value to our assets long term.

[Tom Abrams:]

All right. And then just – I don't want to ask the question so much on the distribution, but just the way I'm understanding it, depending on the size of the preferred, maybe a joint venture, just how the regular business goes, when projects actually come up, all those things adding to EBITDA, coupled with the desire to build coverage, and be, I think Kelcy used the word, safe on the distribution means that you could keep increasing it at the current rate, or you might go flat in 2018, but it's something that you're just evaluating as you go. Is that a fair way to summarize all the commentary?

[Thomas E. Long:]

I think that's probably fair. In other words, I want to make sure I highlight that we do look at this every quarter and we do have discussion. But when we look at it each quarter, we're also looking out and looking at these projects. So, yes, by all means, I think that's probably a fair way of stating it. So...

[Tom Abrams:]

Okay. Thanks a lot.

[Thomas E. Long:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Keith Stanley with Wolfe Research. Please proceed with your question.

[Keith Stanley:]

Hi. Good morning. Just one quick clarification on Mariner East. You've mentioned potentially relocating the valve outside of West Goshen or eliminating the valve. Just cost or challenges with this. And then, the second quarter in service date, I'm assuming that you guys are baking in that you pursue one of those options. So, you're not really depending at this point on the case being resolved at the PUC?

[Matthew S. Ramsey:]

Well, with regard to the first question, yes, that is an alternative not to put the valve on that site at all. So, that is something that we could do and we think there's a resolve to this issue. There's lots of questions within the city. They went and got an administrative law judge to give them an injunctive relief and then the PUC upheld that. But I think that there are a number of different ways to resolve this issue involving some land out there. And we feel very, very confident that we will have this issue resolved in a fairly short order – short time period and then move on to meet that in service date that we put in front of you this morning.

[Keith Stanley:]

Okay. So, you're thinking you can resolve it outside of the PUC process it seems with the town or through relocating it?

[Matthew S. Ramsey:]

We do. We fight through a lot of these issues and rarely does a township go in and get an adjunction against us. But we – these are day-to-day affairs for us, so we'll work through this one. This one got a little bit more publicity than most of them. But we'll resolve this, and we want to be good corporate citizens with all these townships that we go through. And we just understand sometimes we just have to work with the regulatory authorities and get these things done. It's a different world out there right now. And our biggest delay right now on this is rolling through this process with PADEP to get these drills done. And so if we go at the pace that we think we're going to go through here, and hopefully, we begin to get them to turn them around a little bit quicker, we'll make these deadlines. But it's just a little bit different world that you're operating in out there every day. We don't think that West Goshen is the one that's going to in any way affect our in time on this in service day.

[Keith Stanley:]

Great. Thank you.

[Operator:]

Thank you. That concludes the Q&A for today. I'd like to turn the floor back to Tom Long for closing comments.

[Thomas E. Long:]

All right. Well, listen, I thank all of you for joining us today. And as I've mentioned, we're very excited about all these projects and what we have coming online. I thank all of you for your support and we look forward to talking to you in the future.

[Operator:]

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.