Summit Midstream Partners, LP
Q1 2018 Earnings Call Transcript

Published: 4 May 2018

[Operator:]

Welcome to the Q1 2018 Summit Midstream Partners, LP Earnings Conference Call. My name is John, and I'll be your operator for today's call. [Operator Instructions]. All participants are on a listen only mode. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Marc Stratton.

[Marc Stratton:]

Thanks operator and good morning everyone. Thank you for joining us today to discuss our financial and operating results for the first quarter of 2018. If you don't already have a copy of our earnings release, please visit our website at www.summitmidstream.com, where you'll find it on the Homepage or in the News section. With me today to discuss our quarterly earnings is Steve Newby, our President and Chief Executive Officer and Matt Harrison, our Chief Financial Officer, Leonard Mallett, our Chief Operational Officer and Brad Graves our Chief Commercial Officer. Before we start, I'd like to remind you that our discussion today may contain forward-looking statements. These statements may include, but are not limited to, our estimates of future volumes, operating expenses and capital expenditures. They may also include statements concerning anticipated cash flow, liquidity, business strategy, and other plans and objectives for future operations. Although, we believe that the expectations reflected in such forward-looking statements are reasonable, we can provide no assurance of such expectations will prove to be correct. Please see our 2017 Annual Report on Form 10-K, which was filed with the SEC on February 26, 2018, as well as our other SEC filings for a listing of factors that could cause actual results to differ materially from expected results. Please also note that on this call, we use the terms EBITDA, adjusted EBITDA and distributable cash flow. These are non-GAAP financial measures and we have provided reconciliations to the most directly comparable GAAP measures in our most recent earnings release. And with that, I'll turn the call over to Steve Newby.

[Steve Newby:]

Thanks Mark. Good morning everyone. Thanks for joining us on the call this morning. As usual, I'll begin with a few comments on the quarter and then I'll turn it over to Matt for more detail on our quarterly financial results. Yesterday we announced our first quarter 2018, operational and financial results which were in line with expectations, included $70.3 million of adjusted EBITDA and $44.2 million of distributable cash flow. These results keep us on track to achieve our 2018 financial guidance target. On April 26th, we announced our first quarter distribution of [$0.575] per unit which implied the first quarter distribution coverage ratio 0.98 times. As expected the $300 million preferred equity offering issued in the fourth quarter of '17 weighted on distributable cash flow, while our first quarter distribution coverage is below our long-term target range it in line with expectations, and we think that the short-term trade-off was appropriate given that we satisfied our near-term and medium-term equity needs and strengthened our balance sheet. This capital raise enabled us to post 3.6 times leverage ratio at March 31, we had ample leverage capacity at fully funded 2018 capital plans and visibility to adjust EBITDA growth and strength and distribution coverage towards the end of this year and into '19. As a result of a number of recent conversations with investors and [self-side] analyst, I would like to make one thing clear, our distribution is secure and sustainable and at this time, there is no need for us to reconsider our current distribution payout. Our leverage is moderate, our CapEx is fully funded and we have visible and accretive EBITDA growth, we made a deliberate decision over the last several years to focus on accretive organic growth versus large dilutive M&A transactions. We understood the ramifications of this will be a slower growth profile coming out of the commodity cycle until these projects ramp-up. However, we now feel stronger than ever that this approach will be beneficial to our unit holders over the next 12 to 18 months, as organic growth kicks in our coverage expands and our balance sheet remains strong. Our optimistic expectations for near-term growth were primary related to Summit's Northern Delaware, DJ Bakken and Utica assets, all of which we expect to be generating higher EBITDA or in the case of the Delaware beginning contributing positive EBITDA in the fourth quarter of '18. Just for '19 we expect the DJ to Utica and the Delaware to be significant growth catalysts for us at those areas ramp in volume. In the Northern Delaware we continue to dedicate a tremendous amount of focus on expanding our footprint which today consists of a natural gas gathering and processing system that is under construction and underpinned by exterior energy. Since our project announcement in the third quarter of '17, we have added three new customers and additional acreage dedication. We are also excited to announce that we have recently reached an agreement to expand our service offering and we will begin providing crude oil gatherings for existing customers in our catchment area in early 2019. We expect this entry in the liquids gathering in the Delaware will allow for additional expansion opportunities for Summit in the future. With respect to our proposed EE pipeline project in January, Summit announced a non-binding open season as [many of you] know crude oil and associating natural gas production in the northern Delaware is growing at a rapid pace and we believe that an incremental revenue gas takeaway capacity was needed if producers are going to achieve their long-term production target. We have received significant interest in EE which we will provide much needed takeaway solutions by aggregating natural gas from multiple receipt points in the area including our own processing plant and providing transportation to the Waha Hub. In last night's earnings release we announced we are looking at expanding the project in excess of the one bcf a day of initial capacity originally contemplated. This is a marquee project for Summit as it diversifies our service offering, allows to offer an integrated solution to customers and will provide a phase of highly contracted cash flows post completion. I'm going to discuss EE further little later in the call. We are close to finishing construction for our 60 million a day associated natural gas gathering and processing project in Northern Delaware. And the product is on time and on budget. We expect mechanical completion in June with first cash flows beginning in the third quarter of '18. As I previously mentioned, we expect to see the financial benefit from this asset beginning in the fourth quarter of '18, as volumes ramp-up. Based on our customers drilling plans. Our current expectations are for steady ramp from fourth quarter well into 2019 and beyond. This facility is readily expandable and were actively working with existing and nearby producers to optimize the asset. I'll also note that the EE pipeline will originate at the lane plan so stay tune for further development here. Our outlook for our market assets have improved significantly in the last few months due to efficiency gains and higher crude oil prices which has led to sustained drilling and completion activity in our service areas. Increased takeaway capacity most notably dappled has enabled our customers to improve their net back and allocate additional capital for the area. We've also had a couple of recent commercial wins that have brought two new customers onto our Polar and Divide system. These decrease projects will help to solidify what we expect to be double-digit liquids volume growth behind our Williston system in 2018. Additionally, existing customers on our Williston assets have recorded attractive results from the recent wells. We are particularly encouraged by strong recent well results in Northern Williams County, an area that has been less active during the downturn but have seen an increased level of activity over the past six months. We believe as a result of these recent wells may be an additional catalyst for incremental drilling in this area. in the Utica, we are seeing basis differentials narrow that increase takeaway specifically to nearly completed robust pipeline. Higher producer net backs and improving liquids prices are spurring producer activity across Summit's dry gas, wet gas and condensate service areas. Increased activity in these areas will provide significant benefit to SMLP in the near-term and in the long-term. On our SMU system we recently received notification of increased drilling and completion activity for the balance of 2018 and into 2019. The increased activity from our customers will begin in the second quarter of this year and continue in to 2019 with a majority of volume growth coming in the second half of 2018 and in 2019. SMU volumes averaged approximately 350 million cubic feet a day in the first quarter, we are now moving 450 million cubic feet and we will complete a small the bottlenecking project this summer to increase capacity 600 million cubic feet a day. Now I turn it over to Matt to review our financial results in more detail.

[Matt Harrison:]

Thanks Steve. SMLP reported a net loss of 3.8 million for the first quarter of 2018 compared to a net loss of 600,000 in the first quarter of '17. The first quarter of '18 included 21.7 million of non-cash deferred purchase price obligation expense or DPPO expense. In conjunction with the 26 drop down transaction recognized a liability in our balance sheet for the DPPO to reflect the estimate of the remaining consideration to be paid in 2020 for acquisition of 2016 drop down assets. We discount the estimated remaining consideration on the balance sheet and recognize the change in present value on the income statement. Change in present value comprises both a time value of money concept as well as any adjustments to the suspected value of the DPPO. Adjusted EBITDA for the first quarter of 2018 totaled 70.3 million compared to 71.4 million for the first quarter of '17 the $1.1 million decrease in adjusted EBITDA was primarily due to the recognition of a $2.6 million business interruption, insurance recovery at our Williston basin segment in the first quarter of '17, offset by 1.4 million of increases in adjusted EBITDA in our Ohio gathering segment in the first quarter of '18 compared to first quarter of '17. Adjusted EBITDA in the first quarter of '18 included approximately 14.3 million related to MVC mechanisms from our natural gas gathering and crude oil transportation agreements. Additional tabular detail regarding MVCs is included in the first quarter earnings release. Total operating natural gas fine volumes averaged 1.7 billion cubic feet per day in the first quarter a 6.8% increase over the prior year period, led by higher volume throughput in the Utica and the Marcellus. In the Utica, our wholly-owned and operated Summit midstream Utica system gathered 356 million cubic feet per day in the first quarter up over 29% from the prior period due to the 15 new wells in 2017, including two new wells in December of 2017. The first quarter of 2018 also included 40 million cubic feet per day of additional volumes from the TPL7 connector project which was started in the second quarter of 2017. SMU volumes were down 4% relative to the fourth quarter of '17, the quarter over quarter decline was primarily a result of 15 million cubic feet per day production being temporarily curtailed upstream of the SMU system, these sponsors were brought back online by the end of the quarter. We’re in the process of connecting multiple paths [ph] as expect significant volume growth assuming behind the SMU system beginning in the second half of 2018. For Ohio gathering volume throughput in the first quarter of '18 was 771 million cubic feet per day relatively flat in the first quarter of '17 and down 7% in from the fourth quarter of '17. Volumes decreased relative to the prior quarter due to natural declines from wells brought online in the second half of 2017. Although no new wells were connected in the first quarter of '18, we expect over 40 new wells being brought online throughout 2018. Our liquids gathering business in the Williston Basin averaged 85,000 barrels per day in the first quarter up 15% for the fourth quarter '17 and up 11% from the prior period. 46 wells were brought online in '17 including 20 new wells late in the fourth quarter of '17. 10 new wells were brought online in the first quarter of 2018. Liquids volumes also benefited from the addition of a new customer that accounted for approximately 20% of the quarterly volume growth. Liquids volumes in the first quarter of '18 were negatively impacted by an estimated 13,000 barrels per day related to trucked volumes from certain pad sites, due to capacity issues at third-party produce water disposal sites and temporary crude oil production curtailments for certain customers completing wells on existing pad sites. We've forecasted volume growth to continue throughout 2018 supported by an existing backlog of over $35 [docks]. Also, we currently have four rigs working in our Williston basin service areas. Our Piceance/DJ Basins segment average 578 million cubic feet per day in the first quarter of 2018 down approximately 6% compared to the first quarter of '17 and relatively flat to the previous quarter. New well connections were more than offset by national [ph] production declines on the Piceance/DJ Basins systems. In November, we announced this 60 million cubic feet per day processing plant expansion in the DJ basin. This expansion remains on budget and on schedule and is expected to start in the fourth quarter of 2018. In the Barnett volumes throughout averaged 263 million cubic feet per day in the first quarter of 2018 down approximately 8% compared to the first quarter of '17 and increased slightly from the fourth quarter of '17. Six new wells were brought online in the fourth quarter. We have one drilling rig working out existing currently and expect additional wells in the fourth quarter of 2018. This drilling activity will offset some of the natural production declines. Volumes throughput in our Marcellus segment averaged 522 million cubic feet per day in the first quarter, a slight decline from the previous quarter, but approximately 20% higher than volumes in the first quarter of '17. Volumes compared to prior periods were positively impacted by 27 new wells in 2017, also we had nine wells come on late in the first quarter of 2018. Turning back to the partnership, distributable cash flow totaled 44.2 in the first quarter which implied a distribution coverage ratio of 0.98 times relative to the first quarter distribution of $0.575 per common unit to be paid on May 15th. CapEx for the first quarter totaled 40.8 million of which 3.8 million was classified as maintenance CapEx. We have 301 million outstanding on our 1.25 billion revolving credit facilities at March 31, and 949 million of available borrowing capacity. Total leverage as of March 31, 2018 was 3.63 times. SMLP also reaffirmed its 2018 financial guidance. We expect 2018 adjusted EBITDA to range from 285 million to 300 million. Total CapEx is expected to range between a 175 million and 225 million, including 15 million to 20 million of maintenance CapEx. We expect distribution coverage for the full-year to range between 0.95 times 1.05 times. And with that I will turn the call back over to Steve.

[Steve Newby:]

Thanks Matt, I’m proud of the momentum, some of the organic growth catalyst which we have develop over the past several years, our 2018 capital programs are financed and our balance sheet is strong, we’re forecasting significant EBITDA growth beginning in the fourth quarter of this year and in the '19 and we expect this reducing coverage to improve in parallel. I'll reiterate with our low leverage and near-term capital needs met, we have no need to reconsider our current distribution level given our outlook today. It is sustainable and supported by our leverage and liquidity metrics and it will be further supported by the anticipated growth development projects underway which we've already funded. As I mentioned earlier, we received significant interest on the EE project and we are moving forward in excess of solidifying our final investment decision, we expect this decision to remain in the third quarter. The capital estimate for the initial development $400 million to $450 million pending a final decision on route and pipeline size. Project related capital expenditures are expected to be modest in 2018 and 2019, with more meaningful expenditures occurring in 2020. We expect less than 15% of the total capital that to be spent in '18 and '19 combined as we work to obtain the [Permian]. The balance of the capital spend will fit nicely in our medium-term capital plan or currently will occur at a time when CapEx and other systems moderating and at that time, we are expected to generate much higher EBITDA. The target in-service date for the project is in the second half of 2021. Given the attractiveness of the project Summit is received interest from potential shippers and other parties concerning equity participation in the project. Our team is evaluating those alternatives and we expect to make a decision in conjunction with a final investment decision on the project. Given the length and the timing of the spin and the potential for partners we did not expect any issues financing EE. In the DJ, we continue to execute our gathering and plant expansion which remains on budget and on schedule for the fourth quarter '18 in-service date, we have an expensive footprint with over 180,000 dedicated anchors we’re encouraged by activity levels from our two anchored customers along with potential third-party opportunities in and around our footprint. In fact, during the quarter one of our anchor customers closed on a major acreage acquisitions in the area and announce [drilling] plans over the balance of '18 and '19. These plans exceeded our expectations so we anticipate a very healthy level of utilization in our DJ plant in 2019. Driven by the Delaware and DJ expansion projects together with growth for our Bakken and Utica assets, we continue to forecast significant volume and adjusted EBITDA growth resuming in the fourth quarter and into '19, one indication of our increase in confidence is the increase in the deferred obligation to 517.1 million as subsequently reported. This increase is related to the higher EBITDA contribution and lower associated CapEx from the drop-down asset. We have pre-funded a significant portion of our equity needs related to the deferred payment obligation and as EBITDA ramps over the next 18 months are levers capacity will simultaneously expand allowing us to address the payment. As you all know by now if that EBITDA does not increase or ramp is expected then the deferred purchase price obligation will come down. Looking beyond 2018, I’m excited by our backlog of project opportunities. Our commercial team is working diligently and while we won't win them all we are optimistic about our ability to prosecute accretive opportunities in around our existing service areas. We fully appreciate the challenges we currently have with our cost of capital or even access to public equity capital. However, we remain very confident in our ability to access private capital and other alternative resources to fund good accretive growth projects. Our primary focus here is driving long-term value for our unit holders. So, with I'll open it up to the operator for questions.

[Operator:]

[Operator Instructions] Our first question is from Chris Tillett from Barclays.

[Chris Tillett:]

Just wanted to first touch base back on your Utica segment, so you mentioned there that volumes were impacted by curtailments during the quarter. Just curious were those curtailments more price related or operational?

[Steve Newby:]

We had, one of our major customers had an operational issue that actually bleed over us, we had to shut down part of system for most of February actually or about a third of our system I should say for most of February. So, they had an issue on a pad on a well there that caused that, so that's now been cleared up and things are more than back to normal as I mentioned in my commentary that's sort of where we are in volumes.

[Chris Tillett:]

Is that at all related to the improving outlook behind those assets that you guys had talked about or is that a separate customer.

[Steve Newby:]

I wouldn’t tie the two together. I think the improving outlook is more related to obviously basis improving with Rover, liquids prices improving as well. We're actually having a fair amount of pretty high level of activity in the condensate window right now on OGC. So, I would attribute it more to that than the operational issue that was a little bit of a one-time event that's how I would put it, it did cost us about I think 20 days or so of volume or about a third of our SMU systems.

[Chris Tillett:]

Moving to the Piceance, is there any update that you guys can provide on the suspension of activity from one of the anchored customers there that you guys have talked about previously?

[Steve Newby:]

[I don’t think you are talking about the] [indiscernible]. I think they are focused right now on the northern part of the acreage that they acquired with that purchase, but I would say in Brad Graves can comment on this too but I would say discussions are actively going on with them about things in our areas as well too. So, Brad if you have anything to add.

[Brad Graves:]

No, that's right. I mean I think [indiscernible] continue to get their arms around what they purchase from in Canada but we are talking to them on a number of fronts.

[Operator:]

Our next question is from Praneeth Satish from Wells Fargo.

[Praneeth Satish:]

I think I heard you mention Summit Utica is running at 435 million cubic feet per day, it's a big increase over the Q1 level. Do you think that can be maintained into Q2 or how should we or should it come down a bit, how should we model that?

[Steve Newby:]

Yes, that’s actually running about 450 right now and you know a good portion of the increase so far has been our high-pressure service, you will probably remember the purchase of our TBO7 service. So little bit less in the fees than our well ahead gathering but still volumes have ramped up nicely there, I would tell you know, our outlook for SMU is actually increasing volumes throughout '18, more the back half of '18 and in a pretty strong outlook into '19 as well too, I will mentioned, we are doing small debottlenecking project, there's to actually increase our capacity to 600 million a day, that system was built you may recall the half of ECS system initially but we are debottlenecking it for close to nothing getting about a million day more capacity. So, we’re pretty bullish on the outlook of SMU, particularly as we get to the end of this year and into '19.

[Praneeth Satish:]

Okay and then just maybe, without any specifics. But can you talk about the shape of your CapEx spending over the next few years. If you proceed with EE should we assume that the current run rate of around 200 million per year it will stay in that level until the build out completes.

[Steve Newby:]

I will take shot, Matt you can add in. but I will go first. I would say that as it stands right now in our outlook would be actually CapEx being lower next year than 200, again EE spend between the rest of '18, assuming we FID it here in the third quarter on into 19 is pretty minimus and the reason is we’re based in the middle of a third filing, we made use to may still purchases earlier that will be a choice we make depending on the market and what we want to do there and I think everybody known probably what's going on steel, so I would tell you right now if where we sit today is actually CapEx, a fair of lower actually '19. Now that being said we’re actively working on growth projects, we are actively looking at things and so I expect, you know I expect that to change. But if you ask me where we’re sitting today that’s where I tell. The other thing I'll tell you is we’re pretty confident in how much, it's not just CapEx it's just how we view the business ramping up from a cash flow perspective and our leverage capacity and I want to make a point, we pretty effectively funded our deferred purchase price at this point, it's pretty close to down $400 plus million of equity so far over the last 18 months, related to or so. So, we feel good about how all of this lays out over the next two years.

[Matt Harrison:]

I would agree, so will be down from CapEx from standpoint in '19 but that will be up relative to cash flow in '19 compared to '18 and then assuming as EE you could expect 2020 CapEx to increase backup maybe '18 levels but assuming will be down in '19 up in cash flow.

[Steve Newby:]

As it is today.

[Operator:]

Our next question is from Tristan Richardson from SunTrust Robinson.

[Tristan Richardson:]

A quick one on the Utica, in the past you guys have targeted about 50 completions in 2018, but now that we have sort of the subsequent news on higher expected D&C activity that's driving the deferred purchase. Can you update your thoughts just sort of with those new details around completions you expect this year specially with where volumes are running today?

[Matt Harrison:]

I think we are saying Utica you are assuming both SMU and OGC and we can get specific, we are probably close to 8 completions at SMU in '18 we're expecting double that in '19 and then as it relates to OGC, what are our expectations for OGC, 30 to 40 in OGC in '18 so that's still relatively consistent from that standpoint.

[Steve Newby:]

Let me footnote some there too Tristan just to try right such, because I think we've talked about in the past and we need to reiterate, where the completions come is critical right, in our dry gas area let me just give you an example. We've brought on two wells on the last year, those two wells are doing north of 30 million each on one pad after six months without compression. So, when we say eight wells or seven wells dry gas area you can probably do the math, I don't think all of them are going to be that big. But these are big, big wells from the dry gas areas. Conversely on OGC of the 30 to 40 completions there this could be some let gas completions there is also going to be a fair amount of condensate completions and those are smaller wells from a gas perspective and what we move. So, the composition of those really matters is what I'm trying to get out I don’t want to state the obvious but I want to point that out.

[Matt Harrison:]

And obviously we only owned 40% of OGC.

[Tristan Richardson:]

And just curious sort of with where volumes are trending now as you guys have talked about a lot of that having to do with TPL and just sort of where you guys are seeing a higher D&C activity could you just of reconcile that with that customer's decision to defer compression, are those on an unrelated or can you help me with there.

[Steve Newby:]

Yes, they are actually somewhat related. The reason is if you are drilling more new wells that don't need compression you don’t want to pay additional fee on new big strong wells because it's centralized compression rate so we can't segregate obviously volume at the pad [it's centralized]. And so, the two are somewhat related higher level or increased level of drilling over the next two years led to the decision of why we don’t hold off on centralized compression given we're going to have a fair amount of new volumes come on that don’t need it.

[Tristan Richardson:]

Steven and just last one from me in terms of the crude gathering initiatives in the Delaware just kind of curious sort of any capacity you are thinking about or also sort of downstream connectivity where gathering would connect to etcetera.

[Steve Newby:]

So first I'm trying to figure out how to answer the downstream because I don’t want to lead into some of our peers in some thinking around that but I think I'll just state the obvious, planes got pretty good connectivity in that area and so they will be a logical choice is also some recliners connectivity in that area. Eventually, XTO [ph] wants their barrels and as a plan they have been public about it about moving their own barrels and getting those to the goal. So, I would say all of the above. We had an advantage in this area, I want to reiterate this point to folks, this area is unique in that it is a lot of BLN [ph] area, that puts in challenges on timing of permits but it's also an area that there's a lot of potash mining and so what that does the BLN becomes very precise on how you route pipelines, and it also aggregate producers into large drilling islands. So, it will have two or three producers on what we would call a pad, they call it a drilling island but it’s a little bit bigger than a single pad. I bring up that point because once you get that right away through that path in that area you basically have an advantage quite frankly to do multiple service offerings through water and gas were utilizing that that advantage to start first deal is not going to be a huge amount of volumes yet we’re picking up a few pads, a few producers, but what we anticipate is that service to grow over the next several years as we build [out system of their] overall. So that help a little bit.

[Operator:]

Our next question is from Jerren Holder from Goldman Sachs.

[Jerren Holder:]

The appears to be a little bit of a disconnect between the deferred purchase price obligation, then maybe what the street is modeling in terms of EBITDA, is there a way for you guys to give a bit more clarity around maybe some of the components that goes into the calculation maybe some of the CapEx spend today to EBITDA generated today, G&A and how you think about EBITDA into 2019.

[Matt Harrison:]

This is Matt. I will kind highlight a few things and it's really kind of consistent to what I've mentioned last quarter as well. Some items have moved up and some items have move down but it's generally consistent and if you think about the way calculation works it’s an average of 2018 and 2019 EBITDA right, on 6.5 and you minus 13.6 of normalized G&A. But if you can think about that calculation we did about $100 million for those dropped down assets in EBITDA in 2017. We are expecting a relatively flat in '18 and you kind of back into the implied average EBITDA it's around $125 million for the average for '18 and '19. So that implies some very significant growth relative to those drop-down assets in '19, if you’re starting at 100 and you get average of 100, 125. So hopefully that helps and basically the CapEx generally offsets itself with the amount of EBITDA enjoyed from the initial dropdown.

[Jerren Holder:]

As we think about those EBITDA numbers, those are I know there is net components for the G&A that's in there and so that's already adjusting for that.

[Steve Newby:]

Correct yes. And here if I can just take a step back to make one point, we did a transaction in '16 in the middle of the downcycle, some of our other peers did the other transactions. we did this deal of 6.5 times and we did this deal with the ultimate amount of flexibility in financing it. So, this deal is going to be accretive, there is no doubt about that to the partnership and we gave ourselves four years to finance the transaction. So, I agree with you the market is not understanding it, we are not giving it any credit for and I think that's a mistake.

[Jerren Holder:]

And then may be moving on to the Bakken some of the other mission operators seem to be indicating some pretty strong trends there even just in the second quarter versus the first quarter as volumes normally recover from the first quarter disruptions but just seems to be trending well. what are you guys seeing on your assets quarter-to-date and kind of expectations for the rest of the year?

[Steve Newby:]

Yeah, I think we came out with guidance and then we reiterated here. we expect double-digit volume growth year-over-year on the liquid side in the Bakken. we are seeing the same thing at that four rigs running on our acreage now which it sounds great but the other thing we're seeing is just the efficiency gains and some of the completion technique revenues in other places, the Bakken is slower to develop really loading up on profit, and lateral length and now that's catching up and you are just seeing some really impressive wells there. And again, our service offering there when on most of our system when we get crude we also get water so we are making revenue twice typically on a pad there but we would say the same thing. We are also encouraged if you see noted in our comments that Northern Williams County area what we call our black tail system is starting to see some pretty nice results we've got two customers in that area in the past six months and I think it's going to spur some other activity is what we expect here over the next year in that area.

[Matt Harrison:]

And just a little bit of a foot note if you think about the 13,000 barrels a day we talked about been offline, that’s related to saltwater disposal issues or kind of frap [ph] protect. if you run that through that's about a 1.5 million to 2 million of EBITDA impact in the first quarter, so we can we have a little bit behind us as well.

[Operator:]

[Operator Instructions] Our next question is from Kyle May from Capital One Securities.

[Kyle May:]

Just a quick one on the EE project, you talked about potentially bringing in equity participants for that. Can you maybe help us understand or get a sense of the magnitude of participation you might be willing to take on? And then a follow-up to that would be how you are thinking about financing your portion of the project?

[Steve Newby:]

I think it's a little early on magnitude, those discussions are pretty active and ongoing, I don’t think we obviously aren't going to give our control the projects, probably state the obvious. So, I think it's just a little early, but it’s from multiple parties, I think it’s an attractive project and people see that and will see where it all lays out. Matt do you want to touch on just our financing, more outlook on them?

[Matt Harrison:]

Just in generally, we’ve given you guys a lot of information in Steve's comments and in our earnings release as well. We expect, one, we are getting a high level of interest, we expect around the CapEx range of [404], 150 million the spend curve is really back end loaded right with 15% to 20% of spend occurring in the first 18 to 24, months, so it’s really kind backend loaded expense, and that fits in well with our CapEx requirements on other projects, as well as our EBITDA ramp. So, targeting service date of 2021 and all of that, the potential JV opportunities from potential shippers and as well as the interest in the line all that interrelated. So, it's just a little early talk about what percentage if any we would go and then I will also just finish in saying reminding everybody that all or part of the consideration for our deferred purchase price obligation can be made in common equity at the MLP's option. So, we always have that piece available whether the public equity markets are available, private capital is available, while there is something after control at the MLP always through.

[Steve Newby:]

And Carl I think when we announced -- when we make our final investment decision and announce that we are definitely going forward it we’re going to have a financing plan for you. So, I don't think we’re going to sort of legal hanging out there not in this world.

[Operator:]

And there are no further questions at this time. I will turn it back over to Steve Newby for closing remarks.

[Steve Newby:]

Thanks everybody for joining and again if you have further questions, follow up questions, feel free to give us a call. Have a good weekend, we appreciate it. Thank you.

[Operator:]

Thank you. Ladies and gentlemen this concludes today's conference. Thank you for participating. You may now disconnect.