Tallgrass Energy, LP (NASDAQ:TGE) Q4 2017 Earnings Conference Call - Final Transcript

Feb 13, 2018 • 04:30 pm ET


Tallgrass Energy, LP (NASDAQ:TGE) Q4 2017 Earnings Conference Call - Final Transcript


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Good day and welcome to the Tallgrass Energy Q4 2017 Earnings Call. Today's conference is being recorded.At this time, I'd like to turn the conference over to Treasurer, Mr. Nate Lien. Please go ahead, sir.

Nate Lien

Thank you, Brian. Good afternoon, and thank you for joining the Tallgrass Energy quarterly earnings call as we discuss TEP and TEGP results from the fourth quarter of 2017 which were released through our joint press release this morning and 10-K this afternoon.

Joining me on the call are David Dehaemers, President and Chief Executive Officer, Bill Moler, Executive Vice President and Chief Operating Officer; Gary Brauchle, Executive Vice President and Chief Financial Officer; and Matt Sheehy, Senior Vice President & Chief Commercial Officer.

Before turning the call over to David, let me remind you that this event is being recorded and a replay will be available for a limited time on our Web site. Additionally, our comments today will include forward-looking statements and estimates. These forward-looking comments are subject to various risks and uncertainties and reflect management's views as of February 13, 2018.

Please refer to our filings with the SEC, which are available on our Web site, including our 10-Ks and 10-Qs, which provide discussions of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations. Note that except to the extent required by law, Tallgrass undertakes no obligation to update any forward-looking statements.Please also refer to our earnings release and Web site for reconciliations between the non-GAAP financial measures referenced in this presentation and the most comparable financial measure or measures calculated and presented in accordance with GAAP.

With that, let me now turn the call over to David for his opening remarks.

David Dehaemers

Thanks, Nate. Good afternoon everyone and thanks to everyone for joining our Tallgrass Energy fourth quarter earnings call. As many of you saw in our earnings release, this morning, the fourth quarter was yet another outstanding quarter for TEP driven by strong performance in our operating segments and higher than forecasted distributions from REX as a result of incremental capacity sales in Zone 3. All of this contributed to TEP's 18th consecutive quarterly distribution increase. Again, $1.15 annualized at IPO versus $3.86 paid today. Annualized and then TEGP's 10th consecutive quarterly distribution increase, again $0.53 annualized at IPO and $1.47 currently paid today going to $1.95 in the next two quarters.

Now let's review the fourth quarter financial results driving our distribution increases. Adjusted EBITDA for TEP was $173.2 million. DCF was $141.6 million, again, producing healthy coverage of 1.28x for the fourth quarter. As we mentioned on the third quarter call and as expected, one of our Pony Express shippers continued to use previously shipped incremental volumes to meet current period from committed volumes to the tune of $8.3 million. Thus, reducing an accumulated incremental volume balance in current period cash flows.

With the inclusion of those cash flows, DCF and coverage would have been $149.9 million and 1.35x coverage, respectively. At year end,