DCP Midstream, LP (NYSE:DCP) Q3 2018 Earnings Conference Call Transcript

Nov 06, 2018 • 10:00 am ET


DCP Midstream, LP (NYSE:DCP) Q3 2018 Earnings Conference Call Transcript


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Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 DCP Midstream Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will be given at that time. (Operator Instructions) As a remainder, this call maybe recorded.

It is now my pleasure to introduce VP, IR , Ms. Irene Lofland. Please go ahead.

Irene Lofland

Thank you, Andrew. Good morning and welcome everyone to the DCP Midstream's third quarter 2018 earnings call. Today's call is being webcast and the supporting slides can be accessed under the Investors section of our website at dcpmidstream.com.

(Forward-Looking Cautionary Statements)

We will also use various non-GAAP measures, which are reconciled to the nearest GAAP measures and scheduled in the appendix section of the slide.

Wouter van Kempen, CEO; and Sean O'Brien, CFO will be our speakers today. And after their remarks, we will be happy to take your questions.

With that, I'll turn the call over to Wouter.

Wouter van Kempen

Thank you, Irene, good morning, everyone. Appreciate you joining us. On today's call, we will discuss our strong third quarter results, outline the progress on our outstanding growth projects, address the political environment in Colorado, provide a brief outlook for 2019 and highlight the competitive advantage of our diversified business model and our transformational journey.

Beginning with our financial results. We had a tremendous quarter resulting in adjusted EBITDA of $309 million and $209 million of distributable cash flow, totaling $546 million of DCF year-to-date. We delivered a distribution coverage ratio of 1.35 times for the third quarter, while maintaining a solid leverage ratio of 3.6 times, as of September 30th. As an outcome of our dedicated focus on optimizing our fully integrated portfolio and as demonstrated by these outstanding results, we expect to exceed our guidance for both 2018 adjusted EBITDA and DCF.

Our strong earnings are underpinned by increasing volumes across our entire footprint, as we saw an approximately 35% increase in NGL throughput volumes year-over-year and a roughly 10% increase in our gathering and processing volumes. To capitalize on the current production resurgence, DCP is executing a focused multi-year, multi-basin, multi-segment growth strategy that is mindful of the systemic overbuild our industry has created in past cycles.

We will cover these projects in detail later in the call, but as you can see, we are expanding our NGL takeaway capacity, supply and market connectivity on both Sand Hills and Southern Hills, as we work toward plant expansions and innovative optimization strategies stemming from DCP 2.0. We're also building out substantial capacity within our G&P segment, as we successfully operate new Mewbourn 3 plant, quickly progress on the construction of O'Connor 2 and prudently advance our Bighorn facility in Colorado. Ultimately, we delivered very strong third quarter results, while successfully executing a long-term capital allocation strategy to ensure we continue to achieve our vision of DCP 2020.

On the next slide, I cannot overstate just how significantly our Company has transformed over the