Andeavor (NYSE:ANDV) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 09:00 am ET


Andeavor (NYSE:ANDV) Q3 2018 Earnings Conference Call Transcript


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Welcome to the Andeavor Logistics' Third Quarter Earnings Conference Call. My name is Michelle and I will be your operator for today's conference. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) Please note that this conference is being recorded.

I would now like to turn the conference over to Kristina Kazarian. Kristina, you may begin.

Kristina Kazarian

Good morning, and welcome to the Andeavor Logistics' third quarter 2018 earnings webcast and conference call. On the call today are Gary Heminger, our Chairman and CEO of Andeavor Logistics; Don Sorensen, President of Andeavor Logistics; Greg Goff, Executive Vice Chairman of MPC; Tim Griffith, CFO of MPC; Andy Woodward, VP of Finance of Andeavor Logistics and other members of the management team.

We invite you to read the safe harbor statements and non-GAAP disclaimer in our earnings release, which can be found on our website at, and includes reconciliations to certain non-GAAP measures we will be discussing today.

(Forward-Looking Cautionary Statements)

Now, I will turn the call over to Gary Heminger for opening remarks.

Gary Heminger

Thanks, Kristina, and good morning to everyone and thanks for joining our call. I would like to start by welcoming Andeavor Logistics to the Marathon Petroleum family. The addition of this business deepens our presence in the Permian and Bakken regions, and the expanded platform will create new opportunities across some of the fastest growing production regions in the US. Andeavor Logistics delivered EBITDA of $309 million for the quarter, an increase of $66 million over the prior year. Distributable cash flow attributable to common unitholders was $251 million, up 70% year-over-year. This provided distribution coverage of 1.05 times for the quarter. The company ended the quarter with $4.8 billion of debt and approximately 3.7 times last 12 months pro forma EBITDA. EBITDA growth during the quarter was primarily driven by contributions from the $1.6 billion dropdown completed in August. This acquisition included Permian Basin and Bakken crude oil logistics assets as well as the majority of the remaining Andeavor refining logistics assets.

As we look forward, the macro backdrop in the Permian region of the business continues to be compelling. We believe that US production growth and global demand will remain strong across all key hydrocarbons of crude oil, natural gas and NGLs and support an expanded opportunity set for the key parts of our business.

In the Permian Basin, we continue to see a strong drilling and completion environment, which will continue to support the Permian region as one of the lowest cost in the United States. Lastly, as we referenced in the third quarter distribution announcements, we have held the distribution level flat as we evaluate the financial business plans of Andeavor Logistics. Given the evaluation of the business, we will not be providing any distribution growth guidance at this time.

As we continue to enhance our understanding of the business, we reiterate our focus on meaningfully higher coverage, moderate leverage levels and independent sustainability with