Phillips 66 Partners LP (NYSE:PSXP) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 02:00 pm ET


Phillips 66 Partners LP (NYSE:PSXP) Q2 2020 Earnings Conference Call - Final Transcript


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Welcome to Second Quarter 2020 Phillips 66 Partners Earnings Conference Call. My name is David and I will be your operator for today's call. [Operator Instructions] Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Jeff Dietert, Vice President, Investor Relations. Jeff, you may begin.

Jeff Dietert

Good afternoon, and welcome to Phillips 66 Partners second quarter earnings conference call. Participants on today's call will include Kevin Mitchell, Vice President and CFO; Tim Roberts, Vice President, Operations; and Rosy Zuklic Vice President and Chief Operating Officer. Today's presentation materials can be found on the Events section of the Phillips 66 Partners website along with supplemental financial and operating information.

Slide 2 contains our Safe Harbor statement. We will be making forward-looking statements during the presentation and our Q&A session. Actual results may differ materially from today's comments. Factors that could cause actual results to differ are included here as well as in our SEC filings.

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

Kevin J. Mitchell

Thank you, Jeff and good afternoon everyone. During the second quarter, Phillips 66 Partners operated reliably and safely and achieved key milestones on its growth projects. The Gray Oak Pipeline began full service and supplied the first crude oil into the South Texas Gateway Terminal, which recently saw its first cargo loading.

The Board of Directors approved a second quarter distribution of $0.875 per common unit, a 2% increase over second quarter 2019 and unchanged from the first quarter of 2020. Phillips 66 Partners is well positioned to navigate the current business environment with our investment-grade credit rating and strong liquidity. We remain focused on operating excellence, maintaining our strong balance sheet and disciplined capital allocation.

Moving on to Slide 4 to discuss financial results. The Partnership reported second quarter earnings of $255 million. This includes recognition of an $84 million gain related to the Partnership's prior year sale of an interest in the Gray Oak Pipeline. Adjusted EBITDA and distributable cash flow were both down about $50 million. The decreases from the first quarter reflect reduced volumes on wholly owned and joint venture assets, driven by lower domestic oil production, refinery utilization and product demand.

Slide 5 highlights our financial flexibility and liquidity. We ended the second quarter with $7 million of cash and $532 million available under our revolving credit facility. The partnership funded $311 million of growth capital during the quarter. This included investments in the Gray Oak Pipeline and South Texas Gateway Terminal, as well as spend on the C2G Pipeline and the Sweeny to Pasadena Pipeline. In addition, the partnership continues to fund its share of commitments for the deferred Liberty Pipeline project.

The debt to EBITDA ratio on a revolver covenant basis was 3.1, which remains below our targeted long-term leverage ratio of 3.5. Our distribution coverage ratio was 1.09. We recognize the uncertainty associated with the Dakota Access pipeline litigation. The economic implications of a temporary shutdown