NGL Energy Partners LP (NYSE:NGL) Q4 2019 Results Earnings Conference Call May 30, 2019 11:00 AM ET
NGL Energy Partners LP（纽约证券交易所代码：[NGL]）2019年第四季度业绩收益电话会议2019年5月30日美国东部时间上午11:00
Robert Karlovich - Chief Financial Officer
Michael Krimbill - Chief Executive Officer
- Robert Karlovich - 首席财务官
- Michael Krimbill - 首席执行官
TJ Schultz - RBC Capital Markets
Spiro Dounis - Credit Suisse
Dennis Coleman - Bank of America Merrill Lynch
- TJ Schultz - 加拿大皇家银行资本市场
- Spiro Dounis - 瑞士信贷
- 丹尼斯科尔曼 - 美国银行美林证券
Good day, ladies and gentlemen, and welcome to the NGL Energy Partners LP Fourth Quarter Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to introduce your hosts for today's conference, Mr. Trey Karlovich, Chief Financial Officer. Sir, you may begin.
美好的一天，女士们，先生们，欢迎来到NGL Energy Partners LP第四季度财政年度2019年收益电话会议。 此时，所有参与者都处于只听模式。 之后，我们将进行问答环节，届时将提供相关说明。 [操作员说明]提醒一下，正在录制此电话会议。
我现在想介绍今天会议的主持人，首席财务官Trey Karlovich先生。 先生，你可以开始吧。
Thanks Cheryl, and thank you everyone for joining this morning. As a reminder, this conference call includes forward-looking statements and information. Words such as anticipate, project, expect, plan, goal, forecast, intend, could, believe, may, and similar expressions and statements are intended to identify forward-looking statements.
While NGL Energy Partners believes that its expectations are based on reasonable assumptions, there can be no assurance that such expectations will prove to be correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations included in the forward-looking statements.
These factors include prices and market demand for natural gas, natural gas liquids, refined products and crude oil; level of production of crude oil, natural gas liquids and natural gas; the effect of weather conditions on demand for oil, natural gas and natural gas liquids; and the ability to successfully identify and consummate growth opportunities and strategic acquisitions at costs that are accretive to financial results and to successfully integrate and operate assets and businesses that are built or acquired.
Other factors that could impact these forward-looking statements are described in the Risk Factors in the partnership's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases.
NGL Energy Partners undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. This conference call also includes certain non-GAAP measures, namely EBITDA, adjusted EBITDA and distributable cash flow, which management believes are useful in evaluating our financial results.
Please see the partnership's earnings releases, investor presentations and annual and quarterly reports on Form 10-K and Form 10-Q on our website at www.nglenergypartners.com under the Investor Relations tab for more information on our use of non-GAAP measures as well as reconciliations of differences between any non-GAAP measures discussed on this conference call to the most directly comparable GAAP financial measures.
I’ll now turn the call over to our CEO, Mr. Mike Krimbill.
虽然NGL Energy Partners认为其预期基于合理的假设，但无法保证这些预期将被证明是正确的。许多因素可能导致实际结果与前瞻性陈述中包含的预测，预期结果或其他预期产生重大差异。
Thanks Trey. Good morning and thanks for joining us. Fiscal 2019 has been a year of continuing change in repositioning of NGL as you know. This has resulted in a stronger partnership in many ways. So let's identify these accomplishments by addressing the issues that we faced.
First, we had uncomfortably high financial leverage. We solved this by aggressively selling nearly $2 billion of assets at attractive multiples, reducing compliance leverage to approximately 2.6 times while increasing EBITDA not shrinking. We went about this in a very strategic manner not selling our best assets, but rather selling assets such as Glass Mountain Pipeline which wasn’t part of a larger system and pruning our water business to focus on the best basins where we had a competitive advantage.
Second, our EBITDA has been unpredictable and not as stable as we would all like. Our response has been to substantially reduce seasonality of our cash flows and our weather risk as a result of selling our retail propane business. We are adding long-term contracted revenues for the water solutions internal and acquisition growth. Plus, we have also increased the repeatable cash flows from Grand Mesa on the crude oil logistics side.
Third, we were described as too complicated. We have reduced our segments from five to four and are currently reviewing our options in the refined products segment. Fourth, our common units coverage ratio was too low. We took our medicine early on by cutting our distribution to $1.56 and wiping out the entire general partner distribution. We are now in a position where coverage will exceed 1.3 times this fiscal year and continue to grow. We must have a coverage ratio that allows us to earn our distribution even in the bad times.
In addition to addressing these unsold opportunities we have eliminated potential 20 million common unit dilution by redeeming the Oaktree convertible preferred. We have also eliminated our near-term debt maturities, as Trey will address, by redeeming the 2019 and issuing the 2026 notes. So now we can turn our attention to operating our assets and growing them at attractive multiples with long-term contracts.
So where is our capital to be allocated? Our criteria has both rate of return and scale. Water is number one as the returns are the most attractive for both internal growth and acquisition opportunities. We have scale in the DJ Basin, Eagle Ford and now the Delaware. Crude Oil and NGL Logistics do not often have the acquisition opportunities at attractive multiples, so they will probably see opportunistic internal growth and acquisitions where we have significant synergies. We have scale in the DJ for Crude and now in NGL Liquids as well. We will continue our balance sheet discipline keeping leverage at 3.25 times or less.
So where is our excess DCF going to be utilized? We have the ability to buy back units, this will probably happen when our unit price is at the point where the yield is 15% or higher, so that is effectively a 6.5 to 7 times acquisition multiple. We are not there now and hope we don't get there.
那么我们的资金在哪里分配？我们的标准包括回报率和规模。水是第一，因为回报对内部增长和收购机会最具吸引力。我们在DJ盆地，Eagle Ford和现在的特拉华州都有规模。原油和NGL物流往往不具备吸引倍数的收购机会，因此他们可能会看到机会主义的内部增长和收购，我们之间存在显着的协同效应。我们在DJ for Crude和现在的NGL Liquids中都有规模。我们将继续我们的资产负债表纪律，保持杠杆率为3.25倍或更低。
Debt reduction is an option in order to keep our leverage at 3.25 times or less and distribution growth is possible once our yield is below 10% and the market will reward the partnership with increases. Since unit buy backs and distribution growth are not yet in play and we are well below our leverage target, funding growth at 15% to 20% return is our best use of cash currently.
So with that I'll turn it back to Trey.
Great, thanks Mike. So as Mike mentioned we had a very successful year and we're well positioned financially heading into fiscal 2020. Well we have already accomplished significant amount from a financing standpoint. So first from a balance sheet management perspective. We finished fiscal 2019 with a compliance Leverage Ratio of 2.6x, well inside our target of 3.25 times and our overall leverage came in at 4.5 times also inside of our targets. These results are a tremendous improvement and demonstrates our focus on balance sheet and credit improvements throughout the past year plus.
Subsequent to year end we issued 450 million in notes due 2026 and 45 million in Class C Preferred Units and utilized the net proceeds to initially repay borrowings on our credit facility and then redeem a portion of the Class A Oaktree preferred units. In May we redeemed the remaining amount of the Class A Oaktree preferred units and now have no near term debt maturities or any preferred unit conversions.
Pro forma for these transactions we remain just below our target leverage of 3.25 times and improved our liquidity by over $200 million since March 31 and that significantly reduced our cost of capital going forward. These transactions have provided us the opportunity to fund our fiscal 2020 growth projects and flexibility around the funding of Mesquite acquisition where we currently expect to maintain a 3.25 compliance ratio pro forma for the acquisition and for fiscal 2020.
We currently expect finance Mesquite with a combination of available liquidity, equity issued to the seller, potential asset sale proceeds and/or proceeds from debt or equity securities transaction. However, we do not plan to issue common units other than the potentially the sellers option to take 6 million units at a $16 per unit price as part of the consideration. While we cannot comment further, we will note that we are optimistic about our financial alternatives for this transaction.
Now looking at our operating results for the fourth quarter and fiscal 2019. Adjusted EBITDA totaled $132 million for the fourth quarter and $440 million for fiscal 2019. Our overall results are in line with our target for the year, noting that we have earned over $23 million in biofuels blending credits that we have not yet been able to recognize in our refined products business. We finished the year within 2% of our overall EBITDA target and well above the low end of our guidance ranges in spite of certain assets sales occurring throughout the year and not capturing the bio credits. Should Congress pass the Biofuels Blenders Credit retroactively for calendar 2018 and 2019 we will recognize those credits at that time.
The Crude segment generated approximately $51 million of adjusted EBITDA this quarter consistent with prior quarter and matching our expected run rate for this business which continues to be underpinned by Grand Mesa Pipeline. Grand Mesa volumes averaged 129,000 barrels per day this quarter as DJ production remained consistent and we continue to have strong demand for transportation on the pipeline.
原油分部本季度产生的调整后EBITDA约为5100万美元，与上一季度一致，与此业务的预期运行率相匹配，继续受到Grand Mesa Pipeline的支撑。本季度Grand Mesa的平均每日产量为129,000桶，因为DJ产量保持稳定，我们对管道运输的需求仍然强劲。
Full year 2019 adjusted EBITDA totaled $181 million which exceeded the high end of our guidance which was $175 million. This was attributable to the volumes on Grand Mesa exceeding budget and benefits in the Crude segment from basin differentials most notably in the Permian over the summer. We continue to see strong volumes on Grand Mesa as well as potential improvements in other areas of our crude marketing business for the upcoming year. Basin differentials are also improving across our footprint. Based on stable crude oil prices and production activity as well as similar run rate Grand Mesa volumes our adjusted EBITDA guidance range for the Crude Logistics business for fiscal 2020 is a range of $190 million to $210 million with our current run rate right in the middle of this range.
Moving to Water, our Water adjusted EBITDA was $40 million for the quarter. As a reminder, we closed on our Bakken sale in November and our South Pecos sale in February, both of which were reflected in our lower fourth quarter results compared to third quarter and which was expected. Our year-to-date adjusted EBITDA for Water Solutions totaled $166 million which not only reflects the asset sales but also the impact in our second quarter where the significant decline in the Permian crude price differential which impacted our Skim oil revenues and associated hedges and was offset in our Crude segment.
Adjusting for these items, we believe the Water Solutions segment would have been very close our guidance range, which we did not adjust in spite of these items occurring earlier this year. By the way, this was also a 43% increase in EBITDA over the prior year. Water volumes averaged approximately 860 thousand barrels per day this quarter. We saw decline in our quarter-over-quarter volumes in the Eagle Ford and DJ basin as activity slowed slightly due to lower commodity prices coming into January and weather delays impacting producer activity. Our Permian and New Mexico volumes were relatively flat this quarter compared to the prior quarter after adjusting for the South Pecos sale.
We have seen an increase in volumes this spring and are expecting growth through the remainder of the year based on recent activity, producer drilling plans, and infrastructure coming online particularly in the Permian and the DJ Basins. Skim oil production was approximately $3700 per day during the quarter with an average crude cut of 43 basis points which is in line with our expected recovery. We will continue to focus on recovering as much oil as possible from our Water volumes while incremental pipeline delivered volumes generally contain less crude oil per barrel.
We have now hedged approximately 1300 barrels per day for fiscal 2020 at a weighted average price of approximately $62.50 per barrel. We have also rolled out hedges for approximately 1000 barrels per day through December 2020 at approximately $60 per barrel. We will continue to layer in hedges to cover our commodity price exposure on Skim oil.
2019年全年调整后的EBITDA总额为1.81亿美元，超过了我们指导的高端1.75亿美元。这可归因于Grand Mesa的数量超过预算和原油部分的优势，从流域差异，尤其是夏季的二叠纪。我们继续看到Grand Mesa的销量强劲以及未来一年原油营销业务其他领域的潜在改善。我们的足迹也在改善流域差异。基于稳定的原油价格和生产活动以及类似的运行率Grand Mesa量，我们对2020财年原油物流业务的调整后EBITDA指导范围为1.9亿美元至2.1亿美元，目前的运行率处于中间位置。这个范围。
We are expecting continued growth in our Water Solutions business going forward, obviously the Mesquite acquisition will be a significant contributor, but our existing asset base continues to grow as well with incremental gathering pipelines particularly in the Delaware Basin along the Texas New Mexico border.
Our adjusted EBITDA expectation for Water solutions for fiscal year 2020 is a range of $290 million to $320 million, assuming a July closing of Mesquite the largest quarterly increase is between the first and third fiscal quarters as we close the transaction bring on our major pipeline projects and see incremental volumes from producers behind our system.
Our Liquid segment generated from a strong winter season that extends well into March and even April and supported volumes in propane pricing. We also benefited slightly from one month of earnings generated by the new terminals acquired from DCP which closed on March 1. Adjusted EBITDA for our Liquids segment totaled $32 million this quarter and over $90 million for the year, a significant improvement over the prior couple of years and well above the $75 million high-end of our guidance range.
Margins were much stronger than prior years with our lower cost profiles, supported market structures in the quarter and improvements in our contracting. We also benefited during the year from new producers services arrangements, increased NGL production and pipeline issues in the Northeast necessitating rail transport. We are excited about the new DCP terminals and are already seeing the benefits of the new Chesapeake terminal where we are running near capacity.
Our fiscal 2020 guidance for EBITDA take into account synergies between our legacy assets and the new assets acquired along with our strategic initiatives. Our EBITDA range for liquids is between $75 million and $90 million for fiscal 2020.
Finally Refined Products, adjusted EBITDA in Refined Products and Renewables totaled $16 million for the quarter and $29 million year-to-date which is below the low end of our guidance of $55 million. As we previously mentioned, the Biodiesel Blenders Credit should be passed for calendar 2018 and 2019 would generate approximately $23 million for this business, which would have put us in line with our guidance range. We incurred and recognized the costs associated with blending bio to earn those credits during the fiscal year and should they be passed we will recognize those credits in earnings at that time.
Mike discussed our current [indiscernible] business going forward and the team continues to look for ways to maximize margins, grow volumes and manage inventories. Our fiscal year 2020 guidance range for the Refined Products business has been set at $40 million to $60 million for the year. Our corporate costs were $30 million for the year and net of Retail Propane for the first quarter we came in right in line with our guidance of $25 million net for the full-year. We're expecting corporate costs for fiscal 2020 to remain consistent with this past year.
So overall, our partnership adjusted EBITDA target is set at $600 million for fiscal 2020. This growth in EBITDA for next year is supported by our significant capital investment into our Water Solutions segment over the past year and through fiscal 2020. Our recently announced acquisition of Mesquite, the stability of the Crude Logistics business anchored by Grand Mesa and similar combined results from our Liquids and Refined Products businesses as last year. With the growth in Water and Crude, these two segments would now make up approximately 80% of our cash flows in earnings.
Maintenance CapEx was $12 million this quarter and totaled $49 million for the year which include certain costs associated with Retail Propane prior to the sale. We have reassessed our maintenance program primarily in Water Solutions and believe we can reduce our cost per barrel. However, overall disposal barrels and assets have grown significantly, so we are expecting maintenance costs to increase year-over-year. We're expecting fiscal 2020 maintenance CapEx to total between $50 million and $60 million and to be fairly ratable through the year.
We declared a $0.39 per unit or a $1.56 per unit annualized distribution for the quarter and we expect to maintain this distribution level into fiscal 2020 as we integrate the Mesquite acquisition, fund our growth capital program and build our distribution coverage. As Mike mentioned we continue to target 1.3 times coverage or better on a trailing 12-month basis. Should we exceed that coverage level, which we currently expect to be later this year, we would then evaluate the best use of funds for the benefit of unit holders including reinvesting the business, repurchasing equity or increasing our distribution rate. That decision will be made based on numerous factors, but keeping our balance sheet healthy will be our priority. We intend to maintain our target at 3.25 times compliance leverage.
In summary, it has been an eventful year for NGL. We have repositioned the company with the sale of Retail Propane, continued investment into our Water Solutions business and significant strengthening of our balance sheet and liquidity position with no near term debt maturities. We have sold assets in significant multiples and redeployed the capital into projects and acquisitions that we believe will generate better returns and an even stronger business portfolio across our core segments. We see a lot of opportunity for our partnership and appreciate the continued support.
We will now open the call up for any questions.
Thank you. [Operator Instructions] Our first question comes from TJ Schultz with RBC Capital Markets. Your line is now open.
谢谢。 [操作员说明]我们的第一个问题来自TJ Schultz和RBC Capital Markets。 你的生产线现已开放。
Great thanks. Hey guys. I think just first for the Water segment EBITDA guidance for fiscal 2020, I'm just looking for any more color you can provide to kind of bridge the increase from a 4Q run rate if we think about it ex-Pecos about $150 million to that guidance number in the $300 million range, clearly Mesquite’s $90 million to $100 million of that increase, but you’re still implying some meaningful growth to the legacy business. I know you mentioned some major pipeline projects on the base business coming online and maybe if you could just start there and any more details about the capacity you are bringing on? How rates are trending? And just some more color there? Thanks.
十分感谢。 大家好。 我认为首先是2020年财政部门的水务部门EBITDA指导，我只是在寻找更多的颜色，如果我们考虑前Pecos约1.5亿美元，那么可以从第4季度的运行中弥补增长 在3亿美元范围内的指导数字，显然是梅斯基特的9000万美元到1亿美元的增长，但你仍然暗示着传统业务的一些有意义的增长。 我知道你提到了基础业务的一些主要管道项目即将上线，也许你可以从那里开始，还有关于你带来的容量的更多细节？ 利率趋势如何？ 还有一些颜色吗？ 谢谢。
Sure. Thanks TJ. So, to start, the major pipeline projects coming online through the summer and into early fall will be the Western Express Pipeline which is connecting all of our disposal facilities along [ph] Highway 285 essentially from Carlsbad down through Texas into Orla which is the, kind of the core of our disposal capacity.
We’ll be bringing barrels onto that pipeline from both, New Mexico and Texas. Additionally we’re bringing on the - what we call LEX or the Lea County Express which will run from the - essentially the McCloy Ranch area through New Mexico into the east into Texas. So, both of those projects will come online middle of this year. We’re expecting the significant ramp in volumes really from the Delaware.
We do expect some increase in the DJ and a little bit in Eagle Ford, but the Delaware is where the significant amount of growth is. That’s been indicated by volume increases that we’re already seeing into March and April. When you look at the fourth quarter run rate, January and February is similar to what we saw in December was a slowdown, we saw that slowdown based off of declining commodity prices, reduction in capital invested by producers and just general weather activity impacting some of the operations in the Permian in particular. So we saw a leveling out in volumes there and a slight decrease in the Eagle Ford and the DJ. We have seen that pickup, so we are expecting an increase there.
Additionally, we have the Mesquite acquisition as you mentioned coming on in July. We did a smaller acquisition that we closed in April. So that will be factored into our forecast. Additionally we have the impact of the CapEx invested in last - in the prior year primarily associated with the ranches and freshwater activity which we had very little of in the prior year or in fourth quarter. So, we are expecting an increase in freshwater sales which will also benefit the Water business.
Finally, the margin per disposal barrel and our operating cost per barrel will change slightly, so, we are expecting to see an increase in disposal revenue per barrel as we’re adding more barrels in New Mexico at higher disposal rates as well as capturing gathering fees along the pipelines and with the gathering via pipeline we are expecting our OpEx per barrel to decrease. We’ve seen that in our recent projects, we see that from Mesquite and we’re expecting some more throughout the year. So, the combination of those things is what's really driving the increase from a - from what looks like a current run rate to where we’re expecting to be next fiscal year.
我们将从新墨西哥州和德克萨斯州的两条管道上带上桶。此外，我们正在推出 - 我们称之为LEX或Lea County Express，它们将从麦卡里牧场地区通过新墨西哥州运往东部，进入德克萨斯州。因此，这两个项目都将在今年年中上线。我们预计特拉华州的产量将大幅增加。
我们确实期待DJ的增加和Eagle Ford的一些增长，但特拉华州的增长幅度很大。我们已经看到3月和4月的销量增长表明了这一点。当你看第四季度运行率时，1月和2月类似于我们在12月看到的放缓，我们看到放缓是基于大宗商品价格下跌，生产商投入的资本减少以及一些天气活动影响了一些特别是二叠纪的行动。所以我们看到那里的音量有所提升，而Eagle Ford和DJ则略有减少。我们已经看到了拾取，因此我们预计会有所增加。
此外，正如您在7月提到的那样，我们收购了Mesquite。我们做了一个较小的收购，我们在四月份关闭。这将成为我们预测的因素。此外，我们还有最后投资的资本支出的影响 - 去年主要与牧场和淡水活动有关，而我们在去年或第四季度的收入很少。因此，我们预计淡水销售量将增加，这也将有利于水务业务。
Okay. And then the Skim oil, I think you said 43 basis points. Would you - are you expecting that to come down a bit in the guidance?
好的。 然后脱脂油，我想你说43个基点。 你 - 你是否希望在指导中有所下降？
We are as I mentioned Skim oil on piped barrels is expected to be less. We’re targeting something pro forma from Mesquite something like 30 basis points maybe even a little bit under that for next year. So you know, on our base asset it’s probably closer to like a 0.35, so 35 basis points or pro forma for Mesquite or like you know something probably just under 0.3 or 30 bps.
正如我所提到的那样，预计管道上的脱脂油预计会减少。 我们的目标是从梅斯基特那里得到一些类似于30个基点的东西，甚至可能在明年之下。 所以你知道，在我们的基础资产上它可能更接近0.35，所以35个基点或Mesquite的形式，或者像你知道的东西可能只有0.3或30个基点。
Okay, great. Just one last one, just moving to Refined Products as you evaluate that kind of longer term, just any context around thoughts on potentially looking to sell that? What maybe kind of trough levels here versus the potential leverage benefits to you, kind of regardless of timing and then what's your timeline there to make a decision on that business?
大。 然后Marc，也许你可以带我们完成看跌期权，并带上你更新的保证金和EPS指南？ 也许只是任何额外的颜色来帮助弥合底线增量管理过渡成本将是有帮助的。.........
Sure. So obviously Refined Products as we look at it, is in a do in the trough period, from a performance perspective; however, the leverage benefit is significant when you factor in the working capital and the way many people work at our total leverage. So, we are weighing those two. As we mentioned we’re - we continue to evaluate that business. We are looking at ways to maximize the earnings from that business that continues to be our focus. At this point in time, that's really all we can say. I think that as we’ve shown in the past, if we’re going to transact on our business we’re going to do it - something for the value. So, I think that would be the expectation here as well.
Okay, great. Thanks Trey.
Thank you and our next question comes from Spiro Dounis with Credit Suisse. Your line is now open.
谢谢你，我们的下一个问题来自瑞士信贷的Spiro Dounis。 你的生产线现已开放。
Hi good morning guys. First one just on Water. It seems like word maybe is out now that the attractiveness of that business and competition seems to be picking up a bit, so just curious generally how you’re thinking about creating a moat around your business now and then maybe how any of that could sort of change the role of strategy that you guys have been deploying so far?
嗨，早上好。 第一个就在水上。 现在看来，这个商业和竞争对手的吸引力似乎有所提升，所以好奇一般只是好奇你如何考虑在你的企业周围建立护城河，然后可能会如何排序 改变你们迄今为止一直在部署的策略的作用？
I’ll start, I think we are probably in a transition period here where there is more awareness of our Water, especially in the Delaware and there are a number of companies up for sale in the Delaware currently. I think we have synergies others don’t and as you know we don't - we take water to our wells we don’t have royalties. We could certainly cut overhead and have some decent synergies. So I think we can still be competitive and not pay a 9 or 10 times multiple.
Like, we’ll see how these other processes turn out and we’ll know more, you know, it’s a double edged sword. We would love to buy at a 6.5, 7 times and then trade it at 10. But as soon as everyone thinks it’s a 10 multiple business then purchase prices go up to 9. So, it’s, with Water we ought to be careful, we certainly we’re all now aware that truck water is not, it’s more royalty on the service type business, contracted with these massive pipe systems with contracts are more G&P like and so they should be worth more. So, we’ll see what happens I think in the next 90 to 120 days.
我会开始，我想我们可能正处于这样一个过渡时期，在那里人们对我们的水有了更多的认识，特别是在特拉华州，目前在特拉华州有很多公司可以出售。我认为我们有其他人没有的协同作用，正如你所知，我们没有 - 我们向我们的水井取水，我们没有特许权使用费。我们当然可以削减开支并获得一些体面的协同效应。所以我认为我们仍然可以保持竞争力并且不会支付9倍或10倍的倍数。
Got it. And then as far as, sorry guys.
Just to add to that you know you said how do you protect your position, you know that’s through pipelines, contracting, having term as you, similar to gathering business, you want to connect directly to the producer, you want dedications, you want long-term contracts, MBCs [ph] where you can get them, but that’s how you generally protect your position.
只是为了补充一点，你知道你说你如何保护你的位置，你知道这是通过管道，签约，有你的任期，类似于收集业务，你想直接连接到制作人，你想要奉献，你想要长 期限合约，MBC [ph]你可以得到它们，但这就是你通常如何保护你的位置。
Got it. That makes sense. Sticking with Water, just in terms of recycling, how are you guys thinking about maybe doing more of that overtime? Are you getting any producer pressure to do more of that, I think even from your perspective our understanding is that recycling would actually be a margin uplift. So just curious how you are thinking about that instead of the saltwater disposal?
得到它了。 那讲得通。 坚持用水，只是在回收方面，你们怎么想也许在加班呢？ 你是否有任何生产者的压力来做更多的事情，我认为即使从你的角度来看，我们的理解是回收实际上是一个利润率提升。 所以只是好奇你是如何思考而不是盐水处理？
Yes, I think it's somewhat state specific. So New Mexico not having as much fresh water as Texas clearly is, a place where recycle makes a lot of sense. Fortunately, we've been creating drinking water and discharging into the river up in Pinedale. So we're very, very knowledgeable in the chemistry of water and we believe we can deliver a better recycled quality water barrel to producers than anyone else. So we're very, very bullish on recycle in New Mexico. I think Texas is a different story because you have - it's a function of fresh water pricing. If fresh water costs $0.50 in one state it's tougher to recycle if it's a dollar-dollar a quarter in New Mexico than recycle makes a lot of economic sense.
是的，我认为这在某种程度上与州有关。 因此，新墨西哥州没有像德克萨斯州那么多的淡水，这是一个回收利用很有意义的地方。 幸运的是，我们一直在创造饮用水并排入Pinedale的河流中。 因此，我们非常了解水的化学成分，我们相信我们可以为生产者提供比其他任何人更好的再生水质桶。 所以我们非常非常看好新墨西哥州的回收利用。 我认为得克萨斯州是一个不同的故事，因为你有 - 它是淡水定价的一个功能。 如果一个州的淡水价格为0.50美元，那么如果新墨西哥州四分之一美元的回收利用具有很大的经济意义，那么再循环就更难了。
Got it. Last one just outside of Refined and Renewables, any other smaller maybe non-core assets you're still looking to trim at this point or right now have you sort of gone through most of the low-hanging fruit?
I think we've gone through the anything significant. There may be some little pruning left in water perhaps and - but I don't see really much left. We've really got a nice asset base in each of our three major businesses and I think we'll just continue to grow those.
我想我们已经完成了任何重要的事情。 也许在水中可能会留下一些小修剪 - 但我看不到太多的东西。 我们在三大业务中都拥有良好的资产基础，我认为我们将继续增长。
I appreciate the color. Thanks guys.
Thank you. [Operator Instructions] Our next question comes from Dennis Coleman with Bank of America Merrill Lynch. Your line is now open.
谢谢。 [操作员说明]我们的下一个问题来自Dennis Coleman和美国银行美林公司。 你的生产线现已开放。
Thank you and good morning everyone. Just if I could start with just a try and explore a little bit on the financing side, I know you don't want to say much about for Mesquite, but maybe just around the timing when do you think we'll get a little more details? And I guess, part of that you mentioned was asset sales and I couldn't help Trey when you were talking about potentially selling the Refined Products business and the leverage impact that maybe that's part of the matrix or the puzzle that you're trying to put together where that that might help with the leverage target. So, there's a lot of questions there, but if anything more you can help us with understanding how you are going to finance the Mesquite transaction.
谢谢大家早上好。 如果我可以从尝试开始并在融资方面稍微探讨一下，我知道你不想对梅斯基特说多少，但也许只是在你认为我们会多一点的时候 细节？ 我想，你提到的部分原因是资产销售，当你谈论可能出售精炼产品业务以及杠杆影响时，我无法帮助Trey，这可能是矩阵的一部分或者你正在努力解决的难题 汇总可能有助于杠杆目标的地方。 所以，那里有很多问题，但如果还有其他问题，你可以帮助我们理解你将如何为Mesquite交易提供资金。
Sure. So our expectation is to close in July and so that's a little over 30 days away. I would expect to have some color around that between now and hopefully July. So, for timing that's I think that's the best I can give you right now. You did hit the nail on the head from some of our thinking around the financing when we look at this transaction $890 million that the seller is taking 100 million of preferred equity. They have an option to take approximately a 100 million worth of common at a $16 unit price.
So, you're looking at 700 million to 800 million to finance based on the guidance that we've given for that acquisition we can finance with approximately $400 million worth of debt, and that keeps you right at your - that's putting about a 3 to 5 leverage target on the Mesquite projected EBITDA. The remaining could be funded in several different options, but our intent at this point in time is to not issue any common equity.
当然。 所以我们的期望是在七月份结束，所以距离我们还有30多天。 从现在到7月，我希望能有一些颜色。 所以，对于时间安排，我认为这是我现在能给你的最好的。 当我们看到这笔交易价值8.9亿美元卖方正在拿走1亿股优先股时，你确实从我们对融资的一些看法中砸到了头上。 他们可以选择以16美元的单价购买价值约1亿美元的普通产品。
因此，基于我们为此次收购提供的指导，我们正在寻找7亿到8亿美元的融资，我们可以用大约4亿美元的债务融资，这样可以保证您的利益 - 这就是3 对Mesquite预测EBITDA的5个杠杆目标。 其余的可以通过几种不同的方式获得资金，但我们此时的意图是不发行任何普通股权。
Okay. That's helpful. Thanks for the additional color there. I guess one on Grand Mesa and just trying to understand, you came in I guess it's a financial bottom is 129,000. You know, I guess just to confirm we expect that to move towards 150 of your full capacity over the course of this year. And then I guess, how much of the 51 million in the quarter was from marketing if we can sort of separate that out and figure out what the ramp on the volume might be versus what you're getting to marketing?
好的。 这很有帮助。 感谢那里的额外颜色。 我猜一个在Grand Mesa，只是想了解，你进来我猜它的财务底部是129,000。 你知道，我想只是为了确认我们希望在今年能够满足你的全部产能150。 然后我猜，本季度5100万中有多少来自市场营销，如果我们可以将这种情况分开，并弄清楚数量上的增长与您进行营销的速度有什么关系？
Sure so our guidance for next year on Grand Mesa is not to fill the pipeline at this point in time. Our base guidance is at run rate which is 129,000 barrels per day. Anything above that should point us towards the higher end of that guidance range. So, but our midpoint or our run rate is where our current expectation is on Grand Mesa from a guidance perspective. Round numbers that generates about $45 million net of profitability for Grand Mesa on a combined basis. So that's all of the activity associated with Grand Mesa within Grand Mesa standalone basis as well as our marketing activities around Grand Mesa and the remainder is the crude marketing business outside of the DJ.
当然，我们明年对Grand Mesa的指导并不是为了填补这个时间点。 我们的基本指导是每天129,000桶的运行率。 任何高于此值应指向我们指向该指导范围的较高端。 所以，但我们的中点或我们的运行率是我们目前对指导视角的Grand Mesa的预期。 总数为Grand Mesa的综合盈利能力约为4,500万美元。 这就是Grand Mesa独立基础上与Grand Mesa相关的所有活动以及我们围绕Grand Mesa的营销活动，剩下的就是DJ之外的原始营销业务。
Got it. Thank you for that. And then I guess lastly, Mike if I can just ask you gave some guidance on how you think about increasing the distribution and if I heard it right it was sort of a two pronged test the first thing I guess yield below 10%, and then the second bps was you know there had to be a sense that the market was rewarding distribution growth, and so I guess that the question is on that second piece of how will you gauge that and how do you sort of make that decision?
得到它了。 谢谢你。 然后我想最后，迈克，如果我可以问你如何考虑如何增加分布，如果我听到它是正确的，这是一个双管齐下的测试，我认为第一件事产生低于10％，然后 第二个bps是你知道必须有一种感觉，市场正在奖励分销增长，所以我想问题是关于第二部分，你将如何衡量这一点，你如何做出这个决定？
Sure, I think it's really just based on the common unit price reaction, are we being viewed as a growth entity or are we going to be penalized because we're raising our distribution sort of doing something else.
Okay. Thanks for the answers.
Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Mike Krimbill for any closing remarks.
谢谢。 我此时没有再提出任何问题。 我现在想把这个电话转回Mike Krimbill的任何结束语。
Well none. Thank you very much and we'll be back shortly with first quarter results. Thank you.
没有。 非常感谢，我们很快就会回到第一季度的结果。 谢谢。
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.
女士们，先生们，谢谢你们参加今天的会议。 这确实结束了今天的计划，你可能会断开连接。 每个人都有美好的一天。
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