Western Gas Equity Partners' (WGP) CEO Don Sinclair on Q2 2016 Results - Earnings Call Transcript

| About: Western Gas (WGP)

Western Gas Equity Partners, LP (NYSE:WGP)

Q2 2016 Earnings Conference Call

July 27, 2016 12:00 ET

Executives

John Vandenbrand - Director, IR

Don Sinclair - President & CEO

Ben Fink - SVP, CFO & Treasurer

Analysts

Jeremy Tonet - JPMorgan

Kristina Kazarian - Deutsche Bank

Brandon Blossman - Tudor, Pickering, Holt & Company

Selman Akyol - Stifel

John Edwards - Credit Suisse

Richard Verdi - Ladenburg

Helen Ryoo - Barclays

David Amoss - Heikkinen Energy Advisors

Operator

Good day and welcome to the Western Gas Second Quarter 2016 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to John Vandenbrand, Director of Investor Relations.

John Vandenbrand

Thank you. I'm glad you could join us today for Western Gas' second quarter 2016 conference call. I'd like to remind you that today's presentation includes forward-looking statements and certain non-GAAP financial measures.

Be aware that actual results could differ materially from what we discussed today. And I would encourage you to read our full disclosure on forward-looking statements as well as the non-GAAP reconciliations that are attached to last night's earnings release and to the slides that we'll reference on this call.

With that, I'll turn the call over to our CEO, Don Sinclair and following his remarks; we'll open it up for Q&A with Don and the rest of our executive team. Don?

Don Sinclair

Good morning, everyone. Thank you for joining us today.

Last night, we announced our second quarter results for 2016. Our quarter was highlighted by the return of our Ramsey III to full service and the completion of our Ramsey IV. Additionally, we successfully accessed the fixed income market to lock-in a very attractive cost of debt capital through our issuance of $500 million of 4.65% 10-year notes.

As previously announced, we raised the WES quarterly distribution to $0.83 per unit, which is now 11% increase over the second quarter of last year. We also raised the WGP quarterly distribution to $0.43375 per unit, which is 19% increase over the second quarter of last year.

Turning to our quarterly results. We reported adjusted EBITDA of $250.6 million and distributable cash flow of $199.3 million demonstrating another quarter of excellent performance. We delivered a healthy coverage ratio of 1.22x, which includes a receipt of $2.6 million, our business interruption proceeds in the second quarter. If you are able to include all the expected business interruption recoveries attributable to second quarter, our coverage ratio would have been 1.29x.

To-date, we estimate our total business interruption loss to be $21 million to $30 million, in addition to the $2.6 million received in the second quarter, we've received $13.7 million in July, which will be included in our third quarter adjusted EBITDA.

The drivers behind WES' first quarter results were sequential natural gas throughput growth at the DJ, Delaware and Eagle Ford assets as well as our Granger straddle plant partially offset by declines at Marcellus and Chipeta.

Our growth in crude and natural gas liquid throughput was largely driven by additional volumes falling through the Mont Belvieu fractionators.

Our gross margin per Mcf for natural gas assets of $0.84 was $0.04 higher than the first quarter primarily driven by a significant sequential increase, our DBM Complex, as Ramsey came back online.

Our gross margin for barrel, for crude and NGL assets of $2.03 was $0.04 lower than the first quarter driven by changes in our throughput mix. I'm pleased to report that Ramsey V and the related facilities were both on schedule to be placed in service no later than the end of the third quarter. We continue to evaluate, when we will start construction on Ramsey VI and now believe that earliest time of the online is in the first quarter of 2018.

Turning to our 2016 outlook, we are increasing our full year adjusted EBITDA expectation to $930 million to $970 million as a result of our strong year-to-date performance. While there is a possibility of yet another partial business interruption payment in 2016, our update guidance assumes no additional insurance proceeds this year beyond what we received in July.

We are also raising our total capital expenditures ranged to $490 million to $530 million as a result of increased capital requirements associated with the incremental activity in the Delaware basin.

The portfolios excellent performance year-to-date has reduced WES' need for additional equity. And any future WES issuances in 2016 would therefore be strictly opportunistic.

WGP's 2016 distribution growth rate will be 19% to 21% depending on the size and timing of additional WES equity issuances if any.

Finally, as it is customary during our second quarter earnings call, we will reflect back on WES' growth in successful business model. Over the past eight years, WES at times experienced economic uncertainty, operational issues, incredibly rare weather events and multiple commodity price cycles including one we are in now. Get through it all, we have been able to generate results our investors expected and we are extremely proud of this accomplishment.

WES just it's delivered 29th consecutive quarterly distribution increase and our annual EBITDA has grown to almost $1 billion. This performance across multiple cycles demonstrates that WES has a unique combination of an outstanding sponsor, scale and a resilient portfolio of quality assets that continue to perform at a very high level. We truly appreciate our long-term investors continued support.

With that operator, I would like to open up the line for questions.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jeremy Bonnet [sic] [Tonet] from JPMorgan. Please go ahead.

Jeremy Tonet

Hi. This is Jeremy Tonet from JPMorgan. Good morning, congratulations on the really strong quarter there.

Don Sinclair

Thanks Jeremy.

Jeremy Tonet

I was just wondering, if you could help walk us through a little bit some of the drivers for the increased Q2 over Q1 this year, Springfield obviously was a part of the step-up but you guys really going to beat us the upside, so just wondering if you guys break down any of the other larger component to be?

Ben Fink

I mean systemically, this is Ben, Jeremy. Systemically, it's growth in the DJ, Delaware and Eagle Ford, everything else kind of flat to declining. I mean the real growth is obviously the Ramsey Complex, right? Sequentially, you had virtually no volumes going through it in the first, now, we are back in business in the second and what you will see not only is the increase in volumes, but obviously, an increase in gross margin per Mcf sequentially.

Jeremy Tonet

That's great. Yes. That leads to next question as far as, we've seen the margin per unit mix shift really kind of lift, I'm guessing that this is due to the mix shift changing from wet to -- from dry to wet gas. And I'm just wondering, is the unit margin we saw in the quarter is that kind of more of a steady rate or is there kind of more mix shift, where you could get uplift quarter-over-quarter for the rates you are getting there?

Ben Fink

Well, you are correct Jeremy. That's the biggest driver of our blended gross margin per Mcf is our throughput mix. And I will remind you that we previously guided that we do expect to decline at Springfield and so that's a very high margin asset that we do expect to start declining next quarter.

However, keep in mind that probably the biggest driver this quarter was that increase in margin per Mcf at Ramsey. When you have virtually no volumes going through a plant and you are still incurring costs, you actually have negative margins, right? So that's one from negative to positive and as we continue to ramp-up the plant hopefully that margin will even improve a little bit. So when you look at our 2Q versus 1Q, Ramsey is the key driver. When you go up beyond that it's going to really be throughput mix. Hope, we will see some benefit at Ramsey, but you will see declines at Springfield.

Jeremy Tonet

Great. Thanks for that. And just looking up the guidance you guys, out right there, it seems like the back half of 2016 implies kind of a lower run rate, if you just annualize kind of 2Q and appreciate that there is going to be some declines in Springfield as you noted, but, seems like there is a lot of action with Ramsey ramp-up there. Just wondering, what drives kind of the lower end versus the higher end, is there a lot of conservatism baked in here?

Ben Fink

We did try to be prudent when setting the initial range, right? When we looked at this year, we were trying to predict the timing of the start-up of two processing plants and two new processing plants coming online that were damaged. And so, we need to have a lot of conservatism since the timing will impact our results, and so far not gone where things have been going as planned.

Between now and year end, I think you are right, drivers are kind of timing and speed of Ramsey volumes, significance of Springfield declines, obviously, we saw a growth in Springfield this quarter as Anadarko got efficient with its capital and brought 40 wells online, which is a real benefit to us. So those are the things that I think could really drive low end versus high end of the range.

Jeremy Tonet

That's helpful. And thank you for all the color. One very last one, if I could. I'm just wondering, with regard to all the activity in the Permian and Delaware, keep hearing a lot about growth there with Anadarko and others, I'm just wondering, if you could provide any thought for us as far as what that could mean on the water business opportunities that you guys see having kind of a leading position in the area that you operate there?

Don Sinclair

Jeremy, this is Don. Obviously, we look at the water business as a perfect bolt-on to our existing mid-stream business in gas and crude. If you think about it today, Anadarko is already into water business, there -- and dispose the barrels from the wells they produced today. And so that business exists within APC, it's just not been started in WES. So, we are in the middle of the process of putting that business model together and getting it in place so we can go and out offer additional service to the producers that are behind our existing assets today.

And as you mentioned, obviously, have an APC and be able to build infrastructure on their behalf as well as third parties, that's a huge benefit to us.

Jeremy Tonet

Great. That's it for me. Thank you very much.

Don Sinclair

You are welcome, Jeremy. Thank you.

Operator

Our next question comes from Kristina Kazarian from Deutsche Bank. Please go ahead.

Kristina Kazarian

Hey, guys. How are you?

Ben Fink

Good morning.

Kristina Kazarian

Quick question on my side. Don, I know the press release talked about the CapEx increasing, you mentioned increased activity associated with the Delaware, can you maybe a talk -- give a little more color around what you are seeing here, any particulars, or thoughts?

Don Sinclair

I think there was a couple of things Kristina that should -- that at least we have looked at as far as how we've continued to expand capital in West Texas. One is, as Anadarko mentioned in their call today, they have six rigs standing up and so that's an activity level that we continue to put midstream gathering and compression infrastructuring for as well as we have been successful in the third-party side of the business and signed some new contracts out there. And so along with those contracts come CapEx, so those have really been our drivers as far as increased CapEx in West Texas so far.

Kristina Kazarian

And then, in the third-party side, saw some further being able to capture this business, you maybe expecting more here.

Don Sinclair

But, we hope so.

Kristina Kazarian

All right.

Don Sinclair

Not that. It's very competitive out there. We think our footprint and the quality of infrastructure we have as well as our relationships and performance even within Ramsey, give us a distinct advantage. So we continue to pursue that business and continue to have a very high level of success.

Kristina Kazarian

Perfect. And then, can you provide an update and status of the Delaware basin express pipeline; just remind me what I should be thinking here in terms of timing and general thoughts?

Don Sinclair

Well, I will kind of start with how we looked at project. We still believe, we collectively, I think that's WES, Anadarko and the producers out in West Texas. Waha is going to be superior pricing hub and a quality market to have interconnectivity with. And so with asset, as we said before it's not, if it's win, right now, in the short-term perspective producers have ample capacity to move their gas. So there is no short-term issues that are driving long-term decisions, long-term decisions are really being driven on strategic development of the resources.

So, if you think about kind of the process producers go through, I think that the key is going to be when they set their 2017 budgets, and then, they are going to start forecasting from their which is going to be the first time in quite sometime that they have had a higher price. We believe to have a higher price than they did to prior year. And we think that's going to start driving the activity and the decisions. In the meantime, we continue to aggressively work on the project.

Kristina Kazarian

Perfect. And one last quick housekeeping item for me. Can you talk about the remaining timing or the timing on the remaining payment you are expecting from the business interruption insurance? I know you gave me a July number, it looks like but how do I think about the remainder of the 3Q and if I'm expecting anything in 4Q?

BenFink

Okay. This is Ben. As Don stated in his remarks, we are not putting any more payments in the guidance above and beyond what we've received in June and July. It's really hard to predict the timing of actually receiving a cash payment. I think an additional payment whether it's a full payment or partial is possible, most likely in the fourth, but I wouldn't be surprised if that got pushed into the first quarter either. It's almost 50:50 call at this point.

As we mentioned, our total claim to-date is $21 million to $30 million is the range; it's possible that might increase a little bit in the third quarter. We will see about that. But, it would be the delta between the $16.3 million we received and whatever that final claim number is, is what we would expect at a later date.

Kristina Kazarian

Perfect. Thanks for the color there. Nice job on volumes also guys.

Ben Fink

Thanks.

Don Sinclair

Thank you.

Operator

Our next question comes from Brandon Blossman from Tudor, Pickering, Holt & Company. Please go ahead.

Brandon Blossman

Good morning, guys.

Ben Fink

Good morning.

Don Sinclair

Good morning, Brandon.

Brandon Blossman

Let me start with a CapEx question, the $40 million of incremental CapEx, is that mostly related to the third party contracts, or is that kind of shared between Anadarko and third party?

Ben Fink

It's shared.

Brandon Blossman

Okay. Related to that, Don, you suggested in other conference as well that Delaware in particular is getting to be a pretty competitive space for midstream, are you seeing, say per unit margin erosion, or is it just a little bit more work to capture that incremental business?

Don Sinclair

We haven't seen the margin erosion. It's just people trying to decide, if they want to go out and put infrastructure in place without contracts, and so you have that as a backdrop, but you continue to see producers understand that, when you look at WES, we have over $3 billion invested just ourselves in West Texas. We are investment grade and they can see that we are -- we have a sustainable business model out there. And that really has helped us significantly in differentiating ourselves from some of the other competitors.

Brandon Blossman

Okay. That sounds like good news and that's useful color. And then, I will just -- final question, more of an open question. You guys operationally look like you are pretty close to nailing of the goals for 2016; you got just Springfield drop done early or late last year. So full year 2016, almost in terms of EBITDA growth there. Is there any other goals that you have on your plate for 2016 that you are looking to execute against, or we kind of turning our attention to 2017?

Don Sinclair

Well, I think we are a little more superstitious than you, Brandon. So, I'm not sure you would hear us say that, that we've nailed it. Obviously, we are feeling very good about 2016 given that we've adjusted our outlook. Around this time, we will be in the budgeting process pretty soon and our focus will be on next year.

Brandon Blossman

Okay. Fair enough. That's it from me. Thanks guys.

Operator

Our next question comes from Selman Akyol from Stifel. Please go ahead.

Selman Akyol

Thank you, again, and good morning guys.

Don Sinclair

Good morning.

Selman Akyol

Couple of quick questions here. So, in the Anadarko call this morning, they talked about record production up in the DJ, allowing expense down by 15%. Are you guys seeing an acceleration there?

Don Sinclair

What we are seeing Selman, this is Don. We are the beneficiary of Anadarko continue to increase their already -- what we think industry standard performance from high level to even a higher level. And so they are basically getting better performance out of the wells and the capital. And so we are the beneficiary of that as far as any other forecast of increase, I think it will be depending on what APC does.

And as I said earlier, they feel like to have a clear line of sight to $60 crude market and with that -- as they generate incremental cash from divestitures and that commodity strip, it will be deployed in the DJ and the Delaware as well as Gulf of Mexico. So, we were cautiously optimistic of those events, but feel good about our position.

Selman Akyol

Okay. And then, previously, when talking about Springfield, you mentioned that -- is aided by Anadarko bringing on 40 wells. Can you just discuss sort of what's your assumption and guidance there for the remainder of the year, what they do within the Eagle Ford?

Don Sinclair

In the guidance that we gave at the time of drop, which was the multiple of 2016 EBITDA, 2017 EBITDA et cetera. We've seen that they would complete a few more wells and then activity would start. And you would start to decline and that's what still in their model.

Selman Akyol

Okay. Appreciate color there. And then…

Don Sinclair

Anything additional that they do would be upside to our forecast.

Selman Akyol

Got you. And then, I know you talked about starting in the Delaware third party, trying to sign additional third party there. I know there partner was Shell down there. Can you if that's -- what are the potentials that you are dealing with down there? Or do they have their own gathering processing?

Don Sinclair

They do not -- they utilized third parties mainly ourselves, we have existing contracts with Shell. We are always continued to try to improve and extend our commercial relationship with them and now it's not any different than before.

Selman Akyol

All right. Thanks for all the color.

Operator

Our next question is from John Edwards from Credit Suisse. Please go ahead.

John Edwards

Yes. Good morning everybody, and congrats on a nice quarter. Just -- Don, you were talking about in your prepared remarks about there is a Ramsey VI on the way, so naturally question giving the opportunity just sort of expand -- how many Ramsey's do you see coming?

Don Sinclair

Well, that's hard to forecast on a good day. Here is how we kind of look at it today. As Ben stated, we've seen increased volume since we brought Ramsey III and IV are up. And we will see increased volumes as V comes on. Our thought is relative specifically to Ramsey VI and I mentioned it in the remarks as, we are looking at possibly Q1 2018. And the thought around that is, is you have producer to start their capital budgets for 2017, they will start giving us new and updated forecast.

If you remember from previous conversations, we can put that plant in service and roughly 12 months when we start construction. And so we think relative to the sequential line, we are looking to have installing plants at Ramsey that that will be the right time to look at it, which will bring on the incremental -- an incremental [turn me] [ph] today in the first quarter of 2018. Beyond that, it's really is a function what commodity strip does and did the producers continue to see improved performance across resource development.

John Edwards

Okay. Thank you for that. And then, just kind of tacking back to the drivers behind the higher CapEx. I just want to kind of ask about it in a little different way because you've already made some comments there. And that is that the Anadarko CapEx was actually down for Q2 toward the -- I think either at or below -- low end of their guidance. And then, they left their 2016 guidance unchanged, but you raised your guidance. I mean, can you just give us sort of a contextual comment regarding that against what Anadarko is doing?

Don Sinclair

I mean I don't think Anadarko is the only producer that is able to do more with less, all right. So, our CapEx at the worst level is driven by the volumes, we get. As we get incremental volumes relative to our forecast, whether it's from Anadarko or third parties that means more capital for us, hooking them up and maybe additional gathering line, trunk line et cetera. And so more volumes for us, more capital is that simple.

John Edwards

Okay, great. All right. And then, just -- can you explain a little bit, I mean you got some footnotes and things there is on the accounting on the lower interest expense, I think was down sequentially 60% then there was -- this add back comment. Can you just kind of re-enlighten us or if it's too opaque or detail, we could take it offline. But, I just thought, I would ask the question.

Don Sinclair

I'd rather talk about it online. I think it's an important question. And it deserves an explanation. Big picture, interest expense, would have been $28.3 million. And then, we had a $15.4 million reduction to that figure, which is our revision and incretion expense. And so what is that relate to? It all relates to our early 2015 drop down of Delaware basin joint venture assets. If you remember the structure that we utilized, we don't make a payment until 2020, all right. And so we had an estimated payment on the books that we thought we are going to make in 2020 and the present value of that is booked as a liability.

Now, our estimate is based on forecasts, in case I don't remember, it's based on a formula which is 8x the average of 2018 and 2019 EBITDA, less the aggregate CapEx you spend between early 2015 and February 2020, so all the inputs of that formula are forecast driven. So as those variables change that liability is going to change. And so first and more importantly, the important think to remember is that, this is going to change multiple times between now and 2020 because our forecasts has changed as you get new information from your customers.

So what happened this time that caused the liability to go down, very simply, the new forecast we received, actually had a bigger ramp in the back half of the agreement. So we actually had steeper volume, measured growth in the 2020 to 2025 range. That is two impacts on the formula as I described, one, more capital, especially in like 2018 through 2020, they get their steeper ramp.

But also, two if you are familiar with how cost of service agreements work. You will be getting slightly lower rate in those earlier years because you are getting more volume and those out years which gets to your agreed upon return on invested capital.

So, when you put all that together, the net effect on our deferred purchase price allocation that's gone down. And I will stress once again that this will not be the last time you see adjustments in that estimate because it's all forecast driven. Was that helpful?

John Edwards

Yes. That was very, very helpful. And that reminded me you would -- you had warned us about that, I'd forgotten about that. But, you had warned us, it was going to come. So it's -- I guess logically, then this is going to go up. This is going to go down just depend on the data inputs you are going to be given.

Don Sinclair

That's correct, John.

John Edwards

Okay, great. And are there any updates on fixed price extension agreements with Anadarko, I mean, it could be nothing, but I thought it has to be thorough here?

Don Sinclair

No. But, in fairness, those decisions are always made in the quarter before they expire. So it's just normal course of business.

John Edwards

Okay, great. And anything on counter party risk, any updates there?

Don Sinclair

I think our counter party risk is inline with what we disclosed. I believe it was last quarter, two quarters ago, where we showed the credit party -- the credit rating breakdown of our major upstream customers. No big changes.

John Edwards

Okay, great. All right. Thank you very much.

Operator

Our next question comes from Richard Verdi from Ladenburg. Please go ahead.

Richard Verdi

Hi. Thanks for taking my call in. Nice quarter here. I wanted to follow-up on something here, earlier when addressing one of the prior inquires, I think it was Ben maybe, you had mentioned that it was gross margin per Mcf was up because of this Springfield and bringing Ramsey online where the revenue is now covering the cost. On the throughput revenue per Mcf, can you please share with me what drove that in Q2 because it meaningfully outperformed my estimate and it was up nicely, sequentially and year-over-year, I'm wondering if that's sustainable moving forward for modeling purposes?

Ben Fink

Just to be clear, you are referring to the gross margin for natural gas assets of $0.84, is that your question?

Richard Verdi

No. Throughput revenue per Mcf is $1.22? Because you talked about gross margins earlier, I'm looking at $1.22 -- throughput revenue per Mcf?

Ben Fink

Okay. Well, revenue per Mcf, what you must be calculating on your own, it's driven by change. You get more revenue per Mcf in wet gas areas than you do, dry gas areas because you are providing more services, right? You are providing gathering and processing as opposed to just gathering.

The state of the market right now is that, if you have growth anywhere, it's in wet gas areas because people are drilling for crude. And therefore, that should trend up over time, right? Because you are just seeing your higher revenue assets grow such us as in the DJ and Delaware and our lower -- our lower revenue per Mcf assets declined.

I would caution you that revenue can be misleading and I would encourage you to focus on gross margin per Mcf only because that seems to more indicative of profitability of those Mcf.

Richard Verdi

Okay. Great. Thank you. That's great color Ben. And then, just one last question, it's also kind of a follow-up on earlier callers inquires on the water business, you know, that could be something that's really significant. I mean there is a lot of avenues that could be played. You can dispose of the water. You could either gather the water, treat it and then transport it back to Anadarko.

I mean, could you maybe just give us a little bit of color of what you guys are thinking here, if you were to move down that -- into that field. Where would you start and would stay there, or would it be something that could really evolve into gathering water, treating it and then bringing it back, something bigger over the next 10 years maybe?

Don Sinclair

Richard, the water business is still in very infant stage in West Texas. How, we looked at our initial steps is, we are going to look at disposing or produced water. So we do not see going into the fresh water delivery business is going to be disposal of produced water, which will also have some treatment component to it, but it wouldn't be significant, it really be -- will be driven by transportation disposal. And so that will be our first step and then we will see where the market and the opportunity take us from there.

Richard Verdi

So, will it be fair maybe Don, if I could take that as that business is successful than we are going to look to try to really build upon that and it makes -- further exploit that opportunity?

Don Sinclair

You would like to think so. Richard, it's always our objective. It's fine. Commercial opportunities that we think we are pretty good at and expand on them. And so we don't see water being exception to that rule.

Richard Verdi

Okay, great. Thank you for the time guys. And congrats again on a good quarter.

Ben Fink

Thank you.

Don Sinclair

Thank you.

Operator

Our next question is from Helen Ryoo from Barclays. Please go ahead.

Helen Ryoo

Thank you. Just a couple of quick questions, related to the -- your explanation on the DB JV that the change in sort of forecasted rose on that asset. Just wondering, the -- what's your assumption based on the new forecast on that asset, what you're expected to spend going forward, I think at the time of the drop down, you did indicated some spending opportunity every year, and I wonder if that has changed quite a bit given it was more backend loaded nature of that growth? So between now and let's say 2018/2019 timeframe of what do you see in terms of capital?

Ben Fink

I think relative to the initial forecast, Helen. Remember that initial forecast was early 2015. We'll probably be spending a little less in 2016, you know, what happened to commodity prices earlier this year, right? But, more now in kind of the 2018/2019/2020. And so that aggregate CapEx over the five years has gone up, right here, right now, that aggregate CapEx increases, it's about $100 million over the five year period. But, I can't stress this enough, it's going to keep changing just because it's forecast driven.

Helen Ryoo

Okay, great. The aggregate the numbers up but in terms of the timing is much more closer to 2020 versus near term?

Ben Fink

Yes. That's right.

Helen Ryoo

Okay. Now, Anadarko has six rigs running in Delaware, is that all behind your assets and is there anything running behind DB JV at this point?

Ben Fink

They are all behind DB JV.

Don Sinclair

They are all behind DB JV or Haley, all six.

Helen Ryoo

Okay. So Ramsey is all third-party bid?

Ben Fink

Yes.

Don Sinclair

Yes.

Helen Ryoo

Okay. Got it.

Ben Fink

And there is third party behind DB JV as well.

Helen Ryoo

Okay, great. And then, on the Springfield, I guess, when you announced that acquisition, the MVC was set at like 75%, or you sort of running at that level currently? Or is it….

Don Sinclair

We are well above it, right? Because we are at basically forecasted volumes and then MVC was set at 75% of forecasted volumes.

Helen Ryoo

Okay. Got it. Got it. So that's why there is some downside. But, I guess, the downside there is a protection at downside.

Don Sinclair

Best practice.

Helen Ryoo

Okay, great. And then, just lastly, basic through, when I think about your appetite for M&A, I guess, you have some JV assets that -- that JV interest is owned by third parties. Is that -- when you think about a third-party asset acquisition versus buying in your JV interest, I mean is that sort of -- do you have as much appetite in doing some of that versus just going out and buying the third party assets?

Don Sinclair

Helen, does, every asset transaction starts to take, you got to have a willing seller. So we will look for the willing seller whether it's in a JV asset or in third party and determine, if it fits the portfolio. And if we think it's a good solid accretive acquisition for us.

Helen Ryoo

Thank you very much.

Ben Fink

Thank you, Helen.

Operator

Our next question is from David Amoss from Heikkinen Energy Advisors. Please go ahead.

David Amoss

Good morning guys. Trying to get a feel for the ramp in EBITDA at Ramsey over the next couple of quarters, so a month of III and IV in the second quarter? And then, [III] [ph] and V coming on in the third quarter. If we look at 4Q 2016 as sort of the run rate when all of your capacity is online, can you talk about the ramp in EBITDA between 2Q and 4Q for that facility?

Don Sinclair

Just going to have to wait and see David. I mean the reason we have such a large range in our outlook is exactly that question, right? And when you turn to plan online, you don't know the volumes are going to get until you actually get them. And so, as we get closer to the date maybe we can give you a little more color.

David Amoss

Okay. Fair enough. And then, on the Springfield asset, given that Anadarko brought on 40 wells in the second quarter and it seems like in the guidance that's a lot of the activity that you have modeled for this year. Is there a base decline assumption that you can give us if -- say that Anadarko was not the -- to really have anymore activity for the rest of the year?

Don Sinclair

Just refer to the guidance we already gave. And when you look at the guidance we gave in terms of multiples of 2016 and 2017 purchase price, you have a good idea of the decline.

David Amoss

Okay. Thank you very much. Appreciate it.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Don Sinclair for any closing remarks.

Don Sinclair

I'd like to thank everyone for joining us today. also like to welcome John Vandenbrand to the team at WES as far as you see him this is his first foray into WES. But, he has been associated with this asset specifically in West Texas for quite some time. We talked about commercial successes in West Texas there is directly correlated to John's previous job. With that, we all look forward to seeing you again soon. Thank you.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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