Shell Midstream Partners LP (SHLX) CEO Steven Ledbetter on Q4 2021 Results - Earnings Call Transcript

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Shell Midstream Partners LP (NYSE:SHLX) Q4 2021 Earnings Conference Call February 24, 2022 11:00 AM ET

Company Participants

Shawn Carsten - CFO, VP & Director, Shell Midstream Partners GP LLC

Jamie Parker - IR Officer

Steven Ledbetter - President, CEO & Director, Shell Midstream Partners GP LLC

Conference Call Participants

Operator

Good morning, ladies and gentlemen. My name is Olivia, and I will be your conference operator today. At this time, I would like to welcome everyone to today's webcast for Shell Midstream Partners. [Operator Instructions].

I will now turn the call over to Jamie Parker, Investor Relations Officer. You may begin your conference.

Jamie Parker

Thank you. Welcome to today's webcast for Shell Midstream Partners. With me today are Steve Ledbetter, CEO; Shawn Carsten, CFO; and Sean Guillory, VP, Commercial and Business Development.

Slide 2 contains our safe harbor statement. We will be making forward-looking statements related to future events and expectations during the presentation and Q&A session. Actual results may differ materially from such statements and factors that could cause actual results to be different are included here as well as in today's press release and under Risk Factors in our filings with the SEC.

Today's call also contains certain non-GAAP financial measures. Please refer to the earnings press release and Appendix 1 of this presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. We will take questions at the end of the presentation.

And with that, I'll turn the call over to Steve Ledbetter.

Steven Ledbetter

Thanks, Jamie. Good morning, and welcome to our fourth quarter earnings webcast. No doubt, you have all seen the recent announcements that our Board received a nonbinding preliminary offer from Shell Pipeline Company to acquire all of our remaining publicly held units at $12.89 per unit. The Board has appointed a conflicts committee to review, evaluate and negotiate the offer. Of course, if a transaction materializes, it would be subject to a number of contingencies, including Board and conflicts committee approval as well as the execution of a definitive agreement.

For now, we are continuing business as usual. We will continue to focus on delivering unitholder value by fueling stable, ratable cash flows and honoring our contracts and commitments to our customers and partners. Our day-to-day business focus has not changed and will remain steadfast throughout the process. In light of the announcement, we will suspend providing forward guidance as well as our formal unitholder engagement program, such as attending investor conferences and road shows. We will, however, continue to report on our operational and financial performance as usual.

So with that, I'll turn it over to Shawn to walk through the financial results for the fourth quarter. Shawn?

Shawn Carsten

Thanks, Steve. So first, let me cover a few of our key financial metrics for the quarter. Our total revenue was $141 million, an increase of $13 million from the third quarter. Now this increase was primarily related to increased transportation revenue as our assets returned to normal operations following the hurricane impacts experienced in Q3.

Operating expense was $87 million, up about $8 million from the prior quarter, and this was mostly due to timing of Norco maintenance expenses being delayed by the storm in Q3. Income from equity investments was $59 million, down about $27 million from the prior quarter, mostly related to an impairment charge recorded by Colonial. Now all of this was partially offset by increased earnings from Mars and Amberjack.

So with all this, adjusted EBITDA attributable to the partnership was $167 million. And after interest expense, maintenance capital and other adjustments, total cash available for distribution was $142 million. Our partnership declared a distribution of $0.30 per LP unit. Now this resulted in a coverage ratio for the quarter of 1.2x. And finally, we incurred $4 million of maintenance CapEx in the fourth quarter, and this is a mix of various routine maintenance projects across the assets. And as of December 31, the partnership had total debt outstanding of $2.7 billion. Now this equates to a debt-to-EBITDA ratio of 4x based on an annualized Q4 adjusted EBITDA.

In light of the offer from Shell and our suspension of forward guidance, the Q&A portion of our call today will be limited to our operational and financial performance for the fourth quarter. We'll not be able to elaborate any further regarding Shell's offer, and we will not be able to take questions relating to future guidance or future performance. So thank you again for joining our call today.

Now it doesn't look like we have any questions in the queue.

So with that, I'll turn the call back over to Jim.

Jamie Parker

Everyone, we thank you very much for your interest in Shell Midstream Partners. If you have any follow-up questions following today's presentation and call, please feel free to call me directly. My contact information can be found on the presentation materials as well as on our website, shellmidstreampartners.com.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

Question-and-Answer Session

Q -

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