The EnLink Midstream companies (EnLink), EnLink Midstream Partners, LP (the partnership or ENLK) and EnLink Midstream, LLC (the general partner or ENLC), reported financial results for the fourth quarter and full year 2016, reaffirmed guidance outlook for full year 2017, and provided an operational update.
"In 2016, we performed well and are proud of the accomplishments achieved during a volatile and challenging commodity environment," said Barry E. Davis, Chairman and Chief Executive Officer of EnLink. "The team focused on executing our strategic growth plan and we are stronger today due to the progress made this year. We delivered on financial and operational priorities, and exited the year on track.
"We are seeing favorable developments on our asset footprint, as producers increase investments, accelerate drilling programmes and experience higher well productivity. We expect the momentum of producer activity to continue throughout 2017, and our current plan remains to exit the year with an annual adjusted EBITDA run rate net to ENLK between US$925 million and US$950 million, which represents approximately 20% growth compared to 2016's adjusted EBITDA."
ENLK: 4Q16 and full year 2016 financial results
ENLK reported a net loss of US$29 million for the 4Q16, and US$565 million for the full year 2016. The full year 2016 net loss was primarily due to a non-cash expense of US$566 million related to impairments. Comparatively, ENLK reported a net loss of US$714 million for the 4Q15, and a net loss of US$1.4 billion for full year 2015. The full year 2015 net losses were again primarily due to non-cash expenses related to impairments.
ENLK achieved US$195 million of adjusted EBITDA net for the 4Q16 and US$775 million for the full year 2016. Adjusted EBITDA net to ENLK was US$186 million for the 4Q15, and US$678 million for the full year 2015.
ENLK achieved net cash provided by operating activities of US$153 million for the 4Q16, and US$663 million for the full year 2016. Comparatively, net cash provided by operating activities of $138 million was reported for the 4Q15, with full year 2015 results being US$646 million.
Distributable cash flow attributable to ENLK was US$146 million for the 4Q16 and US$607 million for the full year 2016. Comparatively, distributable cash flow was US$149 million for the 4Q15, and US$529 million for the full year 2015. Distributable cash flow is a non-GAAP measure and is explained in greater detail under ‘Non-GAAP Financial Information’.
Growth capital expenditures net to ENLK for full year 2016 were US$465 million, slightly above the midpoint of the guidance range of US$425 million to US$490 million. ENLK 2017 growth capital expenditures guidance net to ENLK is still expected to be in the range of US$505 million to US$645 million.
ENLC: 4Q16 and full year 2016 financial results
ENLC reported a net loss of US$4 million for the 4Q16 and a 2016 full year net loss of US$460 million. Comparatively, ENLC reported a net loss of US$195 million in the 4Q15, and a net loss of US$355 million for full year 2015. As previously mentioned, the net losses are primarily due to non-cash expenses related to impairments.
ENLC’s cash available for distribution was US$52 million for the 4Q16, and US$202 million for the full year 2016. Comparatively, cash available for distribution was US$48 million in the 4Q15, and US$199 million for the full year 2015.
ENLK 2017 full year guidance reaffirmed
Full year 2017 net income midpoint for ENLK is projected to be US$100 million and adjusted EBITDA midpoint net to ENLK is projected to be US$850 million. Year over year growth in excess of 10% is forecasted related to annual adjusted EBITDA midpoint guidance from 2016 - 2017. EnLink's 2017 guidance reflects a reduction to adjusted EBITDA related to announced non-core asset sales.
Distributable cash flow for 2017 is projected to range from US$590 million - US$650 million, and ENLK is projected to exit 2017 with a distribution coverage ratio in excess of 1.0, assuming flat distributions throughout 2017. EnLink expects to continue to build excess coverage during 2017, supporting the potential to resume distribution growth during 2018.
ENLK's debt to adjusted EBITDA ratio for 2017 is projected to be in the range of 3.75 - 4.0, with no near term debt maturities. EnLink is committed to maintaining a strong liquidity position with ample revolver capacity.
Growth capital expenditures funded solely by ENLK continue to be projected to range from US$505 million - US$645 million for 2017. A mid single digit adjusted EBITDA multiple is projected to be achieved from 2017 organic capital investments. Total growth capital expenditures are projected to range from US$610 million - US$770 million, including contributions from joint venture partners and ENLC of approximately US$105 million - US$125 million. Growth capital expenditure ranges exclude the US$250 million installment payment related to the acquisition in January 2016 which was paid in January 2017.
Proceeds from planned and completed asset sales and at-the-market equity issuances are expected to generate sufficient capital for the equity-funded portion of ENLK's 2017 growth capital programme.
ENLC full year 2017 financial guidance reaffirmed
Full year 2017 net income midpoint for ENLC is projected to be US$75 million and cash available for distribution midpoint for ENLC is projected to be US$220 million.
ENLC's distribution coverage ratio for 2017 is projected to be in the range of 1.1 - 1.2. Flat distributions are expected throughout 2017, with the potential for distribution growth resumption as excess coverage reaches the high end of the projected range. Management is considering the potential to recommend the resumption of distribution growth at ENLC before resuming growth at ENLK in light of excess coverage at ENLC.
Growth capital expenditures for ENLC's interest in central Oklahoma assets is expected to range from US$60 million - US$70 million for 2017, with a mid single digit adjusted EBITDA multiple projected to be achieved from 2017 organic projects.
Cash income taxes are projected to be approximately US$5 million per year for each of 2017, 2018 and 2019.
Throughout 2017, EnLink plans to increase gas processing capacity in central Oklahoma at the Chisholm complex by 400 million ft3/d. EnLink's previously announced Chisholm II plant is expected to be operational in the second quarter of 2017, and the Chisholm III plant is expected to be operational by the end of 2017. Once the expansions are completed, EnLink will operate approximately 1 billion ft3/d of processing capacity in central Oklahoma, and will continue to be one of the largest gas processing providers in the STACK. Central Oklahoma is EnLink's fastest growing core area, and is expected to become EnLink's largest operating region.
ENLK formed a strategic joint venture with NGP during 2016. The first joint project was the completion of phase one of the Lobo II footprint expansion, which included the installation of a cryogenic natural gas processing facility with capacity of 60 million ft3/d and approximately 80 miles of natural gas and liquids gathering pipeline infrastructure in Loving County, Texas, and Lea and Eddy counties, New Mexico.
EnLink recently announced commercial success in the Delaware Basin with the signing of an additional long term, fee-based contract with a large investment grade producer who is very active in the region. The new business has accelerated the timing of phase two of the Lobo II footprint expansion, which includes increasing processing capacity from 60 million ft3/d - 120 million ft3/d.
The volume commitments associated with this new contract are expected to utilise the majority of the expanded processing capacity. Phase two is now underway, and the additional capacity is expected to be operational during the 2Q17. Once the expansion is complete, EnLink will operate a total of 155 million ft3/d of processing capacity in the Delaware Basin.
EnLink's natural gas system is located in the core of the Midland Basin, and the company completed a cost-effective gas processing expansion in 2016, which created approximately 30 - 40% of additional capacity to support volume growth as incremental drilling activity continues throughout 2017. EnLink also has the majority of infrastructure in place to cost effectively expand the Riptide gas processing facility by an additional 100 million ft3/d as volumes continue to grow.
ENLK announced plans in 2016 to construct a new crude oil gathering system in the Midland Basin called the Greater Chickadee crude oil gathering project. The project is progressing very well and has expanded in scope due to the addition of new customers, volumes and dedicated acreage. The initial phase of the Greater Chickadee project became operational in early November 2016, and full service is on-track to be operational during 1Q17.
Record volumes were achieved on the ENLK’s Louisiana gas system during the 2H16, as demand across the footprint was strong and ENLK continued to enhance operational capacity and capture new business.
EnLink's natural gas liquids (NGL) system experienced short term weakness in volume throughout 2016. However, this weakness, is expected to reverse in early 2017, as NGL output increases on ENLK’s central Oklahoma system. It is expected that throughput on ENLK’s Cajun-Sibon pipeline should reach capacity in the 2Q17, coinciding with the expansion of the Chisholm complex, which is expected to benefit the entirety of the company's Louisiana NGL footprint.
Devon recently announced initial capital investment increases during 2017 related to their Barnett Shale operations, and plans to invest up to US$50 million of capital in the Barnett to optimise base production and further de-risk future development activity. Devon announced that its initial investment will focus on horizontal refrac activity and the initiation of a drilling pilot of five to 10 wells. Devon also noted that additional capital could be allocated to the Barnett in 2017 as these projects have the potential to deliver highly competitive returns.
During 2016, gathering volume declines were slightly above expectations, and averaged 8%. As forecasted for the mature basin, volumes declines will continue during 2017, and the projected reduction for gathering and transmission volumes is around 10% when comparing 2016 - 2017, and normalising for the north Texas pipeline sale. EnLink is currently evaluating the benefit that Devon's announced investment plans will have on volume uplift in the near to mid term, however, cash flows from the asset base are expected to remain stable for 2017 due to the minimum volume commitments in place. Devon's announcement of new investment activity is an encouraging step forward to the potential redevelopment of the legacy field.
Read the article online at: https://www.worldpipelines.com/business-news/15022017/enlink-midstream-provides-operation-and-financial-updates/