EnLink Midstream LLC (ENLC) 2014 Q3 法說會逐字稿

Welcome to the EnLink Midstream Partners LP third-quarter 2014 financial results conference call.

(Operator Instructions)

Please note that this call is being recorded today Wednesday, November 5, 2014 at 10:00 AM Eastern time. I would now like to turn the meeting over to Ms. Jill McMillan of EnLink Midstream. Please go ahead.

Thank you, Jeremy, and good morning, everyone. Thank you for joining us today to discuss EnLink Midstream's third-quarter 2014 results. With me on the call are Barry Davis, President and Chief Executive Officer; Mike Garberding, Executive Vice President and Chief Financial Officer; Steve Hoppe, Executive Vice President and President of the Gathering, Processing, and Transportation business; and Mac Hummel, Executive Vice President and President of the Natural Gas Liquids, Crude, and Condensate business.

We issued our third-quarter 2014 earnings release this morning, and will file the 10-Qs later today. To accompany today's call we have posted presentation slides and the earnings release on the investor relations portion of our website. If you would like to listen to a recording of today's call, you can access a webcast replay on our website.

I will remind you that any statements about the future, including our expectations or predictions, should be considered forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are subject to a number of assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements, and we undertake no obligation to update or revise any forward-looking statements.

We will discuss certain non-GAAP financial measures and you'll find definitions of these measures, as well as reconciliations of these non-GAAP measures to comparable GAAP measures, in our earnings release. We encourage you to review the cautionary statements and other disclosures made in our SEC filings, specifically those under the heading Risk Factors.

In a moment I will turn the call over to Barry, who will highlight management's perspective, and a summary of our financial results for the third quarter. Steve and Mac will then provide an operational overview. Finally, Mike will review certain financial results from the quarter, and in particular, those topics that relate to our balance sheet and cash flow.

I would also like to remind everyone of our upcoming analyst and investor conference, which will be held in New Orleans in 2015 on March 30 and 31. We issued a save the date last week, and we will send more information out soon. I will now turn the call over to Barry.

Thank you, Jill, and good morning, everyone. We are excited to have the opportunity to communicate with you this morning about the progress we're making at EnLink Midstream. We are proud of the exceptional level of execution across all of our businesses in current operations and growth.

Earlier this year, we laid out four avenues of growth, which will enable us to reach our goal to double the size of EnLink Midstream by the end of 2017. We laid out a clear plan, and are executing on that plan, with tremendous progress made in the third quarter. We recently announced the completion of approximately $1 billion of organic growth projects, which include the Cajun-Sibon expansion project in South Louisiana, and a portion of the Bearkat project in West Texas. Just over the last 90 days, we have announced projects and acquisitions totaling approximately $1 billion in additional new capital, utilizing each of our four strategic growth avenues.

If you turn to page 4 of the presentation we posted today on our website, you can see an illustration of these efforts. The projects we've announced include an approximate $200 million drop-down from our GP, a $235 million strategic acquisition in South Louisiana, a $250 million Expansion Project to enhance our ORV condensate position, a $200 million expansion of our West Texas position to serve Devon and other producers, and over $50 million in expansion of our Cajun-Sibon project to serve Marathon.

We are excited about these opportunities, not only for the good returns, and the near-term impact it will make, but also long-term, as they increase our strategic footprint for future growth. These projects represent key steps that will help us achieve our goal of doubling the size of the Company by the end of 2017.

Now, let's briefly walk through the four avenues of growth. Our first is to take advantage of drop-downs from our GP in Devon into the MLP, and you can see an outline of our drop-down plans on pages 5 through 7 of the presentation. Two weeks ago, we announced ENLK's acquisition of E2 from our GP, for approximately $193 million. This transaction marks the first drop-down from our GP, ENLC, to our Partnership, ENLK.

The E2 drop-down is just the first of several drop-down opportunities. These include Devon's Victoria Express pipeline in the Eagle Ford, which we expect to happen in the first half of 2015, the Access pipeline in Canada, and the 50% interest in the legacy Devon midstream assets, currently owned by ENLC.

Our second avenue of growth is maximizing our relationship with Devon, by responding to Devon's midstream infrastructure needs. As part of our expansion projects in the Permian Basin, we announced a new 120 million cubic feet a day natural gas processing plant, multiple low-pressure gathering pipelines, and a new 23-mile high-pressure pipeline.

This project is supported by a long-term fee-based agreement with Devon to provide gathering and processing services for over 18,000 acres under development in Martin County, one of the hottest spots in all of the Permian Basin. The entire expansion project is expected to cost over $200 million, roughly doubling our investment in the Permian to over $400 million. We are also excited about the additional opportunities in other areas where Devon is growing their production, including the Eagle Ford, Oklahoma and the Delaware Basin, as well as possible new basins that Devon may develop in the future.

Our third avenue of growth is the expansion of our core businesses and organic growth projects. In September, we announced the completion of the Cajun-Sibon expansion project in South Louisiana, and a portion of the Bearkat expansion project in West Texas. Together, these projects represent approximately $1 billion of capital investment, starting back in 2012. We will continue to take advantage of the additional growth opportunities from our expanded platform of assets.

Moving to the Utica Shale, in August, we announced plans to construct a new 45-mile condensate pipeline and six natural gas compression and condensate stabilization facilities that will serve several major producers. This project will cost over $250 million, builds on our strategy in the Utica and Marcellus Shale plays, where we are primarily focused on creating a logistics network to stabilize and transport condensate and crude oil.

Also in August, we announced our new 50/50 joint venture with a subsidiary of Marathon Petroleum Corporation, to construct an NGL pipeline along the Gulf Coast in Louisiana. This project also represents the next phase of growth for our Cajun-Sibon expansion project, and further deepens our relationship with Marathon. The opportunity to grow through the expansion of our core businesses is due to the strategic location of our assets, and we remain committed to identifying projects in areas that we know well.

Our fourth avenue for growth is mergers and acquisitions. And we remain active in sourcing opportunities that complement our core businesses at reasonable valuations. We recently closed the acquisition of Gulf Coast Natural Gas Pipeline assets from Chevron for approximately $235 million.

These assets support our growth strategy by expanding and strengthening our franchise position in southern Louisiana, to take advantage of the growing demand in the industrial, refining and petrochemical marketplace. These high-quality assets will complement our existing business and provide us with opportunities to serve a wider range of customers, with an expanded range of services.

We will continue to pursue acquisition opportunities, again, particularly in areas where we can expand on our existing platform, and where Devon is active. And we will remain disciplined in our approach. To recap, in the third quarter, we completed approximately $1 billion of organic growth projects, which include the Cajun-Sibon expansion project, and a portion of our Bearkat processing complex.

And just in the last 90 days, we have announced an additional $1 billion of projects utilizing all four of our growth areas. These are exactly the type of projects that will help us reach our goal of doubling the size of the Company by 2017, and in our opinion, they have higher returns and lower risk than what we see being done in the M&A market today.

We're confident we will achieve this objective, because we are in a great industry environment. The impact of the shale oil and natural gas revolution is nothing short of a game-changer for our industry. In fact, a recent study by the American Petroleum Institute indicated approximately $890 billion of spending on midstream infrastructure over the next 11 years, and we are perfectly positioned to take advantage of this dynamic and robust market.

Looking to the future, you will see that there is a lot of activity around our core areas, and Devon's core areas of operations, which is where you should expect to see EnLink continue to grow. And with approximately 95% of our gross operating margin being generated from fee-based contracts, we can offer our unitholders a sustainable and predictable stream of cash flow.

Before I turn the call over to Steve, let me quickly review EnLink's third-quarter financial performance. The Partnership adjusted EBITDA for the third quarter was $111.3 million, and we raised distributions by $0.005 to $0.37 per unitholders of ENLK. The general partner's cash available for distribution was $62.2 million, and we increased distributions by $0.01 to $0.23 per unitholders of ENLC. I will now turn the call over to Steve.

Thank you, Barry, and good morning, everyone. We continue to see significant growth opportunities in the gas business. Both through our relationship with Devon and the strategic location of our assets.

I'll start with a summary of our West Texas operations in the Permian Basin. As we had announced in September, the Bearkat Natural Gas Processing Plant project is mechanically complete. We also completed 30 miles of high-pressure pipeline that gathers gas for producers in Glasscock and Reagan Counties.

We started operations in the gathering system and processing plant, and we expect the volumes to ramp up through this year and into 2015. Construction on an additional 35 miles of high-pressure pipeline, which will further provide gas gathering capacity for the Bearkat Natural Gas Processing Complex is underway. The pipeline will provide gas takeaway for constrained producer customers in Howard, Martin, and Glasscock county, and it's expected to be operational in the fourth quarter of 2014.

The second phase of our Permian expansion project includes a new 120 million a day natural gas processing plant, which we have named Ajax. It also includes multiple low-pressure gathering pipelines, and a new 23-mile high-pressure gathering line. The new rich gas gathering pipelines are expected to be operational in the first quarter of 2015, and the Ajax processing plant is expected to be operational in the second half of 2015.

Once complete, the Bearkat gathering system will have the ability to increase its capacity to over 400 million cubic feet per day. You can see an illustration of our footprint in the Permian Basin on page 8 of our presentation. West Texas is a prime area for our additional growth, and we recently partnered with our liquids group to repurpose our Mesquite terminal and rail facility to take advantage of opportunities to treat off-spec NGLs and condensate in the region. This project is supported by long-term fee-based contracts, with an active gathering and processing company.

The Permian remains an important growth area for EnLink, and we are going to continue working this prolific region with Devon and other producers, on developing gas, crude oil, and NGL projects that will provide gathering, processing, transportation, and treating services. We are confident that our footprint in this region will be an integral part of EnLink's success moving forward.

In North Texas, we remain focused on optimizing our existing assets. During the quarter, our gathering volumes averaged approximately 2 billion cubic feet per day, and our processing and transportation volumes were over 1 billion cubic feet per day. While we continue to see declines in produced volumes in the Barnett Shale, we are focused on offsetting these declines through the optimization of our assets, future consolidation opportunities, and serving new customers. As a reminder, we have ten-year fixed-fee contracts with significant five-year volume commitments in North Texas for both gathering and processing.

In Oklahoma, we are seeing an increase in producer activity around our assets. The Cana plant continues to operate near its capacity, which is the result of Devon's successful Cana-Woodford drilling and recompletion program. Devon recently announced plans to increase their operated and non-operated rig count in the Cana-Woodford to ten rigs by the first quarter of 2015, and we're working with Devon and other potential customers on expansion opportunities of our Cana system, and other areas in the Anadarko Basin. We are also exploring gathering and processing opportunities around our Northridge assets.

EnLink's gas business is well-positioned for ongoing success, and we are pursuing initiatives to deliver on our growth strategy, including opportunities to connect our assets in Texas and Oklahoma that will efficiently utilize existing processing capacity, and give us capability for serving new customers. I'm now going to turn the call over to Mac.

Thanks, Steve, and good morning. It has certainly been eventful in the liquids business unit over the last 90 days. We announced significant growth projects, an acquisition, and a drop-down that set us up for long-term growth in both Louisiana and the Ohio River Valley, or ORV.

Starting with Louisiana, in late September, we announced that the Cajun-Sibon NGL expansion is operational. We consider Cajun-Sibon to be a game changer for Louisiana NGL customers, and for EnLink. You've heard me talk previously about the importance of our assets being in the right neighborhood, and we believe that is absolutely the case with our Cajun-Sibon expansion. Given that the NGL industry has long supply in Mont Belvieu and short supply in South Louisiana, we are able to bridge that imbalance with our Cajun-Sibon facilities.

During the third quarter, we experienced a planned shutdown at the Riverside fractionator, as we completed construction of the Cajun-Sibon expansion. Which resulted in reduced volumes throughout the quarter. The reconfigured Riverside fractionator, the new Plaquemine fractionator, and the expanded Cajun-Sibon pipeline are all now operating.

We are happy to report that the start up of the facilities was accomplished safely, and as expected. In fact, as I think through the progress of the start up, it's really been phenomenal. The facilities have performed remarkably well, and our operations, technical, and commercial groups have shown what great teamwork and capability can accomplish.

Volumes have continued to increase since start up, and have reached highs exceeding 85% of fractionation capacity and 90% of pipeline capacity.

In late September, we also announced an agreement with Chevron to acquire Gulf Coast Natural Gas Pipeline assets in South Louisiana. You can see a map and information on this acquisition on page 11 of the presentation.

The natural gas assets include approximately 1,400 miles of pipelines spanning from Port Arthur, Texas to the Mississippi River corridor, and approximately 11 Bcf of working capacity in three South Louisiana storage caverns. We valued these assets at around ten times our expected near-term adjusted EBITDA for the existing business.

The Chevron transaction demonstrates our M&A growth strategy to acquire systems in and around our current asset base, where we can take advantage of synergies, optimization, and bolt-on opportunities. These assets, combined with our existing Louisiana assets, provide EnLink with tremendous optionality to provide midstream service to southern Louisiana's growing marketplace.

And as part of the acquisition, EnLink also operates and manages title tracking at the Henry Hub. We are currently evaluating the future use of these assets, including the option to convert certain pipelines to crude or NGL service over time. Now that the acquisition has closed, we plan to focus on the integration of the pipeline system, and on realizing the many opportunities that these strategic assets can provide us.

And finally, in Louisiana, we also announced a joint venture and term supply agreements with Marathon. You can see a map and information on that transaction on page 9 of the presentation. Under the supply agreements, EnLink is providing Marathon with butane and gasoline supplies that will feed a new joint venture pipeline under development.

Services under the supply agreement have already commenced, and will continue through the term of the joint venture. Per our joint venture, EnLink is responsible for managing the construction and future operation of a 30-mile NGL pipeline from our Riverside fractionator to Marathon's Garyville refinery. We are already working to finalize the pipeline's route, and are procuring the necessary mitigation credits and rights-of-way. We expect the pipeline to begin operation in the first half of 2017.

Moving to ORV, we continue to make progress to enhance our position for substantial growth in the Utica and Marcellus Shale plays, where our investment will be around $700 million by the end of next year. We are successfully executing on our strategy to provide customers with crude, condensate, and brine solutions via our truck and pipeline transportation assets, through which we provide those producers access to premium rail, barge and truck markets.

In ORV, we recently announced the construction of a 45-mile condensate pipeline, and six additional gas compression and condensate stabilization facilities, to service major customers in the region. You can see information for this project on page 10 of the presentation. This pipeline is significant for our ORV business, since it positions us in the heart of the condensate production fairway.

The new 50,000-barrel a day pipeline will connect to our existing pipeline in Eastern Ohio, and is expected to be complete in the second half of 2015. As a component of the project, we have entered into a long-term fee-based agreement with Eclipse Resources for compression and stabilization services, and for the purchase of stabilized condensate to be transported in the pipeline. We have already begun stabilizing and purchasing Eclipse condensate volumes, and moving them to market outlets with our truck fleet, until completion of the new pipeline.

The new gas and condensate facilities associated with the Eclipse volumes will be located in Noble, Belmont, and Guernsey counties. The facilities will have capacities of approximately 560,000 Mcf of compression, and approximately 41,500 barrels per day of stabilization, and are expected to be complete by the end of 2015.

We also recently announced the drop-down of the E2 assets in ORV. This transaction marks the first drop-down from ENLC, our general partner, to ENLK, our Master Limited Partnership. Currently, three of the five former E2 gas and condensate facilities are in service, and commercial start up of the two remaining stations is expected in the first half of 2015.

All five former E2 facilities are supported by long-term fee-based contracts with Antero Resources. Once all of the facilities are complete and in service, they are expected to generate approximately $20 million to $25 million per year of adjusted EBITDA. With the former E2 facilities, along with the six gas and condensate facilities being built as part of the ORV pipeline project, we will have 11 stabilization and compression facilities in service by the end of 2015, with total daily capacities of 60,000 barrels of condensate, and 1.2 Bcf of natural gas.

These investments are exactly the type of follow-on investments we expected when we initially entered the area via the Clearfield acquisition two years ago. And as we continue to develop our position in the area, we expect to experience additional bolt-on opportunities.

In conclusion, the liquids business unit made tremendous progress during the third quarter, in support of EnLink's goal to double in size by the end of 2017. These projects validate the strategies we are executing in ORV and Louisiana, as well as the strategic location of our assets. Simply said, we have the right assets in the right neighborhoods, and we believe that our liquids business will be a key contributor to EnLink's future growth.

I will now turn the call over to Michael Garberding, to review our financial results for the quarter. Thank you.

Thanks Mac, good morning, everyone. Before I get into the financial results for the quarter, I'm going to start with some commentary on the commodity market impacts.

When we were going through the merger with Devon to form EnLink, among our biggest priorities was setting up a stable high-quality midstream Company. A Company that has minimal commodity exposure, stability of cash flows, and a diverse base of assets that can thrive in any commodity environment. We believe we have done this through EnLink. This is why 95% of EnLink's gross operating margin comes from fee-based contracts, and we work to hedge the little direct commodity exposure we have in our business.

The Devon contracts we have in place, which account for approximately half of EnLink's gross operating margin in 2014 are also 100% fee-based, with five-year minimum volume commitments. The large majority of our contracts with third-party customers are fee-based and with volume commitments, wherever practicable. And finally, we have good basin diversity. In short, we believe our strategy is working, and positions us to be a top performing midstream Company in any environment.

Now for a couple reminders on our financial reporting that are consistent with the last quarters. First, the combination of Crosstex and Devon Midstream Holdings was treated as a reverse acquisition, which means that Devon Midstream Holdings is the acquirer of the transaction, because its parent, Devon, obtained control of the Partnership. Since the acquisition closed on March 7 we now have two reported quarters under our belt as EnLink Midstream, and our historical numbers don't provide much insight or relevance for analysis.

Also, note the financial performance of EnLink Midstream Holdings, which is the entity that holds Devon's legacy midstream assets or contributed to EnLink, is reported on a consolidated basis for both ENLK and ENLC statements of operations. EnLink Midstream Holdings is 50% owned by ENLK and 50% owned by ENLC, so we provided a table in both the earnings press release we issued this morning, and the ENLK 10-Q that segregates the results of operations of EnLink Midstream Holdings from the Partnership's other operations.

During the third quarter, we delivered relatively flat financial performance as compared to the second quarter results, just as we said we expected in our earnings call last quarter. An easy way to think about this is to start with our base business, and stack growth opportunities on top. Our base business has been relatively flat; however, we have seen and expect to see declines in areas such as North Texas.

We announced the completion of around $1 billion of new projects like the Cajun-Sibon expansion project and a portion of the Bearkat Natural Gas Processing Complex. We will also spend around another $1 billion on the growth opportunities Barry outlined in the beginning of the call. We have seen very little results from these projects yet in our year-to-date results, which is why our adjusted EBITDA during this development phase has been relatively flat. However, we do expect great growth from not only the projects we have executed upon, but also from additional opportunities around our core business, such as Oklahoma.

For the third quarter, the Partnership realized adjusted EBITDA of $111.3 million, and distributable cash flow of $89.1 million, which is down slightly from adjusted EBITDA of $101.6 million (sic - see 2Q 2014 press release - "$111.6 million") and distributable cash flow of $93.8 million in the second quarter of 2014. Gross operating margin for the third quarter of 2014 was approximately $254.2 million, which is down approximately $8 million from the second quarter, due to relatively slight declines in our operating segments. The decline was primarily due to the planned Riverside fractionator shutdown, to the Cajun-Sibon start up, and lower gathering and processing volumes in North Texas due to temporary volumes realized in the second quarter, and not in the third quarter.

EnLink also received a $6.1 million payment from one of Texas Brine's insurers in the Bayou Corne litigation. This is the first payment we have received for the Bayou Corne litigation, and additional claims remain outstanding. For reporting purposes, the $6.1 million payment is included in EnLink's Midstream's reported net income and adjusted EBITDA, but $4.7 million of the payment is deducted from distributable cash flow, because that money was considered a return of capital for the pipeline replacement.

Taking all this into consideration, the Partnership declared a distribution of 36 -- $0.37 per unit for the quarter, an increase of $0.005 from the second quarter, which resulted in a 0.95 times distribution coverage ratio. As we stated previously, we believe we will be around 1.0 times for the year. We expect fourth-quarter adjusted EBITDA to increase, primarily due to the start up of Cajun-Sibon expansion project, and the Bearkat Gathering and Processing Complex.

We believe we are on track to exceed our guidance target for the year of combined adjusted EBITDA of approximately $675 million on an annualized basis from the second quarter through the fourth quarter of 2014.

The general partner's cash available for distribution was $62.2 million for the third quarter of 2014, which was down approximately $7 million from the second quarter, primarily due to $5.9 million of tax expenses being booked in the third quarter. This resulted in a 1.65 times coverage ratio on the declared distribution of $0.23 per general partner unit. Note that the Partnership is still not in the highest level of incentive distributions, which is $0.375 per unit, but we expect to reach that level of incentive distribution rights by the fourth quarter.

We currently expect to pay around $10 million in taxes at ENLC for the year, with approximately $6 million booked in this quarter. This represents a true up of taxes at ENLC, based upon the updated results for the year, as well as a minimal tax impact of the E2 drop down. We also believe we will fully utilize our existing NOL by the end of this year. For the outlook for taxes at ENLC beyond 2014, the best reference is the tax slide in our 2014 analyst presentation, which laid out the potential tax impact of each type of cash flow at ENLC.

From a balance sheet perspective, the Partnership's debt to EBITDA ratio for the third quarter was approximately 3.4 times, right about where we expected it to be. We ended the quarter with about $370 million drawn on our revolver at ENLK. You may have seen that we filed a registration statement last week for a $350 million at the market equity program, which we will use to help to finance our recent growth projects and acquisitions. With respect to ENLC, we used approximately $130 million of cash received in the drop-down of E2 to fully pay down this revolver.

As we look down the road, we believe we are in a position of strength because we have good stability cash flows from our contract structures and diverse asset base. We have a strong balance sheet, we have good line of sight to additional growth through drop downs, including the general partner's interest in EnLink Midstream Holdings, the VEX pipeline, and the Access pipeline, and we have a strong sponsor in Devon that is supporting our growth. I'll now turn the call back over to Barry for closing remarks.

Thank you, Mike. As you can tell, we are working hard to execute on our identified growth projects and are taking advantage of the many growth opportunities that our partnership with Devon continues to provide. EnLink is strategically positioned with a diverse geographic footprint and strong financial foundation, delivering tailored solutions for sustainable growth. We will continue to drive value creation for our equity holders and customers, well into the future.

With that, we will turn the call over to our operator, and you may open the line for questions.

(Operator Instructions)

Darren Horowitz from Raymond James.

Barry, a couple quick questions for you. The first on slide 8, with regard to your comments around growing with Devon. Obviously, today, we're in a slightly different forward curve for commodity prices relative to where we were when we had the analyst day in May, and things from an economic perspective, or at least net backs to producers, look a little bit different for liquids. I'm just curious, as you're discussing with Devon, has anything changed with regard to their future CapEx spending plans through the drill bit, either geographically or in terms of volume growth or timing? I'm just wondering if that might have an influence, or possibly a shift on infrastructure development in a lot of the areas that they're focused on, whether or not it's West Texas or the Eagle Ford or even the heavy oil stuff where a lot of the Anadarko opportunity -- the Anadarko Basin that you referenced.

Darren, great question, and one that obviously everybody is thinking a lot about right now. The first thing, and you heard us, throughout the prepared remarks today, just really emphasize the balance if you will of our position and having great contracts under existing operations. So, we think, to the extent we see a down cycle here, which -- it isn't clear yet that we're going to see a downturn. We haven't, in fact, in our areas of operations, seen a downturn in development yet. But, to the extent we do, we think that's what we're built for, is to sustain those and to really come out of it on the other side in a better position than we went in.

Specifically to Devon, we won't make any comments. I think you should look to their comments this morning as to any activity levels. But we're still very optimistic that we're in the right places. We're in the places that are going to be profitable at $80 crude, so we're really not projecting at this point any significant changes in any of our plans.

Darren, this is Mike. Also, Devon put out a third-quarter operations report this morning which specifically references their work in Martin County, talks about their first well results were very successful, and also mentions bringing a second rig in. So, it's some good reference material to show just what Devon's activity is around that area.

Okay. Shifting gears a little bit to the existing assets, and the opportunity set that you have in front of you to better optimize the North Texas and Oklahoma assets. Can you quantify the volumetric upside that you think, over time, you can get out of that combined asset footprint? Maybe also the associated CapEx it would take you to reach your goals and have greater connectivity and throughput.

This is Steve. Really what we're looking at on that is maintaining North Texas at our flat -- as we said at our analyst, we're looking to continue that EBITDA contribution to stay flat. And, in Oklahoma, we're looking to grow that business by about either $65 million to $100 million in EBITDA growth over the next three years. We see those opportunities in expansions around the existing asset base and greenfield opportunities, as you are well aware in the SCOOP and the STACK plays, as those continue to expand in areas where we're more competitive, and we can start to grow our asset base.

Okay. And then, last question for me, just more along the lines of the opportunity set across the ORV assets. And I can appreciate the CapEx guidance of spending $700 million by the end of next year, but I'm just curious, you had referenced previously maybe the potential for a condensate refinery or additional pipelines, whether or not it's stabilized condensate or even split condensate, and the ability to move gas, oil, and naphtha out of that area, beyond the end of next year. How big of an opportunity set do you think that could be? Because it seems like there could be a tremendous amount of production growth waiting on additional infrastructure, and that could give you a very vertically integrated approach from the wellhead to the end user, so I'm just curious how that business evolves, or at least the way you see it evolving over the next few years?

Darren, I like the way you think. This is Mac Hummel. As we sit and we look at our ORV position at this point, we're very bullish about the opportunity to grow that business. We are starting to see increased condensate volumes on our facilities, and as we ramp up, both the facility side as well as the pipeline side next year, via the pipeline construction and E2, we're going to expect to see additional growth in 2015. But, really, we'll see the big portion of that hitting in 2016, as all facilities are online for the first full year.

We see that opportunity branching out from where we currently are. We're talking to other producers and other service providers about ways to expand that footprint we've got, along the way that you were talking about, and along the way of the existing pipeline, expanding that existing pipeline. So, we think the opportunities are significant there. We feel really good about our position, and we're hopeful that we'll be able to bring those to fruition.

Thank you very much.

Gabe Moreen from Bank of America.

I will say it's really nice not to talk much about the direct impact of NGL prices on this call. A couple questions for you.

We agree.

I'm sure you do. A couple questions for you. One is on really Cajun-Sibon, sort of Phase II, whether expectations have changed on timing or ramp up there, given what's happened with Phase I, where -- you're set now, but it seems like it was a little delayed.

Gabe, this is Mac Hummel again. Start up of Phase II has really gone very, very well. We started up at the end of September, and so we're just a little over 30 days into the startup, and we've already seen a continued and steady ramp-up in volumes. We have exceeded really our expectations that we planned on in October, and we are -- have hit about 85% to 95% of capacity on those facilities already.

So I really feel very, very good about where we're at there. The facilities have performed very well, and the operations team and the technical teams are really -- continue to work there, and continue to get a feel for the expanded assets, as we bring them up and operate them, and there's all the reason to be optimistic about what the future holds there for us.

Gabe, this is Barry. I'll add a bit of an exclamation there. I think it is a start up that has been second to none -- an extraordinary result. As it was described, essentially, we hit the big green button, we're making spec products across the full stream on the new fractionator, and have hardly had a bobble since then. So, maybe the law of averages does work, and so on average between Cajun-Sibon I and Cajun-Sibon II we've had a terrific start up.

Great, thanks. And then, larger picture question in terms of -- I think you're probably ahead of certainly our expectations and maybe the market's in terms of third-party M&A not from Devon. Third-party organic growth projects. I'm just wondering, given how much CapEx spend and M&A spend you've had, whether that changes the equation at all in drop downs for 2015?

Gabe, it's Mike. It's a good question. We'll always look at that, like we said at the analyst day, it's an option for us right now as we sit today. The two drop downs we're looking at are the 50% of Midstream Holdings, which we said would happen in the beginning, and then also the VEX pipeline. So those are the big ones really that we're looking at.

So, again, we have the flexibility to do whatever portion of EnLink Midstream Holdings would make sense, and we'll look at that, and give you more guidance as we proceed. But right now, still, we're planning as we discussed in the analyst day.

Once again, Gabe, I think you can hear the enthusiasm in Mike's voice to just have that many knobs and levers to turn, whether we're talking about timing or financing structure. We really do have lots of flexibility, but we're not going to be passive, we are not going to be too deliberate about it. We are going to get the drop downs completed as soon as practicable.

Great, thanks guys.

(Operator Instructions)

TJ Schultz from RBC Capital.

Staying there on the drops, Barry or Mike, should we expect Access or VEX ahead of the legacy midstream assets? And then, if you could get any more specific when you think about the legacy midstream assets at ENLC, the likelihood that you take back primarily ENLK units, just to offset some of that lost cash flow.

Yes. I will reiterate what Barry just said, it is nice to have this optionality. We have laid out a plan, but we'll continue to look at that plan just because we have that flexibility. So, when you think about the options, VEX is up and running this last quarter and has been operating. You can look at Devon's earnings release today and look at what kind of success they're having in the Eagle Ford, so we feel we're in a great position for that asset, not only to take that asset, but to grow that asset.

We'll try to optimize the timing of those two, because the VEX pipeline could go before or after, and we'll look at each of those options of what makes the most sense for us, given trying to get the growth into us. Just as Barry said, too, on EnLink Midstream Holdings, when we talked about that before, we said 50% next year and 50% the year after the beginning of both of these years. We'll look at what makes sense there. If you go to our base plan, when we talked about dropping EnLink Midstream Holdings from ENLC to ENLK, we did talk about, under our base plan, really taking ENLK units back to ENLC.

Okay. Good, thanks. Just a couple questions on the growth projects. First, with the Gulf Coast natural gas assets, so beyond the initial investment here, if you could get a little bit more specific maybe on the repurposing options, I guess what the primary focus points for you would be, if maybe that's ethane or ethylene distribution, and then what the incremental costs would be and type of returns on that all-in capital?

This is Mac Hummel again, and we continue to look at those opportunities. The transaction closed November 1. We've been looking at those opportunities now for several months, and really have just been unleashed to begin to talk to the marketplace about what those opportunities are. So, what I would say is that you can look at what's going on in the state of Louisiana from an NGL perspective or from a crude perspective, and you can imagine that there are opportunities for midstream companies to participate in that growth.

And so, as we look at the footprint associated with all of our assets in Louisiana, and we think about the amount of pipe we've got there, and the ability to take full advantage of the optimization of those assets on the gas side -- perhaps on the NGL side, perhaps on the crude side -- we're tremendously excited.

In terms of the capital associated with that, I would say it's a little bit early to know exactly what that capital spend will be, because we haven't really focused on what the right opportunity is for us to try to execute on. But we believe the opportunities are there, and more importantly, we believe the opportunities are real.

TJ, this is Barry. Let me just add a little bit there. One of the things that we really want everyone to appreciate is just the impact of having 1,400 miles of pipe dropped into the middle of what was already about 3,000 miles of pipe that we control in that area.

And just together, the position that it represents is really a phenomenal position. We talk about the map effect around here, and in fact, early in my career, I learned that any midstream guy, development guy, should be able to talk all day off of a map, and we can, and we will off of this in the coming days, as we really start to imagine all of the ways that we can connect the dots associated with the opportunities in the Gulf Coast of Louisiana.

We would say that what we bought for $235 million -- really, irreplaceable pipeline. And if you could replace it, it would be several billion dollars' worth of pipe. And we also would say that we would expect the capital investment around this to be multiples of the acquisition price. So, again, it is a lot like what we did with LIG in 2004. We bought a starting position and really transformed those assets, and we think we'll see that again here.

Okay, that's helpful. Lastly, following up on the ORV, and the condensate pipeline, if there's any update on commitments beyond Eclipse. And then, you discussed expanding that pipeline, but as you look at potential condensate growth in the area, is the potential primarily to look at expanding on the existing footprint, or is there potential -- do you have a view now of potentially taking that pipeline further north into Harrison?

First of all, let me talk about the customer piece. As you know, we're going to be filing for our open season here soon, and we will see what sort of activity and interest comes out of the open season. We're expecting that to be very successful, and are looking forward to that.

In terms of the pipeline itself, really, it's what the market presents. We would be happy to look at expansions of that existing facility, we'd be happy to look at taking that to new market centers, also. So, it's really what the opportunities present themselves to be, as to what our opportunity will be with regards to the footprint of the pipeline. So, excited, expectant about what we might be able to achieve there, but at this point, I think the opportunity in the field is still wide open.

Okay. Fair enough. Thanks, everybody.

This concludes our Q&A session for today. I would like to turn the call back over to Mr. Barry Davis for closing remarks.

Thank you, Jeremy. In closing, as you have heard throughout the call, these are exciting times for us here at EnLink. We are positioned for long-term sustainable growth in the key basins. Our relationship with Devon continues to create abundant opportunities. We have strong business relationships with our key customers that make us a provider of choice, and we have the right people to execute our plans.

Thank you. We have enjoyed communicating with you today on our update. We look forward to talking in the future, and have a great day.

This concludes today's conference call. You may now disconnect.