EnLink Midstream LLC (ENLC) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the EnLink Midstream Q4 2014 financial results conference call.

(Operator Instructions)

Please note that this call is being recorded today, Wednesday, February 18, 2015, at 10:00 Eastern time. I would now like to turn the meeting over to your host for today's call, Ms. Jill McMillan. Ms. McMillan, you may begin.

Thank you, Shannon, and good morning everyone. Thank you for joining us today to discuss EnLink Midstream's fourth-quarter results and 2015 guidance. 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 Gas Business Unit; and Mac Hummel, Executive Vice President and President of the Liquids Business Unit.

We issued our fourth-quarter 2014 earnings and 2015 guidance press release this morning, and posted the earnings release on the Investor Relation portion of our website. We will file the 10-Ks later this week. 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 guidance, 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 also discuss certain non-GAAP financial measures and you will 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 fourth quarter. Steve and Mac will then provide an operational overview. Finally, Mike will review certain financial results for the quarter and the year, and he will also walk through our 2015 guidance.

I would also like to remind everyone of our upcoming analyst and investor conference, which will be held in New Orleans next month, on March 30 and 31. Please visit our website for more details. I will now turn over the call to Barry.

Thank you, Jill, and good morning, everyone. 2014 was an incredible year for EnLink. This morning, we are excited to communicate the progress we have made to create a stable and diversified Company focused on growth. We laid out a clear growth plan and have executed on that plan. We delivered results in line with guidance and utilized each of our four strategic growth avenues to drive a value creation for our investors and customers.

Before I discuss our 2014 results, I would like to address the current commodity price environment and why EnLink is well-positioned for stability and growth. This is a cyclical industry, but we have a reason to be optimistic about the opportunities it will present. I believe we will see improvement in commodity prices over time.

At EnLink, we were built for this. We purposefully created EnLink to have stability of cash flows in any market environment and our strategic platform of assets provides us with increased scale, stability, and diversity. Approximately 95% of our gross operating margin is fee-based, which means we have limited direct commodity exposure.

We have a strong investment grade balance sheet that provides us with a low cost of capital, and Devon's strong sponsorship, which includes 100% fee-based contracts, with minimum volume commitments, accounts for a little over 50% of our gross operating margin.

We have a proven track record of organic growth, asset drop downs, and successful acquisitions. We will continue to take advantage of opportunities from our growing asset base, increased financial capacity, and unique sponsorship with Devon.

EnLink is a strong vehicle for sustainable growth with well-positioned assets and a strong financial foundation that allows us to successfully compete in times like these. This is exactly why we are better positioned than most to take advantage of the current M&A opportunities. The LPC and Coronado announcements are examples of using this strategic advantage.

Now let me turn to our results and accomplishments. 2014 was an incredible year and we delivered strong financial performance. Our combined adjusted EBITDA for 2014 from Q2 to Q4, on an annualized basis, was approximately $690 million, which exceeded our guidance expectations of around $675 million. We raised distributions every quarter in 2014, at both ENLK and ENLC, and we met our guidance expectations with $1.47 in annual distributions at the partnership and $0.865 in annual distributions at the general partner.

We not only created a stable and diversified Company in the creation of EnLink, we also came out of the gate quickly and successfully executed on each of our four avenues of growth. We are excited about the accomplishments we have made to increase our strategic footprint in some of the best shale plays, which position us for tremendous long-term growth. I will walk through our recent accomplishments using the outline of our four avenues of growth.

As you may recall, our first growth avenue is to take advantage of drop downs from our GP, ENLC, and from Devon, into ENLK, our master limited partnership. In October, we announced ENLK's acquisition of equity interest in E2 from our GP for approximately $193 million. This marked the first drop down from ENLC to ENLK and enhances our position in the Utica and Marcellus shale plays.

Yesterday, we announced ENLK's acquisition of a 25% equity interest in EnLink Midstream Holdings LP, or EMH, from ENLC for approximately $925 million. This transaction is expected to be immediately accretive to the partnership. As a reminder, EMH owns the assets that Devon contributed to EnLink Midstream in March 2014, which includes gathering and processing systems in North Texas and Oklahoma. These assets are supported by long-term fixed-fee contracts with minimum volume commitments from Devon and Linn.

This is exactly the type of drop down opportunity we identified previously that allows us to support growth in distributions, reduce the leverage of the partnership, and lower the long-term tax outlook for ENLC. We expect to drop the remaining 25% equity interest in EMH later this year. Other drop down opportunities from Devon include the Victoria Express Pipeline, which we expect to happen later this year, and the Access Pipeline in Canada, which we expect to occur in 2016.

Our second avenue of growth is maximizing our relationship with Devon by responding to their midstream infrastructure needs. In August, we announced the expansion of our Permian Basin assets to support Devon's production in Martin County. We remain focused on identifying future opportunities in areas where Devon is growing their production.

Our third avenue of growth is through 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.

We also announced an expansion of our Cajun-Sibon project for over $50 million to serve a subsidiary of Marathon Petroleum Corporation in the Gulf Coast of Louisiana. This project represents the next phase of growth from our Cajun-Sibon projects, and further deepens our relationship with Marathon. Additionally, in the Ohio River Valley, we have announced an approximately $250 million expansion project to enhance our existing condensate position.

On the M&A front, we have effectively used M&A to expand our platform positions in our core operating regions. In November, we announced a $235 million strategic acquisition of Gulf Coast natural gas pipeline assets from Chevron in the south Louisiana. These assets allow us to capitalize on the growing demand in the industrial, refining, and petrochemical marketplace.

In just the last 60 days, we announced an additional $700 million in new acquisitions in the Permian Basin. These transactions include a $100 million acquisition of LPC, a crude oil marketing logistics company, and a definitive agreement to acquire Coronado Midstream, a natural gas gathering and processing company, for $600 million. Both acquisitions complement our existing business and provide us with opportunities to serve more customers with an expanded range of midstream services. Mac and Steve will discuss these transactions in more detail later in the call.

In summary, we have successfully executed on the growth plan we laid out. We utilize each of our four avenues of growth to create value over the near- and long-term, while also delivering results in line with guidance. We successfully began operations on approximately $1 billion of organic growth projects and announced an additional $1 billion of projects and acquisitions in 2014 that further expanded our growing midstream platform in key producing regions. And, we have made significant acquisitions in the Permian Basin that complement our existing business and provide us with opportunities to serve more customers with an expanded range of midstream services.

This morning, we issued our 2015 guidance, which includes a combined adjusted EBITDA forecast of approximately $740 million, and a partnership adjusted EBITDA of approximately $710 million, for 2015. As noted in our guidance table in the press release, we also expect to increase annual cash distributions by 7.5% for ENLK, and 18.5% for ENLC, in 2015.

Looking to the future, our strategy remains the same and positions us to be a top-performing midstream Company. We have stability of cash flows from our contract structures and a diverse asset base. We have a strong balance sheet and good line of sight to additional growth through the drop down and other opportunities and we have a strong sponsor in Devon that is supporting our growth.

We will remain disciplined in our pursuit of acquisition opportunities where we can expand our existing platform and we are committed to identifying organic growth projects in areas we know well. We are well-positioned for long-term growth in key producing regions and we expect to reap most of the benefits from these transactions in 2016 and beyond.

With that, I will turn the call over to Steve and Mac, who will discuss our new projects in more detail and provide our current outlook for the gas and liquids business.

Thank you, Barry, and good morning everyone. 2014 was a solid year for the gas business unit and we continued to identify growth opportunities through our relationship with Devon and from the strategic location of our assets. Last year, we announced new projects that enhanced our position for growth in west Texas, we focused on optimizing our existing assets in north Texas, and benefited from our contracts with Devon for gathering and processing services, which helped to mitigate the risk of lower producer activity in the region.

In Oklahoma, we saw increased producer activity around our assets and are working with Devon and other potential customers on expansion opportunities. 2015 should mark another year for ongoing success, as we continue to pursue initiatives to deliver on our growth strategy in each of our core operating areas.

In west Texas, we recently announced the Coronado and LPC acquisitions, which totaled $700 million. These new assets are exactly the types of opportunities that allow us to expand our current footprint and enhance our service platform in areas that we know well. The Coronado and LPC asset, are located in the core of the North Midland Basin where economics are among the most favorable for all oil producing plays in the US.

Mac will discuss the LPC acquisition in just a bit, but overall, these assets are in the right neighborhood and we are very excited about the potential to expand our midstream service offerings in the region. The Coronado system is supported by focused and active producers in the region, including Reliance, Diamondback, and RSP Permian, and includes dedicated productions from over 190,000 acres.

By integrating the Coronado system with our existing assets, we will be able to create a multi-county, rich gas gathering and processing system that offers extensive low-pressure gathering services, cryogenic gas processing, and multiple delivery points for marketing our customers' products. The Coronado assets include three cryogenic gas processing plants, 270 miles of gathering pipelines, and multiple field compressor stations. Construction of an additional 100 million cubic feet per day processing plant named Riptide and gathering system expansions are currently underway.

In addition to the Coronado and LPC acquisitions, I am pleased to report that in the second half of 2014, we completed and put into service 65 miles of high pressure gathering pipeline that provided gas takeaway solutions for constrained producer customers at Howard, Martin, and [Midland] and Glasscock counties. We also completed and began operations of our Bearkat natural gas processing plant, which is currently moving volumes of approximately 27 million cubic feet per day and we expect to be near full capacity by the end of the year.

The second phase of our Permian expansion includes a new 120 million cubic feet per day natural gas processing plant named Ajax, multiple low-pressure gathering pipelines, and a new 23-mile high-pressure gathering pipeline. We completed and put into operation the new 23-mile gathering pipeline in January of this year, however, the start of our construction on our Ajax plant will likely be delayed until late 2015.

We are focused on identifying synergies between the Coronado assets and our existing footprint in west Texas and we believe that we can utilize the Riptide plant, which is expected to be operational by the end of the year, to meet our near-term needs for processing capacity in the area. Once the transaction is complete, which we expect to occur around the end of the first quarter of 2015, we will begin consolidating the Coronado system with our existing Permian assets, creating a 400-mile gathering system with 250 million cubic feet per day of processing capacity, extending through six counties in the core of the Midland Basin. We anticipate continued expansion opportunities over the next three to five years and spending approximately $400 million to $600 million of additional capital.

The Permian basin remains a strong and significant growth area for EnLink. We have identified and executed upon strategic growth opportunities to expand our footprint in the area we know well, with over $1 billion of capital invested in the region since 2011. We are confident our growing midstream platform will be an integral part of EnLink's sustained success.

North Texas, we remain focused on optimizing our existing assets. At the end of 2014, our plants were operating near capacity and our overall performance for the year was better then we expected. As a reminder, the large majority of income we received from north Texas is supported by long-term fixed-fee contracts and significant volume commitments from Devon for both gathering and processing services, mitigating our commodity risk in the regions.

We continue to see production declines in north Texas and the impact on our gathering and processing volumes is likely to increase as a result of reduced drilling and work-over activity. We currently expect a 10% decline in volume compared to last year, however, we are working very closely with our customers and are focused on offsetting these declines through optimization of our assets, consolidation, and synergistic opportunities. Devon is focused on high rate of return vertical fracks for legacy wells in the core area of the play, which could further offset declines later in the year.

In Oklahoma, Devon finished their drilling and re-completion plans earlier in the year, which resulted in lower volumes at our Cana plant for the fourth quarter. While we expect to see a fluctuation in the number of rigs in the area during the year, Devon plans to drill and complete as many as 95 wells in 2015, of which a portion will be connected to our Cana gathering system.

This outlook for drilling activity will likely translate into lower volumes at our facilities in the first half of the year, but [will continue look at] expanding our gathering and processing systems [in 10] and with Devon planned drilling programs. Our focus remains supporting Devon drilling activities in the Cana-Woodford where they have thousands of drilling locations on almost 300,000 net acres, with 35,000 acres of overlay stack potential.

We see this area as a great opportunity for us to continue to expand our Oklahoma infrastructure and we are also working with customers to expand our processing capabilities and residue takeaway capacity and looking at opportunities to integrate our Oklahoma and north Texas assets.

Our overall objective is to meet increased local demand in the Cana-Woodford area. While the impact of lower commodity pricing environment is still uncertain, our Oklahoma operations remain stable due to their minimum volume commitments.

In conclusion, EnLink gas business unit performed above expectations in 2014 and is well-positioned for continued success in 2015. We are pursuing initiatives to deliver on our operational growth strategy, investing in opportunities to optimize our operations and integrate assets to serve new customers. I will now turn the call over to Mac.

Thanks, Steve, and good morning, everyone. The liquid business unit substantially increased its contribution to EnLink's results during 2014 and we are excited with the progress we have made to diversify and improve our footprint and service offerings. Through January 2015, we have announced new significant growth projects, strategic acquisitions, and drop downs totaling almost $900 million that enhanced our position for long-term growth in Louisiana and the Ohio River Valley.

We have also recently gained a new foothold with crude services in the Permian Basin. 2015 should mark another year of growth, as we expand our compression and stabilization services in the Utica shale, grow our crude operations in the Permian Basin, and focus on our franchise position in Louisiana, where we have a substantial platform for growth.

Let me start by discussing our accomplishments in Louisiana. In September, we announced that we put our Cajun-Sibon NGL project into service. This project allows us to bridge a portion of the Gulf Coast NGL supply [imbalance] and provide our customers with a greater level of supply diversity than they have previously enjoyed. I am pleased to report that we placed this project safely into service and worked over one million man hours without a loss time accident during construction. That is an important accomplishment and I am very proud of our team for achieving it.

During the fourth quarter, volumes on the Cajun-Sibon pipeline averaged approximately 110,000 barrels per day and today, we are currently moving around 120,000 barrels per day. Our fractionation volumes averaged 130,000 barrels per day during the fourth quarter, which included offloading volumes to third-party fractionators in both Mont Belvieu and Louisiana during the start-up and commissioning of the facilities. After the successful completion of routine maintenance in early January, the volumes are near full capacity at our Plaquemine, Riverside and Eunice fractionators.

Another major accomplishment in 2014 was the acquisition of Chevron's Louisiana Gulf Coast gas pipeline assets. This strategic acquisition, which closed in early November, provides us with tremendous optionality to service southern Louisiana's growing LNG export, industrial, refining, and petrochemical markets, as well as to participate in changing gas flows as supply and market dynamics change.

Our current efforts are multifaceted and include enhancing our Louisiana platform to gain operational flexibility and savings, as well as to access new or advantaged sources of supply; connecting to new markets and customers and further integrating our storage assets; and exploring converting our gas pipelines to alternative service, including NGL work crew service. As I hope you can appreciate, there are many interesting and exciting possibilities generated by our Louisiana position.

Finally, I would like to quickly touch on our joint venture with Marathon. We provide Marathon with required feedstocks that will support a new joint venture pipeline expected to be in service the first half of 2017. We are working to finalize the pipeline's route, which is nearly complete and could begin buying rights-of-way and filing for required permits by April. Marathon is a great customer and joint venture partner and we look forward to future opportunities that may arise from this strategic relationship.

Next, let's discuss our Ohio River Valley operations. We have made significant progress in enhancing our position in the Utica shale, where we are expanding our crude, condensate and brine services, and providing multiple takeaway and transportation options to producers in the region. As we announced last year, we are planning to construct a 45-mile condensate pipeline and related compression and stabilization facilities.

The pipeline will transport condensate through the heart of the gas and condensate production fairway of the Utica Shale and connect with our existing pipeline in eastern Ohio. The capacity of the pipeline, which was initially designed at 50,000 barrels per day, is expandable based on customer interest.

Our open season for volume commitments on the pipeline began in December and the level of interest by potential customers has been significant enough to require the extension of the open season through the end of February. We are already in a great position because our truck fleet allows us to move condensate volumes to premium market outlets. The pipeline only enhances this position. We are currently working on purchasing and clearing rights-of-way, for the pipeline.

We also completed the drop down of the E2 assets late last year. We currently have compression and stabilization construction underway for Antero Resources and Eclipse Resources, both of which were initially E2 projects. Four of the five stations serving Antero are in service and the start-up of the remaining station is expected in the first half of this year.

With regards to the stations serving Eclipse, two of the six expected stations are complete and in service, with operations for the third station commencing by the end of the first quarter. All of the stations serving Antero and Eclipse are supported by long-term fee-based agreements. These are exactly the types of projects we expected when we entered the region over two years ago, and as we continue to develop our position in the area, we will continue to look for additional bolt-on opportunities and strategic acquisitions.

Finally, as Steve mentioned earlier, the Permian Basin is a core area, where we are focused on growing and expanding our midstream platform. Consistent with that focus on growing our platform, we recently announced a definitive agreement to acquire LPC Crude Oil marketing, which closed on January 31. LPC currently purchases, transports, and sells approximately 60,000 barrels per day of crude. This acquisition supports our strategy to provide a full sweep of midstream services in the area.

LPC's experienced senior leadership team will continue to run the daily operations and provide their substantial expertise and knowledge to the business. In the second quarter, we plan to complete a new LPC gathering system that will transport additional crude volumes to major takeaway pipelines and we are looking for additional opportunities to install more gathering systems.

We are excited about the LPC business, as it provides us with additional capabilities to provide even a greater level of service to Permian Basin producers. In fact, we expect cross-selling opportunities to emerge as we further integrate our Permian Basin position.

In conclusion, the liquids business unit continues to be a key contributor to EnLink's growth. We are leveraging and expanding our existing assets in Louisiana and the Ohio River Valley and have established an expanded foothold in the Permian Basin. We believe we are in the right basins, and more importantly, the right neighborhoods in the right basins.

Our high-quality assets complement our existing business and provide us with opportunities to serve a wider range of customers with an expanded range of services. We will provide more detail on the progress of our growth initiatives at our upcoming analyst and investor day in late March. I will now turn the call over to Mike, to review our financial results for the quarter. Thank you.

Thanks, Mac. Good morning, everyone. Before I get into updates on our financial performance and 2015 guidance, I will remind you of some financial reporting issues that are consistent with what we have said in the last three 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 in the transaction because its parent Devon obtained control of the partnership. Since the reverse acquisition closed on March 7, we now have three reported quarters under our belts as EnLink Midstream and our historical numbers still don't provide much insight or relevance for analysis.

Also note that the financial performance of EnLink Midstream Holdings, which is the entity that holds Devon's legacy midstream assets that were contributed to EnLink, is reported on a consolidated basis in both ENLK and ENLC statements of operations. EnLink Midstream Holdings was owned 50%/50% by ENLK and ENLC in 2014.

We've provided a table that segregates the results of operations of EnLink Midstream Holdings from the partnership's other operations in both the earnings press release and the ENLK 10-K. Finally, the drop down we announced yesterday changes the partnership's ownership of EnLink Midstream Holdings to 75% and we plan for that ownership to be 100% later this year.

Before I get into performance, it is important to walk through EnLink's goals from a financial perspective. These are the same goals we laid out when EnLink was created and that help guide us through times like this. These include financial strength through an investment grade balance sheet and a competitive cost of capital, stable cash flows that support distribution growth, strong sponsorship in Devon, and great growth optionality with platform positions in some of the best shale plays. Our current financial results, our 2015 guidance, and our long-term growth potential are supported by each of these goals.

Now to our annual performance. As Barry, Steve, and Mac noted, 2014 was an excellent first year for EnLink. The combined annualized EBITDA from the second quarter through the fourth quarter of 2014 was approximately $690 million, which surpassed our 2014 guidance of approximately $675 million. The partnerships annual distributions were in line with guidance at $1.47 per unit and the general partner's annual distributions were above guidance at $0.865 per unit.

During the fourth quarter, we delivered performance that was largely in line with the expectations we gave in our last earnings call. The partnership realized adjusted EBITDA of $122.3 million in the fourth quarter, which is an increase of approximately $11 million from the adjusted EBITDA of $111.3 million in the third quarter of 2014.

Distributable cash flow for the fourth quarter was $92.2 million, which was an increase of $3.1 million, from the third-quarter distributable cash flow of $89.1 million. The increase in adjusted EBITDA and distributable cash flow was largely due to increased income from the start-up of the second phase of our Cajun-Sibon expansion.

Gross operating margin for the fourth quarter of 2014 was approximately $298.7 million, which was up approximately $44.5 million, from the third quarter. The increase was largely due to the start-up of Cajun-Sibon Phase II and a $24 million gain on derivative activity recorded in the fourth quarter. The majority of the gain on derivatives is related to mark-to-market value of long-term product upgrade swaps on our fractionation business.

The fourth-quarter distribution of the partnership was $0.375 per unit, which was a $0.005 increase from the third quarter. The distribution coverage for the quarter was 0.92 times. The main driver for the lower coverage in the fourth quarter was the timing of the Bridgeline acquisition. The acquisition was financed with long-term debt and equity during the quarter, however, we had limited margin impact from the business due to closing the transaction mid-quarter and to one-time transition costs that will continue into the first quarter of 2015.

We also expect the coverage in the first quarter 2015 will be relatively consistent with the fourth quarter, as projects and acquisitions continue to develop. Ultimately, we look for coverage for the year, which is around 1.09 times, on an annualized basis for 2014.

The general partner's cash available for distribution was $66.3 million for the fourth quarter 2014, which was up approximately $4.1 million from the third quarter, primarily due to income tax benefits being booked in the fourth quarter. Our 2014 expected taxes for ENLC ended up lower than originally forecasted. We will further discuss ENLC's tax forecast in a moment. This resulted in a 1.71 times coverage on the declared distribution of $0.235 per unit.

EnLink has also made excellent progress in financing its growth and maintaining a strong balance sheet. In total, the partnership had $1.1 billion of capital expenditures, acquisitions, and drop downs in 2014, all of which were financed with a combination of debt and equity to ensure we maintain our debt-to-EBITDA goal of around 3.5 times.

In the fourth quarter, the partnership successfully raised approximately $400 million in equity from an overnight issuance and its ATM program. The partnership also issued at approximately $400 million of 10-year and 30-year senior notes in November, at a weighted average interest rate of 4.9%.

After taking into consideration the drop-down we announced yesterday of the 25% ownership interest of EMH, the partnership's debt-to-EBITDA is currently around 3.3 times. As we noted in that announcement, the drop down was financed by issuing ENLK units to the general partner.

In the first quarter of 2015, the general partnership will only receive a prorated distribution from the new ENLK units, with the units converting to common units thereafter. Furthermore, our bank group has shown its support for our long-term growth plans by agreeing to expand the partnership's revolving line of credit from $1 billion to $1.5 billion as of February 5, 2015, which gives us excellent flexibility in financing our future growth plans. The maturity date of the partnership's revolving line of credit was also extended by one year to 2020.

Finally, the Coronado acquisition was structured to ensure we did not have an additional need to access the equity capital markets through a marketed deal. We feel we are in a great position, not having to rely on the capital markets for funding the growth plans we laid out for this year.

We also announced our 2015 guidance in the press release issued this morning. We expect EnLink Midstream to have consolidated adjusted EBITDA of around $740 million in 2015, which would be a 7% increase from the annualized second quarter to fourth quarter 2014 EBITDA of $690 million. We expect the partnership to have adjusted EBITDA of around $710 million and distributable cash flow around $570 million in 2015.

We forecast the partnership's annual distributions to be around $1.58 per unit, which would be a 7.5% increase over 2014 distributions. We forecast the general partner's annual distributions to be approximately $1.25 (sic - see press release "$1.025") per unit, which would be an approximately 18.5% increase over 2014 distributions. Our distribution coverage targets for both the partnership and the general partner are 1 to 1.1 times for 2015.

Our 2015 forecast also includes $700 million of acquisition expenditures for the previously announced LPC and Coronado acquisitions in the Midland Basin. We expect organic growth capital expenditures to be around $500 million and for maintenance capital expenditures to be around $50 million in 2015.

Our guidance assumptions for 2015 also include dropping down the remaining 25% of EMH, which we expect later this year, with similar terms of the first EMH drop down announced yesterday. The Victoria Express drop down could occur later in 2015 and the Access Pipeline drop down could occur in 2016. The Victoria Express and Access Pipeline drop downs are both subject to negotiations and approvals by the Board of Directors of Devon and the partnership.

There are a few additional assumptions to keep in mind regarding 2015 projections. First, as Mac and Steve explained, we expect growth in 2015 to come primarily from our Louisiana, west Texas, and Ohio River Valley assets. We expect income from the Oklahoma segment to be relatively flat, while the north Texas assets are expected to have around a 10% decline.

Secondly, the success and timing of drop down acquisitions will play a big role in the partnership's 2015 guidance. Third, we expect our cost of business to increase, related to our strategic position in growth. We believe we have set up our Organization for successful long-term growth, from a resource perspective. This will be seen in increased operating expenses in G&A in 2015, which helps to create an organizational structure for the long-term.

Fourth, we expect the general partner's tax liability to be around $20 million for 2015, which would imply an effective cash tax rate of around 10%. The general partner currently has approximately $48 million of loss carry-forwards available that we expect to use in order to reduce taxable income through 2015.

Finally, these guidance projections are based on commodity prices consistent with the current strip, which has impacted overall growth for everyone. However, looking at our growth opportunities, we have tremendous amount of optionality in our business, some driven by commodity prices, some driven by market demand. Good examples of this include our Permian business, our Bridgeline acquisition in southern Louisiana, and our processing business. The same can be said for Devon-sponsored businesses such as Oklahoma.

We believe we are very well-positioned with a strong balance sheet, around 95% of our gross operating margin for fee-based business, strong support from our sponsor, and great growth opportunities. I will now turn the call back to Barry for closing remarks.

Thanks, Mike. You have heard throughout this call that EnLink is strategically positioned. We have a diverse geographic footprint and strong financial foundation to deliver tailored solutions for sustainable growth. We are working hard to execute on identified growth projects and are taking advantage of the many growth opportunities that Devon sponsorships continue to provide.

We remain committed to driving value creation for our equity holders and customers well into the future. We look forward to providing you with more information on our progress and growth initiatives at our analyst and investor events in late March. With that, operator, you may open up the lines for questions.

(Operator Instructions)

Darren Horowitz, Raymond James.

Good morning, guys.

Good morning, Darren.

Mike, a quick financing question for you if I could, just with regard to the structure around the drop down. Prior to this, Devon's interest in the GP was about 70%, and given the equity composition of this drop down and then your comments around mitigating public issuance, is there a target that you guys have set with regard to how much Devon owns of the GP? Is it fair to assume, and I recognize it's preliminary, but if we're in this same type of environment from a cost of capital perspective, when you think about the remaining [slug], is it fair to assume that the financing structure could be similar?

Thanks for the question, Darren. To your first question, we really don't have a target in mind for Devon. Devon does not and we don't. Really it's how do we work together from their control of the GP into the business. To the second question, it is likely that you will see the same financing structure that we had on the first drop down in the second drop down, as far as the ENLK unit coming up to ENLC.

Okay.

It just gives us a really good opportunity to bring that unlevered cash flow down into ENLK and really do a reset to the balance sheet and give us a lot of financial flexibility.

Yes. It makes a lot of sense, especially given, on a weighted basis, the current cost of capital. Second question, more of an operations question, and I recognize you are going to cover this in a lot of detail at the analyst day; but just with regard to the liquids segment in ORV, I know that you've committed $300 million of capital over the last six months. Is the plan still to reach $700 million of investment by the end of this year?

I'm just trying to get a feel for how the current commodity price environment and regional basis pricing pressures may have shifted producer commitments, to either ramp crude and condensate and volumes, or if there is a situation where economic net backs aren't what they were, so maybe there's a shift in project scope or timing?

This is Barry. Let me start the answer to that question, then I am going pitch to Mike to maybe give you a summary of the capital and then Mac to give some perspectives on operations. First of all, what I'd like to say is, that nothing is ordinary right now. Given the commodity price environment that we're in, we are on our toes looking at every dollar, every day, to make sure that we're maximizing, optimizing our business, day-to-day, as we always are.

Additionally, as we look at all of these commitments that we've made, we're also staying very sharp and very much on our toes, trying to assess where we're investing capital for future volume growth. So we're gaining knowledge, gathering information on a daily basis, trying to make sure that we map out the investment in the right way. As you have heard us say, and will continue to hear us say, generally, we're on the same path that we have communicated previously. But always subject to change, given the current environment that we're in and the dynamics of that current environment.

Darren, from a capital standpoint, the easiest way to think about it is that original Clearfield acquisition, plus the drop down of the E2 assets, gets you about two-thirds of the way there. As Mac mentioned, four of the five of those assets for Antero are already in service and cash flowing today. The pipeline, as Mac mentioned, is in process today and the open season, and also we're working through on right-away for that.

It's really the timing it's spent in the pipeline. It really represents that one-third that's left. The key for us is that you have a truck fleet today that's continuing to move the volumes and the growth there and it gives us a lot of flexibility and optionality about how to think about that investment.

Okay. Then, Mike, last question. Back to your first point, when you outlined your financial goals for 2015. If I am thinking about the incremental growth this year in cash flow coming from Louisiana, west Texas, and those ORV assets; if you had to rank order those in terms of unlevered cash-on-cash returns, where are you getting the best bang for the buck of capital employed?

The best always is going to be Louisiana because you think of it as a total system. It's hard to separate what's happening there because you had the LIG system a long time ago, and you are layering on the PNGL, et cetera, and then the Bridgeline. So, on an unlevered cash flow basis, the total Louisiana business would have the best returns for what we're doing.

And what are those returns? Just rough percentages? Is it fair to assume low to mid-teens type returns, maybe with some upside if there is some synergistic component to it?

Yes. That's very fair.

Okay. Thanks very much. I appreciate it.

Darren, this is Barry. I just want to add to that. Mike made comments in his prepared remarks around the optionality and the opportunity that we have for upside. That's one of the things that when you look at each of those growth areas, we have significantly positioned ourselves in Ohio River Valley, Louisiana, Permian, and other places, really for that optionality or opportunity well beyond 2015. In fact, most of that return, you're going to see and really be pleased with what you see in 2016 and beyond. So we're extremely well-positioned in those growth areas.

T.J. Schultz, RBC Capital.

Hey, guys. Maybe first it would be helpful to get some breakdown for the $500 million of growth CapEx this year. Specifically, just looking to see if you have plans to start spending on that $400 million to $600 million bucket that you marked to grow or integrate the Coronado business, understanding that Ajax may be deferred a little bit, so just trying to understand what you have marked to spend in the Permian? And then if you have plans to spend on the potential repurposing of pipelines of South Louisiana or if there is anything marked for this Marathon JV pipeline?

T.J., this is Mike. Good question. When you think about that $500 million in capital, and the easy way to think about it that the majority is really pointed toward ORV and Permian. The Permian, as Steve talked about, is still in process of being reviewed, because again, you have a capital plan in around the Coronado assets, you have a capital plan in around in our existing business, and you have capital plan around LPC.

We, as a team, are working through how to best think about that capital plan, but there is capital for that in that $500 million. So, if you compare it to last year, you're finishing out that build-out of our Bearkat system now and you're also looking at the expansion through the Coronado new plant and then the expansion of really the LPC footprint. There is a continuation of spending on the Marathon, but as you remember, that's a joint venture, so there's only about, net to us, about $50 million in capital and that pipeline is not expected to be in service until 2017, so that's more of a 2016 capital expenditure than a 2015.

Okay, thanks, Mike. Then Barry, you laid out a plan previously to hit $1.4 billion of EBITDA by the end of 2017. Has that view changed at all, given the current environment?

T.J., you refer to the plan that we laid out. What you've heard for the last 40 minutes or so is that we're executing on that plan. In fact, just checking boxes as we go down the list of all of the things that we said we were going to do. So we're very much still on the plan. We still feel great conviction around the type of growth, the MLP leading growth opportunity that we have.

We think in today's environment, that could look a little bit different. It could have a little bit more weight to the M&A side because we think that opportunity is going to be greater than the organic maybe that we thought six months ago. But yes, we still have great conviction about this being a Company that not only has a great platform of stability, but extraordinary growth through the four avenues that we've well used so far.

Okay. Thanks, guys.

Thank you, T.J.

John Edwards, Credit Suisse.

Good morning, everybody.

Good morning, John.

Thanks for the comments. If I could follow-up T.J.'s question, on that $1.4 billion, are you thinking that for full year 2017 or is that more of a run rate exiting 2017?

John, our original communication on that was to be at that point by the end of 2017, whether that's the last day of 2017 or the last quarter of 2017, we weren't that fine with that projection, but yes, it was in the end of 2017.

Okay. All right. That's helpful. And Mike, in terms of the guidance, is the Victoria Express drop down, is that in the guidance or is that -- because that is a separate negotiation, is that excluded?

It is in the guidance, John, but as you remember, if you go back to the analyst day, the financial metrics we used around it, it's a pretty small piece and it would be a partial year. The number, just to remind you, on an annual run rate basis we use, was around $12 million. So again, it's not a large piece.

For us, it's really that strategic piece of stepping into the Eagle Ford. A good reference would be is to look at Devon's results in the Eagle Ford. They are moving north of 100,000 barrels as of the end of last year on crude, so we think that's what's key for us.

Okay. All right and then access is going to be pushed out to 2016 then?

That's a fair assumption.

Okay. All right. And just to be sure, just to be clear -- and also the extra 25% drop down, that's also included in the EBITDA guidance?

Yes. If you go back, we laid out a road map ultimately and we're executing on that road map. The only change you might see is really the potential timing of access, but otherwise, we're really trying to execute along what we laid out on those plans for drop downs.

Okay. And then just broadly, in terms of the organic growth landscape, maybe if you could describe the changes you've been seeing here the last few months, given the commodity price backdrop?

Yes. John, I will start the answer to that question and then Mac and Steve may have some things to add. Clearly, what we've seen is, with an adjustment to the commodity price environment, we've seen a slowdown in the requirement for infrastructure need. Infrastructure is always trying to stay just slightly ahead of development of production. And what we do in an environment like this is, we tighten up that slightly ahead, to be even less ahead, so that we see production before we invest in infrastructures.

So we do expect to see less commitments to support additional infrastructure. That's why, as I said earlier, we feel really good about how we were created for the different cycles that we might have anticipated. In fact, what I would tell you is, that in March of 2014, when we established EnLink, we knew that there was going to be another down cycle. We knew that because we've seen it before and we will see it again and so what we tried to do is create a platform that would do well in any environment.

So right now, we've got additional resources focused on the M&A environment. Where can we see strategic add-ons like what we are seeing in the case of LPC and Coronado? If you haven't seen the map, take a look at what we've been able to do there on the map, it looks great, in the Northern Midland Basin. That is what we will focus on. Steve, Mac, can you add to that?

Barry, you hit it. We're being very careful where we're expending our capital and making sure that the projects that we have, have near-term returns and that they're building on the platforms that we've already got a great position in.

The only thing I would add, John, is we still feel really good about this environment for infrastructure requirement. We haven't lost the numbers that the various entities were projecting for infrastructure growth of somewhere between $30 billion and $70 billion a year of infrastructure growth. That's still there, but we're probably in that 5% or 10% of the time when you are going to see a slowdown in that for some period ahead. How long that period lasts obviously depends on how long it takes us to see improvement in prices.

Okay. That is really helpful. All right. Thank you. That's all I had. Thanks.

Thank you, John.

Sharon Lui, Wells Fargo.

Good morning. Just wanted to ask a couple questions about the Coronado acquisition. You mentioned that the long-term target multiple is about 7 to 8 times. Just wondering what type of commodity price environment would you need to see in order to achieve that and the timing of when you expect to achieve that?

We're looking at Coronado really as a long-term investment in the Midland Basin. As Barry mentioned earlier, you look at the map and it really gives us a very good strategic position in that basin. The current numbers that we're looking at are investments over $400 million to $600 million over the next three to five years in developing the acreage position that we already have dedicated.

Producers are continuing to drill. We've seen reports that show -- that they can support -- that the drilling can be supported at $50 per barrel oil prices. When we look at the expansion of that, those volume expansions, that spending will be associated with that volume growth over the next five to seven years, will get us to the 7 to 8 times multiple that we projected.

Okay. In terms of the investments, is that primarily processing, additional gathering expansions, or what would be the bulk of the spending allocated towards?

Those facilities would be made up of gathering pipelines, field compression, and processing facilities.

Okay. Then turning to guidance, if we just look at, on a consolidated basis, annualizing the fourth-quarter numbers would probably get you to about $711 million, versus $740 million projected for 2015. Just looking at the numbers, that seems conservative given the investments earmarked. Just wondering, you mentioned OpEx and G&A expense potentially going up, just wondering how meaningful that could be? The other offset would probably be the north Texas declined, but just wondering if we're missing anything else to get that $740 million number?

Sharon, this is Mike. A good way to think about is those additional comments I gave, because if you're just doing an add them up and you're thinking about changes; one, we did say about a 10% decline in north Texas year over year. We really didn't see that in 2014 because in the first year, we saw some additional volumes come in, so that decline was muted really in 2014.

Oklahoma, like Steve said, we will expect to see initial decline over the first half of the year, then more flatten out in the back half of the year. Permian is really in the growth mode, as you saw, we're expecting to fill the Bearkat plan over this year, so it's really probably more of a timing question, which is a result of the current commodity environment.

With regard to the NGL business, it's really running at about full, as Mac said. Then we're actually working into those next steps on the Bridgeline acquisition on how to think about that. That, as we talked about, was about a 10 times multiple on invested capital.

So, I think you're fair in how to think about that. The increase in OpEx and G&A is really related to the reset of the business and really getting it set right to manage the bigger platform. So you will see an increase in that and we will give you some more details on analyst day on how to think about that. But when you think about the comparisons, probably better to think about the run rate of the full year, versus the run rate of the full year versus the fourth quarter, just because of the impacts we've seen in the business.

Okay.

Again, we're trying to take into consideration what we've seen in the market today. So from an overall standpoint, if you went back six months, you probably had $50 million or so impact to the business would be related to both primary and secondary commodity exposure.

Okay. That's helpful. And just following up on the growth CapEx, is there any spending allocated to the conversion of the pipes in Louisiana?

As of right now, there is not. We're still -- or Mac and his team is still working on that, but as we've said before, we believe we can still spend multiples of investment on that.

Okay. And then, just a last housekeeping question. For the tax rate, at the GP level going forward, do you envision it being around that 10% cash effective tax rate, with the additional drop down planned for the back half of this year?

The way to think about it is that we continue to look and manage that tax rate based on the levers we have. As you saw, ultimately, on how we thought through moving from 2014 to 2015, we were able to push some NOLs into 2015. I still go back to how that tax rate comes about, which is each of the cash flows, which is the ENLK units, the IDRs and ultimately cash flow from EMH until fully dropped down. That's really going to drive the tax rate on the go-forward basis, so the $20 million or 10% is good for this year, but you will see that increase in the outer years.

Okay. Great, thank you.

Thanks, Sharon.

Gabe Moreen, Bank of America.

This is actually Ben Gottesdiener on for Gabe.

Hello, Ben.

I apologize for the technical question here, but given that $30 million gap between the guided 2015 consolidated EBITDA, before non-controlling interest and the EnLink stand on EBITDA after NCI, is it fair to assume that 2015 EBITDA, attributable to NCI, will be that $30 million?

If you think about it, really what you're doing is the difference really represents the timing of the cash flows of EMH still at ENLC.

Okay, sure. So then given that, and given the historical EBITDA attributable to NCI, is it fair to assume a 2Q, 3Q drop backing into that number?

Yes, it is.

Okay. All right, thank you very much, guys. Appreciate it.

Thank you, Ben. Thank you, operator. I'll go ahead and close. Let me just remind you as a close, that 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.

We are operating in a different time today, but we feel very confident in our ability to operate positively and we thank you for all of your support and for joining us today on the call for this update. Have a great day. We'll look forward to talking to you at the analyst meeting.

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