EnLink Midstream LLC (ENLC) 2018 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the EnLink Midstream Third Quarter 2018 Earnings Call.

(Operator Instructions)

I would now like to turn the meeting over to Kate Walsh, Vice President of Investor Relations.

Please go ahead ma'am.

Thank you, and good morning, everyone.

Thank you for joining us today to discuss EnLink Midstream's third Quarter of 2018 earnings.

Participating on the call today are Barry Davis, Executive Chairman; Mike Garberding, President and Chief Executive Officer; Eric Batchelder, Executive Vice President and Chief Financial Officer; and Ben Lamb, Executive Vice President and Chief Operating Officer.

To accompany today's call we have posted our third quarter of 2018 earnings press release and operations report to the Investor Relations portion of our website.

Shortly after today's call, we will also make available a webcast replay on our website.

I will remind you that statements made during this conference call about the future, including our expectations or predictions should be considered forward-looking statements within the meaning of the federal securities laws.

Actual results may differ materially from what is described in these forward-looking statements.

Forward-looking statements speak only as of the date of this call, and we undertake no obligation to update or revise any forward-looking statements.

Additional information on factors that could cause actual results to differ from what is described in the forward-looking statements is available in the earnings press release and the operations report accompanying this call, located at enlink.com and in our SEC filings.

This call also includes certain non-GAAP financial measures.

Definitions of these measures as well as reconciliations of comparable GAAP measures are available in our earnings press release and operations report on enlink.com.

We encourage you to review the cautionary statements and other disclosures made in our earnings press release and our SEC filings, including those under the heading Risk Factors.

The structure of this call will be to start with prepared remarks by Barry, Mike and Eric, and then leave the remainder of the call open for a question and answer period.

With that, I would now like to turn the call over to Barry Davis.

Thank you, Kate, and good morning, everyone.

Thank you all for joining us to discuss our third quarter results, our NGL expansion updates, and our vision forward.

As you saw in press release and operations report we issued yesterday, we achieved another incredibly strong quarter of operational and financial results.

We achieved over 20% growth year-over-year and adjusted EBITDA, continuing strong adjusted EBITDA growth since EnLink's inception.

Our successful track record of significantly growing adjusted EBITDA is a result of intentionally positioning business in high growth supply and demand regions and purposefully executing on strategic acquisitions and organic growth projects.

While EBITDA growth is good news, the even better news is that growth is translating directly to value that benefits all of our stakeholders.

We have achieved over 20% growth in distributable cash flow per unit.

Specifically related to third quarter results, I'm thrilled with outperformance as we exceeded expectations.

We are up year-over-year in segment profit in all 4 our operational segments and we had a standout quarter for Crude and Condensate segment.

Additionally, we continue to execute on high returning projects in high growth areas.

Yesterday, we announced some very exciting expansions to our Gulf Coast NGL platform.

We are expanding capacity to fractionate raw make NGL barrels by 30,000 to 35,000 barrels per day, with the expectation of that capacity being operational and fully utilized within matter of months.

When you take a look at 2018 as a whole, we have been over performing all year.

When we issued guidance back in February, we knew we would have a strong year, but it has exceeded expectations.

When you look at the original range we set for adjusted EBITDA, the bottom of that range was $950 million.

And today we expect to be at the high end of guidance range we increased during second quarter, which is $1.50 billion, that's a $100 million increase from low end of our original expected range to where we expect to exit 2018, incredible.

I love what our team is accomplishing today and I'm equally excited about long-term outlook for EnLink.

In yesterday's press release and operations report, we enhanced visibility into the growth we expect on multiple fronts and reiterated our growth expectations for distributable cash flow per unit.

As we announced with our simplification transactions on October 22, we expect DCF per unit to have a 10% or greater compounded annual growth rate from 2019 through 2021.

When I step back and think about what that means for EnLink and our stakeholders, I think it means a lot and it is important for everyone to understand.

By growing distributable cash flow per unit by 10% or more each year, we are significantly strengthening balance sheet and we are increasing our power to further enhance long-term distribution growth.

At the end of the day, our strong financial outlook gives clarity around and visibility into commitment to sustainably create and return value to all stakeholders over the long-term.

With that, I will turn it over to Mike.

Thanks, Barry, and good morning, everyone.

As Barry said, we've had a tremendous quarter and a tremendous year thus far.

We have delivered more than 30% growth year-over-year in total segment profit and more than 20% growth in adjusted EBITDA for ENLK year-over-year.

We've also delivered 20% DCF per unit growth at ENLK when you compare third quarter of 2018 to the third quarter of 2017.

Compared to this time last year volumes in Oklahoma, Louisiana, and Crude and Condensate have all grown by double digits.

This is driven by the 520 wells we've connected to our asset platform during the first 10 months of the year, with 80 more wells expected by year-end.

Producer activity we are experiencing in our footprint gives us confidence in achieving the high end of our 2018 additional EBITDA guidance range and gives us confidence increasing our DCF and distribution coverage ranges.

We are also confident in 2019 growth.

In Oklahoma, we expect roughly the same number of wells to be connected in 2019 as in 2018.

In fact, as we look at the actual schedules provided by our most active producers in Oklahoma, we see about the same number of wells being connected in the first half of 2019 as we saw in the first half of 2018.

Overall, we continue to expand and deepen relationships with our partners and customers.

We are also executing on our expansion of our strategic NGL position Louisiana.

We announced 2 projects, which represent the first step in expanding our Gulf Coast NGL network.

First, EnLink announced Cajun-Sibon III, a project that will expand our takeaway capacity from the Mont Belvieu NGL hub to our fractionation facilities in Louisiana.

Second, we announced the completion of an expansion project of our fractionation capacity in Louisiana.

The 2 projects combined to unlock the ability to fractionate between 30,000 barrels per day and 35,000 barrels per day of incremental NGLs, once Cajun-Sibon III is operational, which is expected during the second quarter of 2019.

Volumes produced from our core positions in Oklahoma, North Texas and Permian Basin have given us a great opportunity to expand our NGL footprint due to the increased number of barrels coming out of those basins.

We are also evaluating the next leg of our NGL expansion, which could include building a new fractionation facility in Louisiana or participating in a joint venture facility in Texas.

In Louisiana, we are looking at converting existing gas pipelines into NGL service to feed a new large-scale fractionation complex.

We believe we have a strategic advantage to execute a project like this given our growing NGL supply position and franchise position in the heart of the Louisiana demand market.

I'm very excited about the growth we are legging into in Louisiana.

Our announcements yesterday are just the start of what we want to accomplish.

I also think it's important to give an update on the Crude and Condensate segment.

As Barry said, Crude and Condensate had a stand out quarter.

At the beginning of 2018, we had one crude oil gathering system in the Midland Basin.

Today, we have 4 crude oil gathering systems flowing volumes all located in some of the best supply basins in the United States.

Our Black Coyote, Redbud and Chickadee systems are fully operational now, with our Avenger system flowing initial volumes and expected to be in full service during the first quarter of 2019.

We have made considerable investments in our crude gathering systems this year and we've done that in a way that we can accommodate the significant volume growth we expect in 2019 and beyond without requiring a large amount of additional capital.

The scalability of our crude systems means that one of our fastest growing businesses is also one that is very capital efficient.

Shifting topics now, I want to take some time to discuss our broader multi-year financial outlook and how we are thinking about the longer-term outlook metrics we provided in connection with our simplification announcement.

We are focused on creating stakeholder value, as can be seen through current and projected DCF per unit growth.

As part of this discussion, we gave a look forward into our pro forma ENLC business outlook and we like what we see.

And we're starting all this from a position of strength, given our execution in 2018.

Most importantly, this growth is being executed in a capital-efficient manner with further upside through execution on our 7 growth strategies.

A great example of this is our first strategic Gulf Coast NGL expansion with more to come.

Our growth in our core business gave us the opportunity for the NGL expansion.

However, the tightness of the current fractionation market provide some near term headwinds until we can get Cajun-Sibon III up and running.

This was the main driver behind the $25 million change to 2019 guidance we discussed earlier.

The Cajun-Sibon III projects were also included in this guidance for 2019, but also provide great long-term capital efficient growth for the business.

Overall, we love how the business is performing, how our team is focused on executing on our 7 growth strategies, and how our long-term business outlook is focused on creating strong stakeholder value.

With that, I'll turn the call over to Eric to provide an update on our financial highlights.

Thank you, Mike, and good morning, everyone.

As Barry and Mike have highlighted, EnLink delivered strong results for both the third quarter and 2018 year-to-date.

I'll start with ENLC, which reported solid quarterly results of $58 million of cash available for distribution, representing 6% growth from where we were this time last year.

We continue to increase distributions as planned and are on track to raise distributions by 5% during 2018, as compared to 2017.

From an ENLK perspective, we achieved adjusted EBITDA and that's to ENLK of $267 million for this quarter, which represents 23% growth from the third quarter of 2017.

The double-digit growth was a result of year-over-year segment profit growth in all of our regions, with Oklahoma up by 35% and Crude and Condensate up over 130% from this time last year.

This quarter's results exceeded expectations even with the inclusion of a one-time charge of $5 million related to a company realignment initiative we completed during the quarter.

From a cash flow perspective, ENLK's distributable cash flow was up an impressive 25% from the third quarter of 2017.

DCF growth is exceeding our expectations this year, and as a result we have increased our DCF guidance range to $700 million to $730 million.

In conjunction with the DCF guidance range, we also increased our distribution coverage guidance range by 5% at the midpoint to a range of 1.15 times to 1.2 times.

Strengthening our distribution coverage ratio has been a key financial priority for us and we are very pleased with the progress we are making this year.

A stronger distribution coverage ratio points to a stronger balance sheet, which gives us the flexibility to self-fund an increasing amount of our growth capital expenditures and allows us to navigate volatility well.

From a leverage perspective, we ended the quarter in a solid position with debt to adjusted EBITDA of 3.85 times as calculated per our credit facility.

We also raised very little equity via our aftermarket program during the quarter, with equity raises totaling around $46 million for the year.

We continue to maintain flexible liquidity position and exited the quarter with ENLK revolver liquidity of approximately $725 million.

We often get asked about our annual growth capital expenditures.

Generally speaking, we expect our growth capital expenditures for the next 3 years in aggregate to be around $1.2 billion to $1.5 billion.

This year, we expect to fund the majority of the equity portion of our growth capital expenditures with excess cash from the business and we expect to target that same funding model going forward.

When we announced our simplification transaction on October 22, I spend some time discussing our 4 key financial tenants going forward.

First, we are committed to growing distributions responsibly and sustainably and have outlined our expectations to grow distributions annually by 5% or greater.

Second, we are focused on self-funding more of our growth capital expenditures and are forecasting that we'll have cumulative retained cash flow in excess of $700 million over the next 3 years, which gives us greater flexibility to execute our growth plan on our own financing terms.

Third, we are targeting a long-term distribution coverage ratio of 1.3 times to 1.5 times.

And fourth, we are targeting a long-term leverage ratio of 3.5 times to 4.0 times, as calculated under the terms of our credit facility.

Finally, I would like to take a moment to address our inclusion in certain market indices.

We have discussed this topic at length with a variety of advisors and our expectation is that pro forma ENLC will be eligible for inclusion in all of the indices in which we are included today.

Our pro forma entity is set up to give the market visibility into our future financial state of sustainable distribution growth, significant reinvestment of excess cash flow, strong distribution coverage, and responsible leverage levels.

We are building a sustainable balance sheet for years to come.

EnLink is focused on capitalizing on the large, very attractive growth opportunities in front of us and I'm specifically focused on making sure we have the balance sheet in place to create value for all of our stakeholders.

And with that, I'll turn the call back to Mike.

Thanks, Eric.

At the end of the day, execution is the key to our continued success and it is at the very core of what we wake up thinking about.

Our producer customers rely on us to keep building their connections to demand markets and to keep flowing their product to market, our downstream customers rely on us to keep providing the critical supply needed to feed their facilities.

EnLink builds and operates essential midstream energy infrastructure for our customers and that is what you can count on us continuing to do with excellence.

With that you may open the call up for questions.

(Operator Instructions) Your first question will be from Jeremy Tonet of JPMorgan.

This is Rahul on for Jeremy.

The first one, starting off on the STACK side, with Devon reducing rates on lowering well connects in 2019 the STACK and also you feel going to the acquisition, like can you provide some more color on the 10% CAGR which you noted in the segment.

And also, how should we think about the risk here and are there any assumptions behind improved well productivities baked in here?

Yes, Rahul.

It’s Ben Lamb.

Big picture on the STACK, you know you're right what we saw most recently here was a big vote of confidence coming out of in Canada through the new field acquisition, which is essentially a STACK acquisition and they recognize there that they're dealing with one of the very best plays in North America and a play that still has a great deal of running room.

In terms of our confidence around the CAGR, you know when we look into 2019 one thing that informs our confidence is we have been in discussions, as we always are with our producer customers about their plans for 2019 and while we don't have schedules for every single customer going through 12/31/2019.

When we look at what we do have, and what we observe our customers doing, we see roughly the same number of well connects in 2019 as we've experienced in 2018.

And of course, I think the growth we've experienced in 2018 really speaks for itself.

As far as well performance, we do not bake into our projections any assumptions around increased productivity that's just not part of how we forecast.

We do take into consideration the industry's recent learnings around well spacing, and we think that we'll see an average development of 6 wells or so per section for the Merrimack specifically, some places it maybe 4, some places it maybe 8, some operators like Newfield are looking at co-developing the Woodford and I will say, some operators are not, but in the aggregate that's roughly our expectation.

Hey Rahul, this is Mike.

Also, I think it's important to note that we have a great diversity of producer customers in Oklahoma too, we did highlight that in the ops report.

So again it's looking to all those different customers.

I think we had over 16 customers' drill wells this year that have really driven that growth Ben's talking about.

That's helpful guys.

And then, can you provide some drivers behind the Crude and Condensate 3 year growth targets again mentioned here.

And also up to 1.2 billion to 1.5 billion CapEx spend, what's the planned location for this segment and would the growth be entirely off the crude gathering systems and related expansions here?

Hi Rahul, I'll start and then Eric may want to add on.

In terms of the guidance there on the CAGR for the crude segment, it really is driven by our confidence in the resource that's being developed behind those systems.

So in the prepared remarks, you heard that over the course of the year we brought online 3 systems, 2 of those in the STACK and one of those in the Delaware and we've seen fantastic growth on our Greater Chickadee system in the Midland Basin, I believe year-over-year it's up north of 60%.

So a tremendous amount of growth this year and that also comes with a fair bit of investment.

The segment capital for this year is in the range of $115 million to $150 million and that is to really lay the backbones for the Avenger, the Redbud and the Black Coyote systems.

Growth going forward will be very capital efficient because so much of the base system has been constructed over 2018 and into early 2019.

So actually it's rather -- rather a little capital looking forward in 2019 through 2021 as part of the range of 1.2 billion to 1.5 billion that Eric provided.

And you know I think we'll give you some additional guidance around that for 2019 at the time that we provide you full 2019 guidance.

Yes, Rahul, the only thing I would add to that as Ben alluded to, the CapEx -- we get this question a lot, which is why we thought it would be helpful to be transparent and give some of our perspective on it.

And those numbers that I quoted include the large -- the large projects that Ben pointed out, it also includes a lot of our -- what we consider this quick to cash capital in terms of hooking up new wells, compression, et cetera.

All of the work we do on a day in day out basis to serve our customers and to the extent that we have bigger projects down the line as we have in the past we'll provide more information, but the numbers that I provided include everything that has been announced to date on the large project side and then as our day-to-day CapEx that we consider vital to serving our customers.

Yes, Rahul, when you put all that together I think the point you ought to take away ultimately is the efficiency with the growth of the business.

We highlighted with the simplification announcement just the DCF per unit growth over that 3 year period and this is what's driving it.

And you can see it ultimately as far as the capital efficiency build in our core basins and the confidence we feel around that.

Got you, appreciate the color, guys.

And then as final one on -- can you give some color on how you have plan to approach the second phase of the NGL platform build out you mentioned in the ops report?

And like what would -- what would help you make the decision between building the fracs in Louisiana versus the JV in Texas, any color you can provide there?

Yes, Rahul, it's Ben again.

As a follow-up to the Cajun-Sibon III announcement, our focus now shifts to what the next frac solution for us is going to be and as we outlined on the ops report, there's going to be 3 possibilities there.

One of them is a large scale fractionator in Louisiana that would be effectively a brownfield development around our own assets and would likely involve repurposing some gas pipelines to move the Y-grade over into Louisiana.

Another possibility is a joint venture in Texas most likely around Mont Belvieu.

And then a third possibility that is always out there is that we get a very attractive third party solution, much like we did on the transportation of our Oklahoma NGLs that might be superior to add to those capital projects.

So that's what we're working for now.

And to answer your question about what does it take to get to that decision.

It really is just time to do a full evaluation of the options that are available to us and the market for each of those decisions to determine what's most economic for the company.

The next question will be from T.J. Schultz of RBC Capital Markets.

First, just to clarify the infill spacing learning curve that Devon discussed with its operational report this quarter, was that already contemplated in the 2019 EBITDA guidance that you all gave recently?

TJ.

It's Ben.

Yes it is.

We obviously are in cost by contact with all of our customers.

Devon, of course, being no exception.

And so while this is being announced by Devon today, it's knowledge that we've had now for some time and so it is fully incorporated in our 2019 expectations.

And I think T.J., this is Mike, one important point to make ultimately is that you can look at the 3 year CAGR on Oklahoma and feel very good about the growth projections from that solid base, but specific to 2019 the thing we talked about was really the headwinds in the frac market.

And there ultimately is the cost for us to get to the Cajun-Sibon III expansion.

And so when we talked about the guidance change of $25 million that was the large driver to that, but that large driver gave us not only the opportunity for Cajun-Sibon III, but it is giving us that next opportunity for that next leg of Louisiana or Mont Belvieu growth.

And so we feel very, very good about the long-term growth of the business.

There were some headwinds in 2019 related to that, but Oklahoma was fully factored in those numbers.

Okay, understood.

And then STACK versus SCOOP, are you seeing any customer or rig shift from the STACK to the SCOOP or to the merge?

T.J. its Ben.

We really have not -- you know there was one operator who made that shift earlier in the year, but that's an operator that we don't do very much business with.

The operators who are big on our system are still very focused on the STACK.

Now I'll take the opportunity to make a couple of points.

One of those is that as they transition into full field development mode the development becomes much more efficient and so in order to deliver the same number of wells next year as we have seen this year, which is roughly our expectation, we won't need to see as many rigs working on the acreage.

We will be more focused on well count than we are on rig count.

And second point I'd make is you touched on the merge.

And I'll just take a minute to recognize what a bright spot the merge has been for us not just this year, but related to last couple of years and we have seen a little bit of acceleration on our merge position.

That's an area that because the producers are smaller companies and in some cases are not public it doesn't get as much airtime as the STACK does, but it is a great resource, we've seen great results and we have a couple of very active producers in that area.

Okay, understood.

Just lastly following up on the NGL kind of next phase, does any part of that next NGL solution consider a larger expansion of Cajun-Sibon or is that cost prohibitive compared to potential options to build the JV in Texas or contract otherwise?

Yes.

Certainly a larger expansion of Cajun-Sibon is on the table.

And the form that would most likely take would be a conversion of some existing gas pipelines into NGL service.

So would effectively be a second NGL pipeline into Louisiana.

That's what would be needed to move y-grade associated with the large scale Louisiana frac.

So really the question is, is that a better solution or is the better solution to JV with someone in Belvieu or is a better solution to contract with someone who will provide the service even more cheaply than we can provide it to ourselves.

(Operator Instructions) The next question will be from Spiro Dounis of Credit Suisse.

Just want to start off on the strength in Louisiana gas, simply got a real step change there this quarter and I think you alluded to some stronger industrial demand and LNG demand as the driver, just curious is that a structural shift that you're starting to see now or is there any seasonality in there?

Spiro, it's Ben.

I wouldn't describe it as a structural shift.

I would describe it as continued very strong performance from that business in a market that has been strong and I think we'll continue getting stronger, but I don't, I don't think there is any one strong structural shift that you can, that you can point to.

There is a little bit of seasonality from a margin perspective in that business that really is related to the power load that you see in the summer that lasted maybe a couple weeks longer than it usually does this year.

So we had a modest benefit from that, but really the results that you're seeing both from a volume perspective and from an NOI perspective, those are reflective of the base strength of the market.

Spiro, this is Mike.

I mean, when you think about it too.

That's the starting point, we've talked about the multi-commodity opportunity we have in Louisiana, Ben alluded to what we're doing on NGLs we equally have the opportunity on gas and what we're seeing about that longer-term growth in gas demand down on the Southwestern side for LNG.

So, so that'll be a little bit longer-term in nature when you see that coming, but we are as well positioned as anyone to continue to take advantage of that.

And that would be that next big leg of growth in the gas side.

Got it, that's helpful.

And then just in terms of, I think you guys hit the road after the announcement of the merger of the rollup, I was wondering if you could share some feedback you had received, specifically around the potential for new investors to come in, now that IDRs are gone, I think that was sticking point for some.

Yes, I mean I think -- Spiro it is Eric, it's a good question.

I think we've gotten some feedback that it's a more attractive security, I think when we think about the simplification as a whole, it sets us up in a great position from a financial perspective and really helps us to support the business and the great growth that we see coming ahead of us.

I think '18 has been a terrific year as you've heard and the simplification will set us up from a balance sheet perspective to really execute on the opportunities we have in front of us and really that's where it starts in terms of attracting investors is a good story and a strong balance sheet and then structurally having the LLC structure with the 1099, we think makes it a good opportunity for others to come in.

And next question will be from Shneur Gershuni of UBS.

I was wondering if I can follow up on some of the NGL planned expansions and so forth.

One of your peers or I guess partner actually talked about last week about being able to spend low amounts of capital and being able to significantly increase the size of their ability to frac and so forth and you've clearly demonstrated that as well.

How many other instances do you think or possibilities are there out there for you to do more of the same thing like can you synthetically create an entire frac if you are able to turns some screws on all your facilities?

Yes, Shneur, it's Ben.

So you're right.

Effectively what we've announced today is a 30,000 barrel to 35,000 barrel fractionator for the equivalent of $50 million to $60 million.

And not only that, but the fastest solution in the market in the second quarter of next year versus time to new build obviously being significantly longer than that.

In terms of screws that we have left to turn, I don't think we're going to find another 30,000 barrels to 35,000 barrels.

I think that once we get Cajun-Sibon III online and flowing, I imagine that our engineering folks and our operations folks will find ways to move a few incremental barrels as they learn the capabilities of the system.

We've shown our ability to do that over and over again, to over-deliver on our own expectations.

But I don't, I don't think we're going to discover another fractionator that comes almost for free like this one does.

I think the next leg of growth will be, will be along the lines that we discussed earlier in the call.

Okay.

And as a follow-up, you gave a lot of color on Oklahoma, in terms of where you see opportunities and so forth.

Can you talk about the trend on rigs specifically on your acreage dedications, have they being going up or are they the same, have they been going down.

And what are your producer customers talking about over the next 6 to 9 months?

Yes, Shneur, it's Ben again, happy to talk a bit about that.

In terms of the rig trend over the course of the year, it's been fairly steady.

Our expectation is that we will see fewer rigs operating in the play on our acreage next year.

But we expect they will drill approximately the same number of wells.

And that's not based on magical thinking by us it's based on communications from our producer customers that we're having all the time.

And where we sit right now, we see about the same number of wells in 2019, as we expect to connect in 2018, but we think that they will require fewer rigs to do that.

And aside impact of that is that the growth will be lumpy.

We've talked about that in the past that you should expect to see lumpy growth in Oklahoma because the timing of some of the big projects being turned in line can move between quarters and create non ratable growth.

And you saw that in this quarter and I would say that's going to be the new normal.

We'll have some quarters of outsized growth like we did in the second quarter of this year and we'll have some quarters of less growth like we saw in the third quarter of this year.

So when I think about flat well connections like on a year-over-year basis and I also think about kind of the treadmill that sort of created because of natural decline rates and so forth, what is your confidence that your net, net volume is going to grow year-over-year like is that enough or are the showings on the wells better.

What gives us confidence that it will actually grow and be able to offset what should be a natural decline rate?

Yes, so Shneur to talk through that a little bit, to answer the question head on, extremely confident that we'll have year-over-year growth.

As far as how you kind of get there in pieces, if you look at the growth this year with the wells we've connected year-over-year we are up 42%.

If you go back 2 years, we're up 112%.

So next year, I don't expect we will be up 42% again because of exactly what you're saying, you have a bigger system, it takes more wells to continue the same percentage rate of growth.

So it won't be 42%, but if you think about the guidance -- the segment profit guidance that Mike talked about, the 10% CAGR 2018 to 2021, that gives you some idea of how we see growth happening on the system.

And then specifically for 2019 volumes when we give you full guidance for 2019 we'll make some communication around that in particular.

Okay.

And one final question, when can we expect to see the S4 filings?

Shneur, it is Eric.

We are working on that as hard as we can and we expect to get that out very soon.

Obviously, that's something that we recognize is very important and we're spending a lot of time to get that out as soon as possible.

[Operator Instruction] Your next question will be from Colin Crosby of U.S. Capital Advisors.

One more question on the expanded frac capacity.

So once you complete the NGL pipe expansion, you can go ahead and start filling up that expand capacity, how much time do you think that buys you before you start running into the same issues again that were the driver behind the reduced guidance?

Colin, it's Ben again.

It fairly well takes care of our need for next year and that's actually perfect in light of the decision that we are going to need to make around next leg of frac capacity.

We want to see some link in our position because it is link in the position that gives us the ability to make that next leg of growth.

So it takes -- takes pretty well care of 2019 and then we'll be looking for new solutions to begin in 2020 that might be a solution that bridges us to a frac coming online that we would be constructing or it might be a contractual arrangement for long-term with a third party just like we outlined earlier in the call.

And Colin this is Mike.

I mean if you think about it from an industry standpoint that is the key here and you think about what's happening ultimately in Mont Belvieu and what growth we see '19 for us is that key year to break through, which Cajun-Sibon III does for us.

The next question will be from Dennis Coleman of Merrill Lynch.

Just one more on the announcements for today if you would.

So the capacity, is it contracted now or will it be contracted and as you think about the alternatives going forward, are those -- will those also be underpinned by some kind of contracts with the customers?

Yes, so the capacity will be contracted at the point when fractionator comes into service.

As far as next leg of expansion, yes, we certainly will look to have a threshold level of commercial support before we would proceed with the next expansion.

That may or may not be subscriptions for 100% of the fractionator capacity, you know we probably don't need to get quite that far, but we would certainly want to have a level of commercial support that we feel ensures that we will have a successful and economic project and that will be some of the work that we are doing as we progressed towards making that next decision.

Okay, Ben.

And what about infrastructure to move the barrels away downstream to customers, the purity products?

Great question.

Even just with the Cajun-Sibon III expansion it will create some incremental benefit to some of our existing downstream infrastructure.

For example, our extension pipeline and move some of the purity products that are created by the Cajun-Sibon system today.

Certainly a frac expansion in Louisiana could come with some additional downstream opportunity on the purity side and I don't want to get too deeply into what those could look like, but it would be some additional infrastructure investment, could also be some expansion of our export capability.

I think we noted in the materials that we passed 2 million barrels so far exported this year out of Louisiana.

Okay.

And just one last follow-up there in terms of just the more immediate expansion.

Is that baked into the economics that you're talking about today?

This is Mike.

It's all baked into everything we've laid out.

And to think about it, just to make sure people understand with regard to the fractionator, the 10 million for the increase in fractionation capacity has already been spent and the 50 million related to the Cajun-Sibon III pipeline increase is already in the numbers that we laid out.

And ladies and gentlemen, this will conclude our question and answer session.

I would like to hand the conference back over to Mike Garberding for any closing remarks.

Thank you, Denise, for facilitating our call this morning.

And for everyone on the call today, thank you for your participation and for your support.

We look forward to updating you on our fourth quarter call and full year 2018 results in February.

Thank you, sir.

Ladies and gentlemen the conference have concluded.

Thank you for attending today's presentation at this time you may disconnect your lines.