歐尼克 (OKE) 2018 Q1 法說會逐字稿

Good day, and welcome to the First Quarter 2018 ONEOK Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Andrew Ziola. Please go ahead, sir.

Thank you, Mindy, and good morning, and welcome to ONEOK's First Quarter 2018 Earnings Conference Call. This call is being webcast live and a replay will be made available. A reminder that statements made during this call, that might include ONEOK's expectations or predictions, should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings.

Our first speaker this morning is Terry Spencer, President and CEO of ONEOK. Terry?

Thanks, Andrew. Good morning and thank you all for joining us today. As always, we appreciate your continued interest and investment in ONEOK.

Joining me on today's call is Walt Hulse, Chief Financial Officer, Executive Vice President, Strategic Planning and Corporate Affairs; and Kevin Burdick, Executive Vice President and Chief Operating Officer. Also available to answer your questions are Sheridan Swords, Senior Vice President, Natural Gas Liquids; and Chuck Kelley, Senior Vice President, Natural Gas.

On this call, we will focus on our first quarter financial results and operating performance and provide our perspective about the recent FERC announcements related to natural gas and NGL pipelines. But before we dive in, I'd to start where we left off on our fourth quarter call, which is our $4 billion plus of announced organic growth projects. As you may recall, I was clear that the next couple of years will be about executing on these growth projects and we're making good progress so far.

On the natural gas liquids side, we continue to work with landowners, state and local agencies and other stakeholders along the pipeline routes for Elk Creek and Arbuckle II, and we expect to begin construction later this year on both projects.

Within the last couple of weeks, pipe for Elk Creek started being delivered, a big step closer to our actual construction. We plan to start construction with the southern part of Elk Creek first in the third quarter as this section would allow barrels from the Powder River Basin to flow on Elk Creek before the entire line is complete, which would free up capacity on the Bakken NGL Pipeline for additional barrels from the Williston Basin. The southern section could be in service as early as the third quarter of 2019. Additionally, our MB-4 fractionator is permitted and we expect construction to begin this month.

On the natural gas gathering and processing side, expansions of our Canadian Valley and Bear Creek plants and construction of the Demicks Lake plant are progressing on schedule. Kevin will discuss these projects in more detail shortly.

Increased ethane recovery and Mid-Continent volume growth remained key drivers of our 2018 guidance. And so far this year, we've seen both. STACK and SCOOP volumes on our system continue to meet or exceed our expectations, and demand for ethane continues to ramp-up with additional ethane crackers coming online this quarter.

With that, I will now turn the call over to Walt.

Thank you, Terry. ONEOK's first quarter operating income totaled nearly $420 million, a 30% increased year-over-year and a 6% increase compared with the fourth quarter 2017. First quarter adjusted EBITDA was $570 million, a 24% increase year-over-year and a 4% increase compared with the fourth quarter 2017.

During the first quarter, we paid a dividend of $0.77 per share and in April, we announced another 3% increase to $0.795 per share or $3.18 per share on an annualized basis, which is payable on May 15. We generated more than $115 million of distributable cash flow in excess of our dividends paid in the first quarter. Total distributable cash flow in the quarter was more than $430 million, with healthy dividend coverage of nearly 1.4x.

In January, we successfully completed a $1.2 billion equity offering, pre-funding a significant portion of our more than $4 billion capital growth program. At March 31, our debt-to-EBITDA on a trailing 12-month basis was 3.8x. On an annualized run-rate basis, we are 3.5x. As we said previously, we expect our leverage to increase modestly as we move through the construction cycle on the larger capital growth projects we've announced this year. But we continue to view leverage of 4x or less as an important target for ONEOK over the long term. We expect to fund our capital growth projects through excess cash flow from operations and ample borrowing capacity while maintaining our strong credit metrics.

We ended the quarter with no outstanding commercial paper and nearly the full $2.5 billion available on our credit facility. Since December 31, we've decreased total debt outstanding by $1 billion. ONEOK's strong liquidity offers us financial flexibility and the ability to repay current debt maturities with cash from operations and short-term debt or to opportunistically access the long-term debt markets. We are maintaining our financial guidance expectations for 2018 and continued to expect no need to issue equity in 2018 and well into 2019, if at all.

Before I turn the call over to Kevin for an operational update, let's briefly discuss the March FERC announcements and the potential impact to ONEOK. First, related to interstate natural gas transportation pipelines, which represent only slightly more than 5% of our total 2018 adjusted EBITDA. A couple of key points. Most of ONEOK's natural gas pipeline demand charge contracts have been established through shipper-specific negotiated rates and settlements and are not based on cost of service calculations. Additionally, as a corporation, ONEOK is a taxable entity. So any taxable allowance adjustments on cost-of-service rates would reflect an adjustment to the newer lower corporate tax rate not an elimination of the tax allowance.

From a regulatory timeline perspective, we do have a couple of interstate pipelines with upcoming rate cases, including Viking, which is required as part of its previously negotiated rate settlement to put in place new rates by January 2020. Midwestern, which is currently undergoing a routine FERC-initiated Section 5 rate review, with any changes in rates being prospective only. Guardian has negotiated rates for virtually all of its firm capacity through 2022 and Northern Border Pipeline recently implemented new FERC approved settlement rates. We do not expect the ultimate outcome of any of these matters to materially impact our financial results.

Moving on to FERC-regulated natural gas liquids pipelines. There is still quite a bit of uncertainty as to how changes related to tax policy may be applied or what adjustments may be made related to indexing during FERC's next 5-year review. We've taken a close look at our NGL pipelines that could potentially see some impact from indexing adjustments. A key item to understand about ONEOK is that the vast majority of volumes transported on our NGL pipelines are at negotiated rates, which we expect would see very little impact from a change in indexing. We expect that a 100 basis point change to the FERC index rate would have an annualized impact to ONEOK's revenue of less than $2.5 million. We feel this hypothetical provides a good look at what could happen in a downside scenario, and we expect the impact will be immaterial.

I'll now turn the call over to Kevin for a closer look at each of our business segments.

Thank you, Walt. Starting with the performance of our natural gas liquids segment. First quarter adjusted EBITDA increased 23% year-over-year and 11% compared with the fourth quarter 2017. NGL volumes gathered in the first quarter averaged 855,000 barrels per day, a 12% increase compared with the first quarter 2017 volumes and relatively flat compared with the fourth quarter 2017. Year-over-year growth was primarily driven by increased volumes in the STACK and SCOOP areas of the Mid-Continent, a trend that we expect to continue throughout 2018.

Winter weather impacted first quarter volumes relative to the fourth quarter, but we've since seen volumes pickup in April. Volumes on our West Texas LPG system reached more than 200,000 barrels per day on several occasions in April, and system-wide NGL gathered volumes reached more than 900,000 barrels per day on multiple days during the month.

NGL volumes in the Mid-Continent are materializing at/or above our expectations at this point in the year, driven by strong producer results in the STACK and the SCOOP. In the Williston Basin, our Bakken NGL Pipeline remains full, and we continue to expect to begin transporting additional NGL volumes by rail in the second quarter 2018 to provide interim takeaway capacity until Elk Creek is in service.

NGL volumes fractionated averaged more than 690,000 barrels per day during the first quarter, a 21% increase compared with the same period last year and a 2% increase compared with last quarter. Ethane volumes on our system have increased approximately 50,000 barrels per day in the first quarter 2018 compared with the same period in 2017. Our reported ethane rejection levels may look relatively unchanged year-over-year. However, this comparison is affected by our 12% increase in NGL volumes gathered since the first quarter 2017. A portion of this increased volume is attributable to ethane recovery. We're seeing increased demand from newly operational petrochemical facilities and exports, and we expect demand to continue to ramp-up through the remainder of the year as recently completed crackers operated full rates and additional facilities are completed later in the year.

Higher optimization and marketing activities in the first quarter also contributed to the segment's adjusted EBITDA increases, resulting in approximately $25 million increases, both year-over-year and sequential quarter-over-quarter. Wider NGL location price differentials between Conway and Mont Belvieu and the sale of NGL inventory previously held contributed to the increases. We expect wider spreads between Conway and Mont Belvieu to continue until Arbuckle II goes into service as growing volumes from new production consume available transportation capacity between the 2 market centers.

Moving on to the natural gas gathering and processing segment. Adjusted EBITDA for the segment increased 26% year-over-year, driven by volume growth in the Williston Basin and the STACK and SCOOP areas. Adjusted EBITDA decreased approximately 9% compared with the fourth quarter 2017 due primarily to higher third-party processing costs, weather impacts in both of our regions and temporary system constraints in Oklahoma due to the volume growth. These higher weather-related costs were isolated and are not expected to continue.

A key metric for the quarter was our volume growth. Average natural gas volumes processed in the first quarter 2018 were more than 1.7 billion cubic feet per day, a 24% increase compared with the first quarter 2017 and a 3% increase compared with the fourth quarter 2017. Volume growth compared with the fourth quarter was primarily driven by increased STACK and SCOOP volumes where processed volume averaged 845 million cubic feet per day during the quarter, a more than 6% increase from the fourth quarter and our highest volumes processed, to date, in the Mid-Continent.

We connected 112 wells in the Williston Basin and 35 wells in the Mid-Continent during the first quarter. We continue to expect approximately 650 total well connections in 2018. We have approximately 75 million cubic feet per day of available processing capacity in Oklahoma, including the 200 million cubic feet per day offload that is fully in service, and we will add an additional 200 million cubic feet per day of capacity in the fourth quarter 2018 with the completion of our Canadian Valley plant expansion.

Available processing capacity in the Williston Basin is approximately 125 million cubic feet per day currently, but this will be reduced with the return of warmer weather and additional well connections. We're in the process of expanding our Bear Creek plant and related infrastructure, and expect the initial expansion to 130 million cubic feet per day from 80 million cubic feet per day to be complete in the third quarter of 2018. This expansion will require no additional capital at the plant and minimal capital for additional field compression. Additionally, our 200 million cubic feet per day Demicks Lake plant is expected to be completed in the fourth quarter 2019.

In the natural gas pipelines segment, first quarter adjusted EBITDA increased 13% year-over-year and 6% compared with the fourth quarter 2017, primarily benefiting from higher interruptible transportation volumes and increased storage services. The segment this month completed its 100 million cubic feet per day westbound expansion of our ONEOK Gas Transportation system, and we continue to have discussions with producers in the Permian Basin and STACK and SCOOP areas to accommodate additional natural gas takeaway capacity given the strong growth expectations in those place.

As for the general market conditions, producer activity across our operating footprint remains strong. In the Williston Basin, our customers continue to experience production increases resulting from drilling and completion improvements, which is causing more of the play to have strong economics, specifically further south and west in McKenzie County and further north in Williams County. ONEOK has substantial acreage dedications in both of these counties.

In the STACK and SCOOP areas, it's a similar story. Producers continue to test various drilling and completion techniques in different formations to determine what provides the best results. The volumes we're seeing on our system so far this year from the STACK and SCOOP areas are extremely positive and have met or exceeded our expectations at this point. This continued activity gives us confidence in our volume growth outlook across our operations.

Terry already touched on our growth projects and construction progress. But in addition, we continue active discussions with producers and processors for additional commitments on our announced projects. We've contracted an additional 40,000 barrels per day on Arbuckle II, a 20% increase in contracted volumes since the project was announced in February. We've also seen a 20% increase of committed volumes on Elk Creek since it was announced, with more than 120,000 barrels per day now contracted.

Terry, that concludes my remarks.

Thanks, Kevin, for that really good and thorough update.

Before we take your questions, I think it's important to mention the Western Oklahoma wildfires. Although the fires had a minimal impact to our facilities, the fires did affect and caused hardship for several of our employees. Some employees experienced significant damage to their homes, buildings or to their farm and ranch lands. Fortunately last week, rainfall soaked the region and helped firefighters contain the wildfires, which have charred almost 550 square miles. I want them to know that we're thinking about them as they recover and rebuild. Much work lies ahead for those impacted by the fires, and ONEOK is here to help by making resources available to those employees in need of assistance.

To our investors, thank you for your continued support of ONEOK and as always, thank you to our employees for your hard work and continued dedication to operating our assets safely and environmentally responsibly.

So with that, operator, we're now ready for questions.

(Operator Instructions) We'll go first to Eric Genco with Citi.

You've talked in the past about Mid-Con processing each 200 a day plant produces roughly 20,000 or 25,000 barrels a day of NGLs. What -- can you just remind me, what's the decent rule of thumb for the Bakken even if we were to assume full ethane rejection?

Eric, this is Kevin. If you assume full ethane rejection, you're probably talking in that same range.

Okay. So if I'm -- I'm just trying to think about this now. Just looking back a year ago, I mean, the Bakken Pipeline was basically full a year ago. And if you look at the state-wide data, February to February, year-over-year, it's almost a 400 a day increase, (inaudible) of the day increase. So basically, like the simple math is that would suggest that there's another 50 -- 50,000 barrels a day. So I'm just trying to put this into context, and if you need to get to 100,000 a day on Elk Creek, are you basically with what must be being railed out of the basin now? Are you basically halfway there with your targeted returns?

Well, I think, first, we're not railing today. So the pipeline's been able to run a little above nameplate. So that's out there. If you -- the numbers last year did have some additional, if you remember, had some additional ethane included in those barrels for our spec due to specification issues downstream. So we've since been able to back some of that ethane out and replace it with C3 plus as we've had other additional ethane come on from other parts that are flowing into the Mid-Continent frac assets. So as we -- but your -- where you're going with, as we continue to rail and you look at the available capacity we've got and you look at the Demicks Lake plant that we'll be adding, the Bear Creek expansion, yes, if you start doing the math on that, we're a long ways down the road as of those assets fill up to meet the commitments and to meet the numbers we've provided for Elk Creek.

Okay, I mean, that's really helpful. I guess, maybe switching a bit. Like I just wanted to ask, I don't know if you had the question fairly regular but around ethane and NGL exports more broadly. If you look at your asset portfolio, you're probably the largest player without an export terminal in-house and recognizing that your molecules can still get the docks today, still potential margin opportunity. How aggressive would you pursuing another export terminal? We saw another player announced a JV, someone kind of came in on an ethane terminal. Is that something you're after or could be there? Or what would be your structure for that, that might be interesting?

Yes, Eric, this is Terry. So we've been thinking about exports for many years. And so, we've been very actively engaged in developing opportunities. We came real close a few years ago with an opportunity that would involve -- that would have involved the third-party JV partner. It didn't materialize as the economics eroded significantly. We continue to work the export side. Most likely, if we did put an export project together, it probably would involve a potential JV. It could involve existing facilities that are already in place that need to be modified and it could consist of just a completely grassroots new facility. But we do and continue to remain very interested in having exports -- export capability. It's not absolutely essential that we have it because we have international relationships in markets and market access today. But to your point, it's a good solid fee-based business that would be a nice bolt-on added to our service capabilities. So yes, we continue to remain highly interested and continue to be very active in that regard.

We'll go next to Shneur Gershuni with UBS.

Just maybe this take on the whole ethane pieces for a bit. There's sort of a broader thesis out there about the Permian tightness for capacity to evacuate natural gas out of the basin could incentivize more recovery of ethane in the Permian at the expense of other basins. Is that incorporated into your ethane recovery view? You've kind of had a bigger number this quarter but you still got into a lower number, I'm just trying to square the circle here.

Sure, this is Kevin. You know, as we look at ethane recovery, our premises haven't changed. I mean, we still are confident in the numbers we see coming out. Yes, you're seeing some downward pressure on basis, on gas basis in the Permian. But by and large, we believe the vast majority of ethane is already being recovered out of the Permian. So how much incremental ethane can continue to come out, I don't know that, that -- I don't think that changes our point of view that we're still going to see ethane come out in the Mid-Continent given the demand we are seeing, we've seen come online and the demand we expect to come online the remainder of the year. I mean, Sheridan? (inaudible)

What I'll add is we're also seeing some pressure on Mid-Con and gas prices as well, which is making ethane to be extracted Mid-Con very competitive with the Permian.

Okay, fair enough. And sort of continuing on the Permian gas team. Roadrunner, is that an option that you guys can flip or do something with is kind of a response to what's going on in the Permian?

Yes. We're in active discussions with several companies out there to utilize our West Texas system and also our -- the Roadrunner system to potentially move gas bidirectionally. So connections to potentially move gas to the West to the El Paso and Mexico markets, or back to the East, back to the Waha market on Roadrunner. Similarly with the West Tex intrastate system, a lot of conversations of potentially some services around the Waha hub, and also looking at bidirectional capabilities to take gas out of Waha back to the North up to other interstate markets in the Texas Panhandle and western Oklahoma. So a lot of activity going on with our commercial team on the gas pipeline side. And obviously, as we get some of those inked up, then we may make some announcements.

Let's say you FID a decision given the various options you're looking at, how long would that actually take to execute?

I'm sorry, I didn't catch the first part?

How long you think, now these projects are very low capital, very quick time frames. We're talking weeks or months, not years. This has installed some compression, maybe we have to install a little piping and we're done.

We'll go next to Christine Cho with Barclays.

The last time the Belvieu Conway spread was (inaudible), you guys had a decent amount of capacity for your proprietary use. Last quarter, you said Sterling was about 60% to 70% realized. So I think that leaves 130,000, 140,000 barrels per day open. I'm guessing some of that is expected for the ethane extraction that you're expecting and some of that's for just general growth in Oklahoma production. If ethane rejection doesn't fall from 140,000 to 70,000 barrels per day by year-end, does that mean you essentially have 70,000 barrels per day that you could use for optimization? Just trying to figure out how we should think about the impact of wider spreads for you?

Christine, this is Sheridan. I think you're looking at it right. To the extent that ethane does not come out, so that does leave us more opportunity for optimization. We are seeing volume growth today that's probably pushing our Sterling system to the 80% to 90% range. And then also, one thing we are seeing today is also we're moving more wide grade onto the bigger line, the Sterling III line that we can't utilize all the capacity. So we get a little bit of degradation there. But there's no doubt if the ethane doesn't come out, these spreads are staying wide optimization will more than cover the shortfall.

Okay. And then one of your competitors who is currently building a pipeline in Texas announced that it's also going to be building a line to connect to their plans in the Mid-Con. Should we think that there is a potential for volumes to come off your line in the future or is this more of an opportunity cost and that volume from their future plant would likely will be going down that line?

Yes. That pipeline is connected into a -- will connect into a plant that's currently on our system. So we will probably see about 20,000 barrels a day come up our system later this year. But I think that will be the extent of it. As Kevin mentioned in his statements earlier, that we've already contracted more volumes in the Mid-Continent and part of that is in the [Aracoma]. So we did not see that, that we will prevent us from continuing to secure plant commitments in that area.

Okay, great. And then do you expect the change in flaring rules in the back end to impact you guys at all on the G&P front?

Christine, it's Kevin. No, we don't. I mean, our, historically, our flaring has been well below the -- has been at/or below the state flaring capture targets, and we've been below the state-wide averages. So we get to the wells in a timely manner with the capacity. We have available right now on the expansions in the new plant we're talking about. We still feel good that we'll be able to stay ahead of those targets. And we don't necessarily think the new regulations will have any impact on us. Chuck?

Yes. I think the only thing I would add to that is with the flaring rules going from 14 to 60 days for the producer, as Kevin said, we've connected these pads and these wells very quickly. That extra 46 days, it's not even an impact to us because we're typically out there tied and ready.

Okay. And then, lastly, I vaguely remember you guys awarding 1 share to all of our employees every time the STACK hits an all-time high. You guys aren't that far off from your high, the next time this happens, what's the impact on G&A?

Well, actually, I don't think we've actually provided that estimate in the past. So I'm not going to provide it now. But I'm hoping that's the problem.

We'll go next to Praneeth Satish with Wells Fargo.

I'm sure you're aware that ethylene margins have declined. Just curious on your thoughts on this and whether you see this as just a temporary risk or a longer-term issue?

Praneeth, I think broadly it's a temporary issue. And Sheridan can give you some more color.

Yes, this is Sheridan. I think the big thing you need to look at is and you've heard the company say the same thing is, if you look at the ethane, the polyethylene spreads, they're significantly wider now than they were a year ago. And that's really what these crackers are looking at where the fundamentals are. So we're still seeing great. It looks like there's great demand for polyethylene out there. So I think you're really talking about a temporary phenomenon this time.

And yes, some excess ethylene inventory.

Yes. We came in and the last we heard, we came in, the crackers came in with little excess inventory, they just need to get the derivative unit ramped up to keep this point up. So I think what you're seeing is going to be cleaned up for the next couple of months. The next couple of months -- quarters.

Got it. And then, can you just talk about where you stand on gas takeaway in the Bakken with respect to Btu limits, I guess, on Northern Border? And then, tied to that question, if we are hitting limits, could we start to see meaningful ethane recovery out of the Bakken and on Elk Creek?

Yes, this is Kevin. We still feel good about where we're at right now as we -- with the residue going into Northern Border, we're not seeing any downstream impacts. Now as we've talked about that, yes, if you continue to push higher Btu content into Northern Border and it's displacing drier Canadian or lower Btu Canadian gas, then you could get to the point where you would see some downstream impacts, but we don't see that happening in the next couple of years. But that's going to be driven more from the volume growth in the Bakken and what happens there. So it's not an immediate problem and/or opportunity for us but it is something that we're clearly keeping our eye on.

We'll go next to Jeremy Tonet with JPMorgan.

This is Charlie for Jeremy. On the G&P segment, (inaudible) average for your age were pretty high this quarter. I understand it's a larger mix shift impact, but curious if you could expand here and $0.80 is still the right way to look at it?

Yes, Jeremy. This is Chuck. Going into the quarter obviously, we expected the $0.80 average fee rate to, in fact, be there. As we went through the quarter and ultimately, exited that quarter, yes, our Mid-Continent volumes were up. So you would expect that fee rate would have declined a bit in the $0.80 range. However, our Bakken fee rate increased due to volume from certain large 100% fee-based contracts. We should recall, we have barely several kinds of contracts, some 100%, some 100% with a little bit of pop. But these were large 100% fee-based contracts that ultimately caused the segment's overall fee rate to increase to that $0.88 level.

The only thing I'd add is. Go ahead.

No, no. You go.

I was just going to say, a lot of that is driven by weather. When you think about what's going on in both the Williston and Oklahoma, you have certain areas where you have more wells offline and could impact different contracts. So it's not uncommon for us to see a little bit of noise related to that fee rate due to the weather impacts.

Okay, that's helpful. And then on your optimization in marketing result, just kind of curious what NGL products you're optimizing during the quarter?

Right now, we're seeing E/P spreads in the $0.16 range, propane in $0.15 and normal butane in the $0.18. So we're pumping as much as all of that, that we can.

Right. And then last one from me. G&P segment, apologies if I missed it, but can you discuss the higher third-party processing cost and system constraints?

Yes, this is Kevin. That was really kind of an isolated phenomenon in the first quarter. As we've talked about the $200 million a day third-party -- long-term third-party offload we have, as we were transitioning volumes from kind of other third-party offloads that we were kind of using the bridge and to that, as we work through the start-up process on the long-term offload, we incurred some additional costs as we worked through that transition. That's really what that was. And similarly, just some other constraints that we're going on as we saw the volume growth and as we were trying to move volumes around to ensure that we got it to a processing plant, we had some of that. But we do not expect those costs to continue. As we have transitioned to our longer-term third-party offload, it's fully in service and at a much more attractive rates.

Okay. So we shouldn't see anything show up in 2Q then?

No.

We'll go next to Brian Zarahn with Mizuho.

Discussed Permian gas takeaway projects that you're evaluating, any update on potential expansion of the NGL system in the Permian?

This is Sheridan. We continue and we're in some advanced discussions with a couple of other producers and processors in there. And so, we're expecting to hear, hopefully, in the short-term we'll have something more to talk about on the West Texas system. But as we've done in the past, we usually don't announce expansions until we've secured the contracts behind them.

Appreciate the update in the Permian. I guess, on your projects overall, any impact on how you're still costs?

No. As we've talked about before we have procured and locked in the steel prices for the pipe several months ago actually. So we're in great shape from a steel perspective.

And then on financing, if you can elaborate a bit on your expectation with no equity potentially on in 2019, is the key driver more, if you have additions to your project backlog or is it more of the cash flow ramp and marketing contributions?

No. I think that is if we were in a position where we saw an attractive project that we needed to have and then we'd have to think a little bit harder about whether some equity was appropriate. But the reason we put the qualifier at all as we see the business moving today and the fact that we're starting today at a 3 of a heavy annualized first quarter at a 3.5 debt-to-EBITDA ratio, we've got some pretty good room there for debt capacity going forward as EBITDA expands.

We'll go to Ted Durbin with Goldman Sachs.

Just the 140,000 barrels a day of ethane rejection across the system, can you give us the split between the Williston and the Mid-Continent?

Yes. It's about 50,000 to 70,000 barrels a day in the Williston and about 70,000 to 100,000 barrels a day in the Mid-Continent.

Okay, got it. I realized that changes based on the process and economics. So if we think about the Elk Creek, the early Elk Creek expansion you're doing, how much volume can you get out of that Bakken pipeline with that early construction you're doing?

I think we can get another 10,000 to 15,000 barrels a day down the pipeline, but also that will release more of the rail volume that had to go on rail, there's probably another 15,000 to 20,000 barrels a day that we could increase coming out of the Bakken that go out of our rail terminal. So I think overall, that will give us about a 25,000 barrels a day, it could give us 25,000 barrels a day output.

Okay. And that will be of the same sort of $0.30 economics that you've talked about before?

Probably a little bit. We said that when contracted Elk Creek, it was a little bit less than the $0.30 that we've seen before, but it's going to be in the high 20s.

Got it. Okay, that's helpful. And then just this additional contracting that you've done both on the Elk Creek and Arbuckle with the additional commitments. Is that pushing up closer to the midpoint of a 4x to 6x build multiple range? Is that coming close to the low end? How do we think about the returns now with the new commitments?

So how I think is that terms on the new -- with these new commitments is we will get to the 4 to 6 faster because we'll have more of the ramp-up coming in quicker, and we will push more towards the lower end, if not even lower than the 4x.

Got it. That's great. And then last one for me just kind of some cleanups. Can you quantify the impact of weather this quarter on your volumes and your revenues? I guess, by segment if you have it? And then, the impact of the NGL inventories, so how much could that impact the results?

As for what -- from a weather standpoint, no, we're not. I mean, we haven't necessarily quantified that from -- we've kind of given you where we're at in April. And from a G&P perspective process volumes, it was normal. Again, it's not uncommon for our volumes to be slightly off relative to Q4. And so the fact that we were up was a very positive signal from a weather standpoint. And then on the -- I don't think we're going to go down the path of splitting out kind of our optimization or the details of the optimization and marketing from an NGLs held in inventory.

We'll go next to Craig Shere with Tuohy Brothers.

Congratulations on your continued great execution here.

Thanks, Craig.

Most of my questions have been asked and answered, just picking out on Ted's question about the NGL inventory with marketing. To the degree that you can't -- you aren't quantifying it, can we -- do you then need to rebuild? Is that a headwind for future periods? How should we think about that?

I don't think it's -- I don't view it as a headwind at all. Again, Sheridan talked about the spreads we're seeing right now, and on the previous question also talked about the capacity we have for optimization. And that if ethane shows up great, but even if it doesn't with these spreads, there's the opportunity, we'll see an offset there. So that's how I'd think about it going forward as we do believe the spreads will remain strong. And so you would expect to see that optimization bucket stay strong.

Okay. And you addressed the higher G&P OpEx for the quarter that a lot of that was temporary. I think there were some lower expense in the NGL segment, how should we think about that?

Yes. You can have a little bit of both in those. If you think about -- I think what you're trying to get is kind of run rate. In the G&P segment, a run rate might be a little lower than what we saw on the first quarter because of some of these costs. But you've also got volume growth. So as you go through the year, you'll see a little step up in op cost just for -- to deal with that volume growth. On the NGL side, it's -- we saw a higher op cost in the fourth quarter. We had several maintenance projects and expense projects and work that we did in the fourth quarter that it was probably a little artificially high, and then you saw a step down. So kind of our run rate there might be probably closer towards Q1, maybe a little above that. Again, as you see volume growth through the rest of the year, you're going to see a little uptick there as well.

We'll go next to Becca Followill with U.S. Capital Advisors.

Just following up on the fee rate at $0.88 versus the guidance of $0.80, are you saying that $0.80 is probably the good go-to number for the rest of the year?

Becca, it's Kevin. Yes, that's what I would use at this point. Again, we've got -- that will depend on how the volumes come on, on which contracts. But we do believe we saw some anomalies in the first quarter that drove it up a little bit and it will -- you'll see it come back down as kind of the weather gets out and our customers get back to some of their drilling programs and you see the volume growth. We do think that will tick down a little bit.

And then back to the Texas intrastate market and what you can do there, can you quantify how much additional capacity you can add to evacuate gas north?

It's not. We're not talking Bcf-a-day type projects. You're probably got 2 or 3 different projects in 100 million, 300 million a day type range. So these are a little more tactical projects that we're talking about. Again, low capital, low multiple building off our existing asset footprint. But that's how I would think about those types of projects.

The next to Ethan Bellamy with Baird.

Just a follow-up on Brian's question on steel prices, a couple questions in that area. First, can you confirm you're not exposed on Elk Creek? Separately, other projects in your backlog either announced or unannounced, does that meaningfully move or change the economics there, the viability? And then finally, will we see any movement in maintenance CapEx cost going forward if steel prices maintain current levels?

Well, I'll take the first one. Elk Creek, no. We're not exposed there. Again, we bought that pipe. It's already showing up and we're locked in from a price perspective. So nothing there. I mean, as we look at, as we think about our backlog and other things, we have not seen any other kind of ancillary cost escalation at this point and feel good about those projects that we've already announced. As we think about our backlog, I mean, obviously, the tariff staff continues to evolve. And so, we'll get as we move through it, we'll include anything there in our economics as we evaluate the economics.

Kevin, you might mention Arbuckle in terms of or probably aren't stable...

That's right. We've focused on our Elk Creek, but Arbuckle II is also locked in as well from a steel price standpoint. So we got the vendors locked in, prices locked in, schedules locked in. We're good to go there.

And in terms of anything you might be negotiating with customers, does it delay potential negotiated agreements on new lines if you don't know what the cost of project's going to be?

No.

Okay. And then just kind of a housekeeping item, but we've seen a few small North Dakota flood warnings. Anything to be concerned about for Q2?

No. I mean, we -- not, what's that?

I saw the ordinary. No, again normal to me is we moved through April and May, we've seen what we would consider a normal spring.

That concludes today's question-and-answer session. At this time, I'll turn it back to Mr. Ziola for any additional or closing remarks.

Our quiet period for the second quarter 2018 starts when we close our books in early July, and we'll extend until we release earnings in late July. We'll provide details on the conference call at a later date.

Thank you, all, again for joining us and have a good day.

This concludes today's call. Thank you for your participation. You may now disconnect.