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EnLink looks to take advantage of Okla., Texas growth in 2017


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EnLink looks to take advantage of Okla., Texas growth in 2017

The EnLink family of midstream energy companies expects "the momentum of recent volume growth" by producers to help support its strategic growth plan for 2017, according to an operational update and financial guidance news release.

2017 growth CapEx funded solely by EnLink Midstream Partners LP is projected to range from $505 million to $645 million, the companies said Jan. 23, while total growth CapEx is expected at $590 million to $750 million, taking into account contributions from joint venture partners and EnLink Midstream LLC of about $85 million to $105 million.

EnLink noted that it reached an agreement with a Newfield Exploration Co. affiliate dedicating a portion of Newfield's Anadarko STACK play acreage in Oklahoma to EnLink. In addition, EnLink formed a joint venture with Kinder Morgan Inc.'s midstream segment, Cedar Cove Midstream LLC, which would offer gas gathering and processing services in an area of mutual interest in the STACK play.

Cedar Cove is underpinned by gathering and processing dedications of more than 50,000 gross acres, with the system to be expanded as acreage is developed. EnLink contributed about $40 million in cash and other consideration for a 30% stake in the joint venture's gathering and compression assets while providing gas processing services.

The deals were made in the fourth quarter, EnLink said in the release.

EnLink intends to boost gas processing capacity by 400 MMcf/d in central Oklahoma at its Chisholm complex with two expansion projects. The Chisholm II plant becomes operational in the second quarter of 2017 and the Chisholm III plant at the end of 2017. Upon completion, EnLink's processing capacity in central Oklahoma would be about 1 Bcf/d.

EnLink's NGL operations in Louisiana are expected to benefit from the growth in central Oklahoma, as NGL output from the Chisholm II plant would be linked to the Louisiana system. The Ascension pipeline in southeast Louisiana, a joint venture with Marathon Petroleum Corp., is expected to begin operations in the second quarter.

Financial guidance

"We expect the momentum of recent volume growth to continue throughout 2017 and beyond. Our current plan is to exit 2017 with an annual adjusted EBITDA run-rate net to [EnLink Midstream Partners] between $925 million and $950 million, with an expectation of continued strengthening throughout 2018 of producer activity related to our core growth basins," said Barry Davis, chairman and CEO of EnLink.

EnLink expects its operations in central Oklahoma to draw greater returns and replace north Texas as its biggest contributor in 2017, among its other operating regions. Gross operating margin from central Oklahoma and Permian Basin operations are forecast to "significantly" more than offset lower gross operating margin in mature basins. Net income and adjusted EBITDA outlook from central Oklahoma assets acquired in 2016 are meeting or exceeding expectations, according to the Jan. 23 news release.

EnLink Midstream projects net income for 2017 to range from $80 million to $120 million, while adjusted EBITDA is expected to range from $815 million to $885 million, or more than 10% annual midpoint growth. Distributable cash flow is forecast to be between $590 million and $650 million, with a distribution coverage ratio over 1.0x exiting 2017, assuming flat distributions.

Net income attributable to EnLink Midstream LLC for 2017 is expected to be $45 million to $105 million, while cash available for distribution is projected at $215 million to $225 million, with a distribution coverage ratio of 1.1x to 1.2x exiting 2017 and flat distributions throughout the year.

EnLink Midstream LLC's 2017 growth CapEx for its interest in the central Oklahoma assets would range from $60 million to $70 million.