DCP MIDSTREAM, LP Fourth Quarter 2020
Earnings and 2021
Forward-Looking Statements
This presentation may contain or incorporate by reference forward-looking statements regarding DCP Midstream, LP (the "Partnership" or "DCP") and its affiliates, including outlook, guidance, projections, estimates, forecasts, plans, and objectives. All statements in this
presentation, other than statements of historical fact, are forward-looking statements and are typically identified by words such as "target," "outlook," "guidance," "may," "could," "will," "should," "intend," "assume," "project," "believe," "predict," "anti cipate," "expect," "scheduled," "estimate," "budget," "optionality," "potential," "plan," "forecast," and other similar words and expressions. Although
management believes that expectations reflected in such forward-looking statements are based on reasonable assumptions, no assurance can be given that such expectations will prove to be correct due to risks, uncertainties, and assumptions that are difficult to predict and that may be beyond our control. If any of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Partnership's actual results may vary materially from what management anticipated, expected, projected, estimated, forecasted,
planned, or intended. You are cautioned not to place undue reliance on any forward-looking statements.
Investors are encouraged to consider closely the risks and uncertainties disclosed in the Partnership's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission, which risks and uncertainties include, but are not limited to, the ongoing global economic impacts of the COVID-19 pandemic, pricing and supply actions by oil exporting countries, the resulting supply of, demand for, and price of oil, natural gas, NGLs, and related products and services, the duration of the foregoing impacts, and the time period for any recovery in commodity prices and demand. These risks and uncertainties could cause our actual results to differ materially from the forward-looking statements in this presentation, which may include, but are not limited to, our expectations on outlook, guidance, and sensitivities, our sources and uses of liquidity and sufficiency of financial resources, our projected in-service dates for growth projects, and our construction costs or capital expenditures in relation to estimated or budgeted amounts. Furthermore, in addition to causing our actual results to differ, such risks and uncertainties may cause our assumptions and intentions to change at any time and without notice, and any such changes may also cause our actual results to differ materially from the forward-looking statements in this presentation.
The Partnership undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Information contained in this presentation speaks only as of the date hereof unless otherwise expressed, is unaudited, and is subject to change.
Regulation G: This document includes non-GAAP financial measures as defined under the rules and regulations of the Securities and Exchange Commission, such as adjusted EBITDA, distributable cash flow, excess free cash flow, segment adjusted EBITDA, segment adjusted gross margin, forecasted adjusted EBITDA, forecasted distributable cash flow, and forecasted excess free cash flow. A reconciliation of these measures to the most directly comparable GAAP measures is included in the Appendix to this presentation.
Successful 2020 Navigation
Multi-year Strategic Execution |
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COVID-19 Response & Downturn Mitigation |
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Sustainability Enhancement |
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Published inaugural Sustainability Report and helped develop the EIC/GPA Midstream
Operational Execution |
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Strong 2020 Financial Results
($MM)
2020 Guidance and
2020 Actual
Outlook
Adjusted EBITDA(1)
$1,252
$1,205 - $1,345
4% increase YoY
Distributable Cash Flow(1)(2)
$850
$730 - $830
12% increase YoY
Excess Free Cash Flow(1)(3)Bank Leverage(4)Sustaining Capital(5)
$237 3.9x $45
$129 - $269
~4.0x
$75 - $95
46% savings YoY
Growth Capital
$205
$150 - $190
77% savings YoY
Highlights
• Conserved ~$930 million of cash via capital, distribution, and cost reductions on an annualized basis compared to 2020 guidance
• $145 million year-over-year cost reduction underpinned by DCP 2.0 digital transformation
• $300 million of debt reduction, closing 2020 with zero borrowings on bank facility
Early and aggressive downturn mitigation efforts drove excess FCF and debt reduction
(1) Adjusted EBITDA, distributable cash flow, and excess free cash flow are non-GAAP financial measures
(2) Distributable cash flow is reduced by cumulative cash distributions earned by the Preferred Units
(3) Excess Free Cash Flow = DCF less distributions to limited partners, and less expansion capital expenditures and contributions to equity method investments
(4) Bank leverage ratio calculation = Bank debt (excludes $550 million Jr. Subordinated notes which are treated as equity) less c ash divided by adjusted EBITDA, plus certain capital project EBITDA credits
(5) Sustaining Capital = Cash expenditures to maintain cash flows, operating or earnings capacity
Q4 2019 vs. Q4 2020 Financial Results
$15
($MM)
$175 | $178 |
Q4 2019 DCF | Q4 2020 DCF |
$8
Q4 2020 Drivers (YoY)
Q4 2020 Volumes (YoY)
Strong commitment to cost discipline, offsetting increased spend from deferred project execution Continued capital prioritization driving low sustaining capital, while maintaining operational excellence
Higher overall NGL pipeline throughput driven by increased ethane recovery
Increased volumes driven by Southern Hills extension
Low growth capital as DCP concludes final phase of multi-year major project portfolio
Incremental volumes from Cheyenne Connector Lower Sand Hills volumes due to third party ethane rejection Decrease in overall G&P volumes, driven by the South and
Lower commodity price impact net of hedges
Midcontinent, partially offset by increased DJ Basin volumes
2020 Financial Results
Cost and capital reductions, coupled with strong L&M earnings more than offset price and G&P volume declines
($144)
($19)
($10)
$145
$2
2019 DCF
Hedge SettlementsPrice Net ofG&P Non- Price Margin
$38
$76
$207
$406
OtherFinancing/
TaxSustaining
CapitalLogistics MarginCosts
2020 DCFGrowth Capital/Other
$237
Distributions 2020 Excess
FCF
2021 Guidance
2021 Financial Guidance and Capital Outlook
($ in Millions)
Range
Adjusted EBITDA(1) | $1,120 - $1,260 |
Distributable Cash Flow (DCF) (1)(2) | $710 - $810 |
Excess Free Cash Flow(1)(3) | $310 - $460 |
Bank Leverage(4) | ~4.0x |
Sustaining Capital(5) | $45 - $85 |
Growth Capital | $25 - $75 |
2021 Commodity Price Assumptions & Sensitivities (6)
Conservative outlook underpinning solid 2021; potential for substantial pricing upside
(1)Adjusted EBITDA, distributable cash flow, and excess free cash flow are non-GAAP financial measures
(2) Distributable cash flow is reduced by cumulative cash distributions earned by the Preferred
Units
(3)Excess free cash flow = DCF less distributions to limited partners, and less growth capital expenditures and contributions to equity method investments.
(4)Bank leverage ratio calculation = Bank debt (excludes $550 million Jr. Subordinated notes which are treated as equity) less cash, divided by adjusted EBITDA, plus certain projectEBITDA credits from projects under construction
(5) Sustaining Capital = Cash expenditures to maintain cash flows, operating or earnings capacity 7
(6)Sensitivities are relevant to margin impact
(7) Forward and spot prices as of February 8, 2021
2021 Assumptions
2021 Assumptions
Logistics Outlook
G&P Volume Outlook
Sustaining 2020 cost reductions
No capital markets needs
88% fee-based and hedged
Reducing absolute debt
Maintain stable distribution at $1.56/unit annualized
Conservative price deck Overcapacity driving margin compression
NGL pipeline volumes: Slight increase with stronger ethane recovery YoY Cheyenne Connector: Full year of operations Guadalupe: Decreasing earnings due to tighter pricing spreads
Overall volumes: Slight declines North: 5-10% growth
Permian: Flat Midcontinent: Slight decline South: 10-20% decline, including low margin contract expirations
Potential 2021 Tailwinds
• Improved commodity pricing recovery, between ~$50 million - ~$90 million (1)
• Accelerated COVID-19 vaccine distribution driving faster demand rebound
• Increased producer activity driven by demand and pricing improvements
(1) Marked to forward and spot prices as of February 8, 2021, respectively
Increasing Excess Free Cash Flow
Excess Free Cash Flow
(1)
Outlook
($MM)
2H
$385
2020
2021e
(1) Midpoint of guidance
Total Capex Outlook
($MM)
$970
2019
2020
2021e (1)
Sustainability
Solid 2021 Outlook
Accelerate DCP 2.0
Transformation
Focus
Reprioritize Workforce of Tomorrow, digital efficiencies, and advanced technology
Committed to emissions reductions and enhanced Inclusion & Diversity initiatives
Appendix
Financial and Other Supporting Slides
Ample Liquidity(1)
Strong Financial Position Exiting 2020
• $1.75B capacity via bank and A/R securitization facilities; ~$350 millionutilized
• Predominately utilizing excess free cash flow to retire September 2021 maturity, maintaining liquidity
Enhanced Cash Flow Stability
• Exited 2020 with Adjusted Gross Margin 83% fee-based and hedged
• 70% of earnings were fee-based
• 43% of equity length hedged
(1) Bank facility liquidity as of December 31, 2020
Generating Excess Free Cash Flow
• $237 million of excess free cash flow in 2020, fully fundingdistribution and all capital expenditures
• Anticipating increased excess free cash flow in 2021
Accelerating Debt Reduction
• Top capital allocation priority
• Yearend bank leverage at 3.9x(2), better than 2020 target of 4.0x
• Targeting 3.5x long-term leverage ratio to achieve IG metrics
(2) Bank leverage ratio calculation = Bank debt (excludes $550 million Jr. Subordinated notes which are treated as equity) less cash divided by adjusted EBITDA, plus certain project EBITDA credits from projects under construction
Q3 2020 vs. Q4 2020 Financial Results
Expected cost and sustaining capital increases due to completion of deferred projects, coupled with reduced ethane recovery driving QoQ declines
Distributable Cash Flow
($MM)
Q3 2020
Costs
DCFLogistics MarginSustaining
CapitalFinancing / Tax / OtherG&P Non-Price
Margin
Price Net of Hedge Settlements
Q4 2020
DCF
Distributable cash flow is viewed as a non-Generally Accepted Accounting Principles (GAAP) financial measure under the rules of the SEC and is reconciled to its most directly comparable GAAP financial measure under "Reconciliation of Non-GAAP Financial Measures" in schedules at the end of this presentation
Adjusted EBITDA by Segment
Logistics & Marketing Adjusted EBITDA*
($MM)
$1
$7
$178 | $183 |
Q4 2019
Adjusted EBITDAGas and NGL
MarketingCosts
NGL and Gas
PipelinesQ4 2020
Adjusted EBITDA
Gathering & Processing Adjusted EBITDA*
($MM)
$17
$190 | $181 |
Q4 2019 Adjusted EBITDA
Margin/ Volumes
Price Net of Hedge Settlements
Costs
Q4 2020 Adjusted EBITDA
* Adjusted Segment EBITDA is viewed as a non-Generally Accepted Accounting Principles (GAAP) financial measure under the rules of the SEC and is reconciled to its most directly comparable GAAP financial measure under "Reconciliation of Non-GAAP Financial Measures" in schedules at the end of this presentation
Volumes by Segment
NGL Pipeline Volume Trends and Utilization
NGL Pipeline % Owned | Approx System Length (Miles) | Average Gross Capacity (M Bbls /d) | Net Capacity ( M Bp d ) | Q4'20 Average NGL Throughput ( M Bp d ) (1) | Q3'20 Average NGL Throughput ( M Bp d )(1) | Q4'19 Average NGL Throughput ( M Bp d )(1) | Q4'20 Pipeline Utilization | |
Sand Hills | 66.7% | 1,410 | 500 | 333 257 | 307 | 316 | 77% | |
Southern Hills | 66.7% | 950 | 192 | 128 | 108 | 104 | 74 | 84% |
Front Range | 33.3% | 450 | 260 | 87 | 57 | 57 | 56 | 66% |
Texas Express | 10.0% | 600 | 370 | 37 | 21 | 20 | 20 | 57% |
Other(2) | Various | 1,110 | 395 | 310 | 167 | 192 | 133 | 54% |
Total | 4,520 | 1,717 | 895 | 610 | 680 | 599 | 68% |
Q4 2020 Southern Hills volumes up 46% vs. Q4 2019
G&P Volume Trends and Utilization
System | Q4'20 Net Plant/ Tre a te r Capacity (MMcf/d) | Q4'20 Average Wellhead Volumes (MMcf/d) (5) | Q3'20 Average Wellhead Volumes (MMcf/d) (5) | Q4'19 Average Wellhead Volumes (MMcf/d) (5) | Q4'20 Average NGL Production ( M Bp d ) | Q4'20 Plant Utilization(3) |
North(4) | 1,580 | 1,510 | 1,506 | 1,527 | 131 | 96% |
Midcontinent | 1,110 | 804 | 834 | 991 | 69 | 72% |
Permian | 1,200 | 1,014 | 975 | 1,053 | 125 | 85% |
South | 2,120 | 1,114 | 1,049 | 1,427 | 89 | 53% |
Total | 6,010 | 4,442 | 4,364 | 4,998 | 414 | 74% |
Q4 2020 South
volumes 6% higher than Q3 2020
Q4 2020 Permian
wellhead volumes
4% higher than Q3
2020.
(1) Represents total throughput allocated to our proportionate ownership share
(2) Other includes Wattenberg, Black Lake, Panola, Seabreeze, Wilbreeze, and other NGL pipelines
(3) Plant utilization: Average wellhead volumes divided by active plant capacity, excludes idled plant capacity
(4) Q4'20, Q3'20 and Q4'19 include 1,262 MMcf/d, 1,239 MMcf/d and 1,243 MMcf/d, respectively, of DJ Basin wellhead volumes. Remaining volumes are Michigan and Collbran
(5) Average wellhead volumes may include bypass and offload
Margin by Segment*
$MM, except per unit measures
Gathering & Processing (G&P) Segment
Natural gas wellhead - Bcf/d
Segment adjusted gross margin including equity earnings before hedging (1) Non-cash impairment in equity investment
Net realized cash hedge settlements received Non-cash unrealized gains (losses)
$ $ $ $
G&P Segment adjusted gross margin including equity earnings $ 316
G&P adjusted margin including equity earnings before hedging/wellhead mcf $ 0.80
G&P adjusted margin including equity earnings and realized hedges/wellhead mcf $ 0.81
Logistics & Marketing Segment adjusted gross margin incl equity earnings (2)
$ 180
Total adjusted gross margin including equity earnings
$
Direct Operating and G&A Expense
$ (240)DD&A (92)
Other Income (Loss) (3) (3)
Interest Expense, net (76)
Income Tax Benefit (Expense) 2
Noncontrolling interest (1)
Net Income (Loss) - DCP Midstream, LP
$
Industry average NGL $/gallon $ 0.49
NYMEX Henry Hub $/MMBtu $ 2.66
NYMEX Crude $/Bbl $ 42.00
Other data:
NGL pipelines throughput (MBbl/d) (4) 610
NGL production (MBbl/d) 414
Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | ||||
4.44 | 4.36 | 4.49 | 4.94 | 5.00 | ||||
326 | $ | 304 | $ | 264 | $ | 299 | $ | 333 |
- | $ | - | $ | - | $ | (61) | $ | - |
$ | 13 | $ | 29 | $ | 9 | $ | 20 | |
$ | (39) | $ | (62) | $ | 92 | $ | (23) | |
$ | 278 | $ | 231 | $ | 339 | $ | 330 | |
$ | 0.76 | $ | 0.65 | $ | 0.66 | $ | 0.73 | |
$ | 0.79 | $ | 0.72 | $ | 0.68 | $ | 0.77 | |
$ | 220 | $ | 194 | $ | 248 | $ | 175 | |
$ | 498 | $ | 425 | $ | 587 | $ | 505 | |
$ | (212) | $ | (208) | $ | (209) | $ | (255) | |
(92) | (93) | (99) | (100) | |||||
(4) | (5) | (749) | (68) | |||||
(77) | (71) | (78) | (83) | |||||
(1) | 0 | (1) | 3 | |||||
(1) | (1) | (1) | (1) | |||||
$ | 111 | $ | 47 | $ | (550) | $ | 1 | |
$ | 0.44 | $ | 0.32 | $ | 0.39 | $ | 0.50 | |
$ | 1.98 | $ | 1.72 | $ | 1.95 | $ | 2.50 | |
$ | 40.93 | $ | 27.85 | $ | 46.17 | $ | 56.91 | |
680 | 676 | 677 | 599 | |||||
406 | 376 | 404 | 404 |
4 (14)
496
86
*Segment adjusted gross margin is viewed as a non-Generally Accepted Accounting Principles ("GAAP") measure under the rules of the Securities and Exchange Commission ("SEC"), and is reconciled to its most
directly comparable GAAP financial measures under "Reconciliation of Non-GAAP Financial Measures" in schedules at the end of this presentation.
(1) Represents Gathering and Processing (G&P) Segment adjusted gross margin plus Earnings from unconsolidated affiliates, excluding trading and marketing (losses) gains, net, before non-cash impairment in equity investment
(2) Represents Logistics and Marketing Segment adjusted gross margin plus Earnings from unconsolidated affiliates
(3) "Other Income" includes asset impairments in Q1 2020, goodwill impairment in Q1 2020, and gain/(loss) on asset sales and other miscellaneous items
(4) This volume represents equity and third party volumes transported on DCP's NGL pipeline assets
2021 and 2022 Hedge Position
Largest hedge position entering a year; growing fee-based margin percentage by 5% YoY
Commodity
Q1 2021
Q2 2021
Q3 2021
Q4 2021
2021 Avg.
2022 Avg.
NGLs hedged(1) (Bbls/d)
Average hedge price ($/gal)
7,633 $0.47
8,868 $0.48
11,413 $0.48
11,413 9,832
$0.48 $0.48
% NGL exposure hedged 21%
493 $0.47
Gas hedged (MMBtu/d)
Average hedge price ($/MMBtu)
145,000 $2.50
145,000 $2.50
145,000 $2.50
145,000 145,000
$2.50 $2.50
% gas exposure hedged 83%
80,000 $2.51
Crude hedged (Bbls/d)
Average hedge price ($/Bbl)
5,978 $50.03
5,912 $50.03
5,848 $50.03
5,848 5,896
$50.03 $50.03
% crude exposure hedged 62%
Total Equity Length Hedged(2)
1,000 $47.79
Note: Hedge positions as of January 29, 2021
(1) Only purity products hedged are propane and normal butane, all other products are set to internal budget prices
(2) Based on crude equivalent
(3) 75% fee-based + 52% of 25% open position hedged = 88% fee-based and hedged
Disciplined and Strategic Capital Projects
Recently In-Service Projects
100% CapacityTotal Est. CapEx ($MM)In-Service
Date
Gathering & Processing
Latham 2 Offload
• Long-term gas processing offload agreement at Western Midstream Partners Latham facility, with retention of full downstream NGL and gas upside
• Brings DCP's total processing, bypass, and offload capacity to over 1.6 Bcf/d in the DJ Basin
225 MMcf/d
$125
Q4 2020
Non-GAAP Reconciliations
Non-GAAP Reconciliations
** We define adjusted gross margin as total operating revenues, less purchases and related costs, and we define segment adjusted gross margin for each segment as total operating revenues for that segment less purchases and related costs for that segment. Our adjusted gross margin equals the sum of our segment adjusted gross margins. Adjusted gross margin and segment adjusted gross margin are primary performance measures used by management, as these measures represent the results of product sales and purchases, a key component of our operations. As an indicator of our operating performance, adjusted gross margin and segment adjusted gross margin should not be considered an alternative to, or more meaningful than, operating revenues, gross margin, segment gross margin, net income or loss, net income or loss attributable to partners, operating income, net cash provided by operating activities or any other measure of financial performance presentedin accordance with GAAP.
20
Non-GAAP Reconciliations
Non-GAAP Reconciliations
Non-GAAP Reconciliations
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DCP Midstream LP published this content on 10 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 February 2021 17:14:04 UTC.
