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EnLink Midstream Fourth Quarter, Full Year 2021 Results; 2022 Guidance

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   |    Wednesday,February 16,2022

EnLink Midstream, LLC reported financial results for the fourth quarter and full-year 2021 and provided 2022 financial guidance.

Highlights:

• Reported net income of $88.6 million and $142.9 million for the fourth quarter of 2021 and full-year 2021, respectively, and net cash provided by operations of $258.1 million and $857.3 million for the fourth quarter and full-year 2021, respectively.
• Generated adjusted EBITDA, net to EnLink, of $286.4 million and $1.05 billion for the fourth quarter of 2021 and full-year 2021, respectively, an amount that was in the upper end of full-year 2021 financial guidance. During the quarter, EnLink benefited from robust producer activity and disciplined focus on the cost structure.
• Grew fourth quarter 2021 adjusted EBITDA 17.5% compared to the fourth quarter of 2020 and full-year 2021 adjusted EBITDA 7.0% compared to full-year 2020, each after excluding the impact of minimum volume commitments (MVCs) that expired in 2020.
• Continued to see strengthening producer activity across EnLink's gathering and processing systems during the fourth quarter of 2021. Permian gathering volumes for the fourth quarter of 2021 increased 28% over the fourth quarter of 2020. Oklahoma gathering volumes for the fourth quarter of 2021 declined only 2% over the fourth quarter of 2020, while North Texas gathering volumes for the fourth quarter of 2021 remained flat over fourth quarter 2020.
• Delivered $67.4 million of free cash flow after distributions (FCFAD) for the fourth quarter of 2021, despite a 20% increase to fourth quarter distribution, driven by strong operational results. For the second consecutive year, EnLink generated FCFAD in excess of $300 million, with $313.6 million reported for the full-year 2021.
• Reached near-term leverage goal with credit facility leverage of 3.9x at year-end.
• Increased returns to unitholders in 2021 by increasing the common unit distribution 20% for the fourth quarter of 2021, repurchasing $40.1 million in common units during full-year 2021, and redeeming $50 million of Series B Preferred Units in the fourth quarter. In addition, during January 2022, EnLink repurchased an incremental $10 million of common units and redeemed an incremental $50 million of par value of Series B Preferred Units. Both redemptions were executed at 101% of par value. Taking into account these repurchases and redemptions, the overall distribution payout increased by approximately $25 million on an annualized basis.
• Expects solid cash flow generation to continue in 2022 with adjusted EBITDA growth of approximately 10% over 2021 at the midpoint of 2022 guidance range of $1.11 billion to $1.19 billion. EnLink also expects to generate more than of $300 million in FCFAD based on the midpoint of 2022 guidance.
• Subsequent to the quarter, EnLink announced that the company has signed a memorandum of understanding (MOU) with Talos Energy to provide a complete carbon capture, transportation and sequestration (CCS) offering for industrial-scale emitters in Louisiana, utilizing EnLink's midstream assets combined with Talos' subsurface assets. Talos has secured approximately 26,000 acres in Louisiana providing sequestration capacity of over 500 million metric tonnes, which will be known as River Bend CCS.

Barry E. Davis, EnLink Chairman and Chief Executive Officer, said: "EnLink achieved another quarter of robust financial results, closing out a great 2021, which is a testament to our employees' relentless focus on execution, innovation, and cost discipline. The strong performance and execution of our team allows us to enter 2022 in a position of strength.

"We are continuing to advance our vision to become the future of midstream by leading in innovation and creating sustainable value. We will do this by utilizing our integrated business model and operational excellence to build upon our large-scale, cash-flow-generating platform, while pursuing energy solutions for the future, as we are doing with our focus on growing a substantial CCS business. The alliance that we announced today with Talos builds on our strategic advantage in CCS by combining the expertise and assets of both companies to create a more cost-efficient and environmentally friendly offering than potential new build projects.

"We are confident in our ability to execute and drive value in 2022, and our financial guidance and strategic plan initiatives exemplify how we plan to create sustainable value for our investors and position EnLink as the midstream company of the future."

2022 Financial Guidance

• Adjusted EBITDA, net to EnLink, for 2022 is forecasted to continue the trend of solid growth, with implied growth over full-year 2021of nearly 10% at the midpoint of guidance.
• The Permian is forecasted to show robust segment profit growth, along with solid growth in Louisiana. The Permian is forecasted to exit full-year 2022 as EnLink's largest segment, excluding the impact of plant relocation costs. Oklahoma and North Texas are expected to be about flat compared to full-year 2021, excluding the temporary impacts of Winter Storm Uri in 2021.
• Capital expenditures for 2022 are expected to be focused on highly efficient well connect activity. The main expansion project, the previously announced "Project Phantom" is expected to cost approximately $80 million, of which $45 million is considered operating expenses for GAAP purposes in 2022, representing savings of approximately 50% over illustrative new-build costs.
• 2022 is forecasted to mark the third consecutive year of FCFAD in excess of $300 million at the midpoint of guidance. FCFAD is forecasted to be roughly flat over full-year 2021 as significant adjusted EBITDA growth is offset by modest increases in capital expenditures and distributions.

Segment Updates

Permian:

• Segment profit of $73.8 million for the fourth quarter of 2021 was approximately 7% higher as compared to the third quarter of 2021 and approximately 60% higher as compared to the fourth quarter of 2020. Segment profit included $0.1 million and $8.8 million of operating expenses related to plant relocation expenses in the fourth quarter of 2021 and third quarter of 2021, respectively. Segment profit also included unrealized derivative gains/(losses) of $(4.7) million, $10.2 million and $(1.1) million for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020, respectively. Excluding plant relocation expenses and unrealized derivative activity, segment profit in the fourth quarter of 2021 grew approximately 16% sequentially and 66% over the prior year period.
• Segment cash flow totaled $10.8 million for the fourth quarter of 2021, marking the sixth consecutive quarter of positive segment cash flow.
• Average natural gas gathering volumes for the fourth quarter of 2021 were approximately 8% higher as compared to the third quarter of 2021 and approximately 28% higher as compared to the fourth quarter of 2020. Average natural gas processing volumes for the fourth quarter of 2021 increased by approximately 7% sequentially and by approximately 25% as compared to the prior year period. EnLink continues to benefit from strong producer drilling activity on its Permian footprint. Driven by continued producer activity in the Delaware Basin, EnLink reactivated the Tiger natural gas processing facility in December 2021.
• EnLink continues to meet incremental customer activity needs through a capital-light approach. During the second half of 2021, EnLink completed Project War Horse and an associated expansion, adding 95 million cubic feet per day (MMcf/d) of processing capacity in the Midland Basin. Project Phantom, which will add 200 MMcf/d of processing capacity in the Midland Basin, remains on schedule to be completed during the fourth quarter of 2022 and is expected to achieve an EBITDA multiple of less than 4x.
• Average crude oil gathering volumes for the fourth quarter of 2021 decreased by approximately 5% as compared to the third quarter of 2021 but were approximately 25% higher as compared to the fourth quarter of 2020. The sequential decrease was primarily driven by the timing of producer completion activity, while the year-over-year increase was driven by increased drilling activity.
• Segment profit for 2022 is expected to range from $300 million to $340 million, with growth over full-year 2021 expected to be driven primarily by strong producer activity in the Midland Basin. Excluding approximately $40 million of Project Phantom expenses, the Permian is expected to exit 2022 as the largest segment.
• Given the costs related to Project Phantom and the pace of well connects projected for EnLink's Permian system, EnLink expects to allocate approximately 55% of total capital expenditures in 2022 to Permian projects. This includes costs related to Project Phantom, the majority of which are treated as operating expenses for GAAP purposes.

Louisiana:

• Segment profit of $111.7 million for the fourth quarter of 2021 was approximately 75% higher as compared to the third quarter of 2021 and approximately 38% higher as compared to the fourth quarter of 2020. Segment profit included unrealized derivative gains/(losses) of $19.3 million, $(8.8) million and $1.3 million for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020, respectively. The majority of the unrealized derivative activity in the fourth quarter of 2021 was associated with gas and natural gas liquids (NGL) storage operations. Excluding unrealized derivative activity, segment profit in the fourth quarter of 2021 grew approximately 27% sequentially and 16% over the prior year period.
• Segment cash flow for the fourth quarter of 2021 was $107.8 million, which marked the highest quarterly Louisiana segment cash flow in EnLink's history.
• Average natural gas transportation volumes for the fourth quarter of 2021 were approximately 16% higher as compared to the third quarter of 2021 and approximately 12% higher as compared to the fourth quarter of 2020.
• Average NGL fractionation volumes for the fourth quarter of 2021 were approximately 13% higher as compared to the third quarter of 2021 and 7% higher as compared to the fourth quarter of 2020.
• Average crude volumes handled in EnLink's Ohio River Valley system for the fourth quarter of 2021 were approximately 11% lower as compared to the third quarter of 2021 and 17% lower as compared to the fourth quarter of 2020.
• Segment profit for 2022 is forecasted to range from $350 million to $360 million, which implies approximately 9% growth over full-year 2021.

Oklahoma:

• Segment profit of $99.4 million for the fourth quarter of 2021 was approximately 14% higher as compared to the third quarter of 2021 and roughly flat as compared to the fourth quarter of 2020. Segment profit included $1.5 million of operating expenses related to plant relocation expenses in the fourth quarter of 2021. Segment profit also included unrealized derivative gains/(losses) of $9.4 million, $(2.3) million and $(2.1) million for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020, respectively. Excluding plant relocation expenses and unrealized derivative activity, segment profit in the fourth quarter of 2021 grew approximately 2% sequentially and 10% over the prior year period.
• Segment cash flow for the fourth quarter of 2021 was $86.1 million.
• Approximately half of all wells scheduled to come on line during 2021 came on line during the fourth quarter, establishing strong momentum in volumes for 2022.
• Average natural gas gathering volumes for the fourth quarter of 2021 were approximately 2% higher as compared to the third quarter of 2021 but approximately 2% lower as compared to the fourth quarter of 2020.
• Average natural gas processing volumes for the fourth quarter of 2021 increased approximately 4% when compared to the third quarter of 2021 but decreased 2% compared the fourth quarter of 2020.
• Segment profit for 2022 is projected to range from $335 million to $355 million, which is roughly flat compared to full-year 2021, excluding the impact of Winter Storm Uri. EnLink forecasts volumes for 2022 to again be roughly flat driven, in part, by an additional rig on the Devon Energy Corp. and Dow Inc. joint venture acreage.

North Texas:

• Segment profit of $56.1 million for the fourth quarter of 2021 was approximately 6% lower as compared to the third quarter of 2021 and approximately 9% lower as compared to the fourth quarter of 2020. Segment profit included unrealized derivative gains/(losses) of $(3.5) million, $(0.3) million and $(0.5) million for the fourth quarter of 2021, third quarter of 2021 and fourth quarter of 2020, respectively.
• Segment cash flow for the fourth quarter of 2021 was $51.8 million.
• Average natural gas gathering volumes for the fourth quarter of 2021 were roughly flat compared to the third quarter of 2021 and the fourth quarter of 2020.
• Average natural gas processing volumes for the fourth quarter of 2021 increased by approximately 3% as compared to the third quarter of 2021 and were roughly flat as compared to the fourth quarter of 2020.
• Segment profit for 2022 is expected to range from $225 million to $235 million. EnLink expects to benefit from new drilling activity in the basin by BKV and other customers.