Good day, and welcome to Enable Midstream Partners Third Quarter 2018 Earnings Conference Call and Webcast. All participants will be in a listen-mode, [Operator Instructions] Please note that this event this being recorded. I would now like to turn the conference over to Enable's Senior Director of Investor Relations, Mr. Matt Beasley. Please go ahead, sir.

Thank you, and good morning, everyone. Presenting on this morning's call are Rod Sailor, our President and CEO; and John Laws, our Chief Financial Officer. We also have other members of the management team in the room today to answer your questions. Earlier this morning, we issued our earnings press release and filed our Form 10-Q with the SEC. Our earnings press release, Form 10-Q filing and the presentation that accompanies this call are all available in the Investor Relations section of our website. We will also be posting a replay of today's call to the website. Today's discussion will include forward-looking statements within the meaning of the securities laws. Actual results could differ materially from our projections and a discussion of factors that could cause actual results to differ from projections can be found in our SEC filings. We will also be referencing non-GAAP financial measures on today's call, which we have reconciled to the nearest GAAP measures in the appendix to today's presentation. We invite you to review the disclaimers in this presentation for both forward-looking statements and non-GAAP financial measures. With that, we'll get started, and I will turn the call over to Rod Sailor.

Thanks, Matt. Good morning, and thank you for joining us on today's call.The third quarter of 2018 was another great quarter performance for Enable, both operationally and strategically. Operationally, the partnership achieved record natural gas gathered and processed volumes, natural gas liquids production and crude oil gathered volumes during the quarter, driven by continued producer activity and strong well results. These increased volumes contributed to higher total revenues, gross margin, net income, adjusted EBITDA and DCF for the third quarter compared to the third quarter of 2017. On the strategic front, we are excited to share that we closed on the previously announced Velocity acquisition on November 1, adding crude oil and condensate gathering and transportation infrastructure to Enable's market-leading midstream platform in the Anadarko Basin. This acquisition continues Enable's strategy of extending our reach across the midstream value chain and better positions us to offer complete wellhead to market solutions for our customers. Velocity, together with new contractual commitments in the Williston Basin from ExxonMobil's XTO Energy subsidiary, substantially increases the scale of our crude assets, providing fee-based growth as producers continue to target crude oil production. I will cover both of these expansions later in the call. Turning to the next slide. We continue to see strong rig activity. At our last count, there were 47 rigs drilling wells expected to be connected to Enable's gathering systems, including rigs dedicated to the Velocity system. In the Anadarko Basin, there are currently 38 rigs running with 10 rigs in the STACK, 25 rigs in the SCOOP and 3 rigs in the Granite Wash. Sustained producer activity and strong well results drove record natural gas gathered and processed volumes for the quarter. Enable has seen a 40% increase in natural gas gathered volumes since the first quarter of 2017 and…

Thank you, Rod, and good morning, everyone. I will now cover a few of our key operational and financial metrics for the quarter. As always, you can find a more detailed and comprehensive overview of our financial and operational results in our third quarter earnings release and in our 10-Q, both of which were released earlier this morning. Turning to our operational performance slide. Customer activity and well results in the Anadarko and Ark-La-Tex Basins continue to drive volume growth in our Gathering and Processing segment. As you can see, we had a 31% increase in total natural gas gathered volumes and a 32% increase in total natural gas processed volumes in the third quarter of 2018 compared to the prior year. We also saw increases in our crude oil gathered volumes for the third quarter of 2018 compared to the same period a year ago, primarily driven by several multi-well pads coming online on our Williston Basin gathering systems. As Rod mentioned, we set the records for natural gas gathering, natural gas processing, NGL production and crude oil gathered volumes for the quarter. The increase in NGL production was the result of both higher natural gas processed volumes and higher plant recoveries of ethane. In our Transportation and storage segment. The increase in our transported volumes was a result of increased usage from power and LDC customers. Moving to our financial results on the next slide. Our adjusted EBITDA increased by $51 million to $301 million for the third quarter of 2018. The higher adjusted EBITDA was driven by higher gross margin after adjusting for noncash items due to higher natural gas gathered and processed volumes and higher crude oil volumes as discussed on the previously slide, higher NGL prices and higher Transportation and storage system management activities. The…

[Operator Instructions] And our first question comes from TJ Schultz with RBC Capital Markets. Please go ahead, with your question.

Hey guys, good morning. Just first for Velocity. Clearly, it improves your position just with the full suite of services. Were there opportunities you were losing before but are now better positioned on both the crude and G&P side from some of these undedicated operators? And have you assumed you'd get some of these dedications in either the 2019 outlook or the multiple improvement?

Yes. No, TJ, thanks for the question. No, I wouldn't say we felt like we were losing any opportunities to date. But again, we continue in this price environment. You see our customers and some other producers in the area targeting the more oilier areas of the SCOOP as we kind of said in our remarks. And I really felt that to be able to capture the crude portion of that business, again, I don't think anybody is better, in fact, nobody is better prepared in the SCOOP to capture gas opportunities than Enable, but this really put us in a position where we had the infrastructure, customers that we know, opportunities with other customers that we currently don't serve. So I think it provides us with that suite of services that we've been talking about for a while, that we wanted to transport our crude knowledge out of the Williston and down into the Anadarko and by having this asset, it allowed us to do it. And again, I think we felt very strongly that this is the right acquisition in the right location to enhance our, what we believe is a market-leading position in the Anadarko.

Specifically, on those, the opportunities you mentioned with customers that you don't serve. Just how quickly or confidence level on getting some of those dedications?

Yes. And again, not a lot of that new business is baked into the 2019 guidance, but look, we've got the infrastructure, we've got the relationships, we've got the track record of operational capabilities. So I feel pretty confident that we'll win our fair share or more than our fair share of those opportunities. Again, you're either going to truck it or you're going to have to put it on infrastructure with it. We are now the company that has the oil infrastructure in the SCOOP. And again, it lays right on top of our header system. So again, I think if, once again, it just feels on an incredibly unique position that Enable has in the SCOOP and the STACK plays.

Okay, makes sense. Just moving to the Ark-La-Tex. First, with the Align connected into Waskom. Can you just expand on the optimization benefits that provides? And then for that region, just in general, rig activity, down a little. You're I think, a little over a year out from MVCs rolling off that you can provide any expectations for cash flow impact on roll-off of those MVCs?

Yes. No, good question. Yes, no, by connecting the Align assets up into Waskom, again, that allows us, we've got some great liquids customers coming out of our Waskom facility. This allows us to move some additional molecules up there and capture some margin on the NGL side. And again, one of the things that we've always felt strongly about was the ability to hopefully service those customers with some additional volumes. As it relates to the MVCs, again, as we've said on prior calls, we've got kind of 2 primary systems in the gathering systems in Ark-La-Tex region. One of those systems is above the MVCs, kind of what we're seeing now are producers growing to, trying to target some of the areas of the other system. So again, we continue to believe we'll see gas growth in there until we fully get above the MVCs on both of those systems. Might not see a significant move in margin. I think the good news is we really, really don't see that we're going to have any kind of degradation from our gross margin related to the MVCs as those producers continue to target growing their production above those levels. Did that capture your question?

Yes, no. That's fair. Just last one real quick on Gulf Run. How long is build time on that? I'm just trying to get a sense of near-term things to watch with the, FID for the shipper and further process to kind of track to the -- in-service on your current time line?

Well, I believe we talked about in-service of 2023 is kind of what we've targeted. Could it come on -- 2020 -- in the 2022, fully in service by 2023. And so could we accelerate that a little bit? Yes, a little bit, but we think that's a reasonable build time. So completion in 2022 and fully operational in '23.

Okay, thank you.

Your near-term milestone TJ, will be the FIDs in our profile, which really kicks off at that time.

Okay, understood. Thanks.

The next question comes from Jeremy Tonet with JP Morgan. Please go ahead, with your question.

Just wanted to pick up with Velocity here and just want to dive in a little bit more there. In the -- midstream space has been -- other midstream players have talked about acquisitions in big compression the multiples overtime. That hasn't always turned out for some of your peers. Just wondering if you could extend a bit more -- the multiple compression at 10x, a couple of years that I was here. What gives you the confidence level of that? How much is kind of baked in with existing contracts? Or how much is new third party business? Or could you extend a bit more than that?

Yes. No, a lot of that compression is based on the existing customer profile. Again, as you can imagine, we are very active in the STACK and the SCOOP. We have a lot of information around production growth on the gas side. As we said, both I think our -- first question and also kind of our remarks on slides, the trends that we have seen, again, with the higher crude and gas around $3 or under $3, we're really seeing producers targeting more oilier areas of the SCOOP. And so that is -- that's a trend that we've been -- we've seen and believe that we'll see more of in 2019 and beyond. That gives us a lot of confidence in and around our ability to work that multiple down. There are a significant number of undedicated customers. The Velocity system can provide some premium pricing to the Wynnewood refinery. So potentially, ability to even some expansions around that refinery. So we feel very good that there's going to be a lot of volumes flow on but that's just from customers that are already dedicated to that system. And ultimately though -- but again, the upside to our analysis around that acquisition and our ability to also attract the -- some new customers on it. So again, I think we can't talk about what our producers are going to do and further going to drill and what their future outlooks look like, but we could get a lot of information and feel very strongly that we're going to see volume growth, significant volume growth on that system.

Jeremy, we'll try to point you to a couple of customer names, which I think you'll find are incredibly active in the SCOOP area in Continental and Marathon, we've not been permitted to share the entire list of customers that are in that area, but there are others that are active there today. That also pointing volumes to the system and as Rod mentioned in his opening remarks on the call, one of the things that's incredibly attractive about this asset, which is similar to the same thesis that we tried to bring to bear with all of our assets is providing attractive markets for the commodity. And I think it could be underappreciated, but just so it's not pointed out. Having a direct connection to a refinery in basin provides a real premium market access point for the refiner. And that demand-pull in this pipeline is incredibly attractive. As we think about what drives volumes to this platform, and how we think about it on a go-forward basis.

That's helpful.

Yes, again, just to add. I mean, this when you step out from a new basin perspective. I mean, I think we have better intelligence than anybody in the Anadarko on where producers are going with their drilling plans. So again, this was an area that we know very well and we used that knowledge when we made this acquisition.

Great. And then just want to go back to Gulf Run, a little bit here as well. And you touched on a bit here, but wondering if you might be able to provide more examples as far as the upstream integration benefits that you guys could see. I mean, you have a lot feel on the ground in that area. And where do you see that gas being sourced from? There's a lot of touch points there, but could this be SCOOP/STACK pool or how do you see that playing out?

Yes, that's great question. I think, one of the benefits that we were able to break the barrier with the foundation shipper on that was the fact that, again, we'll build a piece of pie off of our Line CP, which has access to Carthage and Perryville. We think that we'll see a lot of gas getting landed at both of those places. We'll make Line CP bidirectional. So one of the, I think one of the selling points on our Gulf Run project was the fact that they're going to be able to ultimately source gas from a multitude of basins, including the STACK and the SCOOP, the Northeast. There is an incredible amount of activity. You've seen it on our system with volume growth in the Haynesville, our Ark-La-Tex region. So the customers on the Gulf Run system are going to be able to have probably as diverse a selection of basins to source gas from than other opportunities. I know from other opportunities that they looked at. So again, we can provide, I think, and again that was one of the reasons, I think the foundation customer liked our proposal and selected us with our ability to source gas from multiple areas. Anything else?

That's it for me.

And our next question comes from Tim Howard with Stifel. Please go ahead with your question.

Back to Velocity, could you provide how much incremental capital is required to build-out that system?

We've not provided that directly. The good news is, I'm happy to share that the incremental capital there is not material as it relates to developing that system as we got it detected. Most of it's going to be incremental well connect-type capital. A lot of these volumes get brought to this system via truck and truck rack and then we'll kind of have to well -- and that's again, where we see some real opportunity for synergy just in our operations. We're already going to these wellheads in a number of cases and instances and so we're able to do that attractively, but it's not a number that we've broken out specifically, but it's also not a material portion of this guidance for 2019.

Yes. While you didn't specifically asked the question, I just would add that we've got significant infrastructure in the SCOOP. And in fact, a lot of the STACK gas that we were gathering and processing, we're actually moving on our header system, south, down towards our -- some of our SCOOP facilities. It's the great thing about the Super-Header in the Anadarko, we can move gas up and down that system wherever we have capacity. And as you know, we announced the -- our completed Wildcat as we began to move it down into Texas. But -- so we are well positioned to, once again, capture opportunities with capital that -- we've already got a lot of capital in place. And again, we continue to build an operational leverage story that we talked about for the last couple of years now that we've invested a lot in that region and we think, again, as John mentioned, we're already going to go to a number of these wells. So it's just a matter of incrementally getting the crude piece built. We've already invested a lot of capacity on the gas -- or just a lot of -- invested for a lot of capacity on the gas side. So again, I think as we see the migration of oil activity down into the SCOOP, nobody's better prepared to capture those opportunities than us.

That's very helpful. And then shifting to the Bakken, I think that the release, if I didn't -- subject to drilling activity, I was just wondering what's your -- guys' base case as you get into -- I saw the volumes for 2019 and into 2020. And then additionally, where are these incremental volumes headed? Do you have pipeline capacity lined up? Or do you think rail will have to be an option just kind of generally what you're seeing up in the Bakken?

Yes, I'll start that and then we'll kick it over to Craig here, he's our Chief Commercial Officer. But again, it is largely an acreage dedication. So the -- we anticipate a lot of activity on that. We mentioned that there's some wells awaiting completion proximity to that system that we expect to start to come on. But Craig, I don't know if you want to add something.

Yes, on the downstream takeaway capacity, I guess, that was what's referring to our customer, XTO, has lined up downstream takeaway capacity. So some of the concerns you're seeing on the basis differential playing out in the Bakken, not impacting us nor our customer drilling plans for the region.

Got it. And then just 2 more quick ones, if I can. Focusing on a volume guidance in the Anadarko. It seems like 3Q volumes are kind of at the midpoint of 2019. I was just wondering what's driving this? And then also are there any additional thoughts or progress on the Wildhorse Processing Plant?

Yes, one of the things we said in our opening remarks was that as we see some of this activity shift that some of the wells that are being drilled have a higher crude oil content. So what we are expecting gas volume growth, may not be as robust as some of the activity that we have seen this year in the STACK -- STACK, right? John, you want to...

No. I think, what the -- clearly, to date, the volumes have been driven by the rig activity and the rig activity has continued to be strong through the year, particularly in the SCOOP and in the STACK, collectively. As Rod mentioned, we're beginning to see a little bit of a transition from the STACK to the SCOOP, which is an oilier area of the play. So there's, with these more heavier crude cut wells, we tend to see a little bit of a lower gas IP. But again, I think overall, we're still expecting to be within guidance and see some growth.

Got it. Then last one. Is the wildcat expansion, is that kind of fully ramped up or should we expect volumes to increase, kind of, through 2019?

Wildcat is fully up to, we're please, we open, yes, it's full.

And the next question comes from Ned Baramov with Wells Fargo. Please go ahead with your question.

Do you expect further improvements in the overall return profile of Velocity in the Bakken expansion after 2020?

Yes. I think there is certainly that ability there. We've not guided beyond 2019, but if you look at these areas, the drilling inventory that's there, it gets down. So to your assumptions are on activity levels. And based on what we're saying and the things that we're looking at, we don't necessarily see any reason for activity to slow at this time. So there's certainly substantial inventory in the ground that's available to be brought to bear. And with the new system, for example, in the Bakken, if you're talking about something that could be up to a 72,000 barrel a day expansion. You ramped into that overtime, that can take more than 2 years. But, given that we've got a lot of existing infrastructure there, these incremental investments are typically highly accretive, particularly after you build the infrastructure and are working into the capacity.

Sure. And then maybe, can you talk about some of the details around the contract for both assets for Velocity and the Bakken expansion, specifically if there is any commodity price-sensitive aspects of your agreement?

Generally, no. They're typically filed as acreage dedications in both instances. There's not any minimum volume commitment features, but they are also predominantly fee-based.

Okay, got it. And then switching gears a little bit to your Align Midstream acquisition from roughly a year ago. I believe at the time you had a target of achieving 7x, a 7x multiple by 2020. Just curious where returns are a year after the close of this transaction.

Yes, I'd say, sitting where we sit here today, we've probably seen, particularly with respect to that area, a little bit more drilling on the dry side than the rich side. And so some of the richer gas that would be brought on and some of the things that would compel the economics that would be stronger to us around optimizing with Waskom. So we've not yet seen some of the growth here in the near term. We've got some, had some producers, acreage change hands and we've -- we expect to see additional growth there, but it's probably a little bit slower than what we had initially anticipated, but you see compression there still overtime. Craig, would you offer anything?

Yes, I think on that, we have gotten to the line in service, as Rod mentioned. And that provides a lot of synergies on the NGL side because we do have rack space, which is becoming an issue in the market. So we have rack space that we're taking advantage of, that we've been able to get that going, which kind of helps us on the -- reducing our multiple. And we are seeing a lot of activity in the East Texas area, on the drilling side, as John said, somehow he's focused on Haynesville. But now that we've gotten those plants interconnected, regardless of the area, where they drill in East Texas, we're able to wield gas back and forth between the plants. So we're starting to see those synergies start to ramp-up as we've gotten that line in service.

Okay, that's great. And then a quick question on Gulf Run pipeline. I guess, could you provide the 2 book ends of the capital program. The low end being just capital to construct capacity for the anchor shipper? And then obviously, the high end being the full capacity of 2.75 Bcf per day?

Yes. We really haven't yet given out that guidance on on the upper end, and I think we need to get through our open season and see where we come out on that before we want to guide anything higher than what we've previously discussed.

Yes. Look, and Ned, in case you didn't see it, we did include, in the open season, a reference about $550 million for the scope that we had disclosed previously.

Okay, that's helpful. And may be last question for me. The obligatory update on the IDRs and whether there's any updates from Centerpoint?

Well, again, we're not in the splits as we sit here today. So that's not an issue that we have to deal with. I think we've been pretty open, then again, we continue to have dialogue and our cost of capital is [indiscernible] to our sponsors and to the extent that we feel like we need to do something to address that. I'm confident that sponsors will be supportive of the steps that we may have to take in the future. But right now, no update on that. Yes, we would -- we feel like we would need to talk about.

[Operator Instructions] And our next question comes from Alex Kania with Wolfe Research.

Just a question on thoughts around distribution growth. So it sounds like you just want to see how that industrial cash and coverage works out into next year. I just was wondering if there's, maybe, a sense that you need to wait kind of a full year to get towards the end of next year? Or do you think there may be kind of want to decide to make a decision on that sooner? Just kind of any other, question -- just on how that evolves.

Yes. No, I appreciate the question. I mean, that's something we evaluate every quarter looking at our capital needs and again, as coverage continues to build and we continue to see the operational performance that we have seen. I think, again, it continues to bring us closer to positive developments around that. But again, I think we'll get into 2019 and evaluate that more further as we firm up our operational outlook.

And this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Sailor for any closing remarks.

Well, thank you all for joining us on our call to get today. Again, we're very excited about our performance in the third quarter and more importantly, with the opportunities that we're seeing across our system, not only with the areas that we're already in and the capacity that we already have, but more importantly with the potential to expand our transportation system, integrating in the Velocity acquisition and expanding our presence in the Williston. So thank you very much, and again, in closing, I just want to recognize all of our employees for their hard work and dedication. Again, thank you all for your interest on the call. Everybody, have a safe day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.