Good day everyone. Welcome to the PAA and PAGP Fourth Quarter and Full 2019 Earnings Call. Today's conference is being recorded.At this time, I like to turn the conference over to Roy Lamoreaux, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Kelly. Good afternoon, and welcome to Plains All American's fourth quarter and full-year 2019 earnings conference call. Today's slide presentation is posted in the Investor Relations News and Events section of our website at plainsallamerican.com.Slide 2 contains important disclosures regarding forward-looking statements and non-GAAP financial measures. The appendix includes condensed consolidating balance sheet information for PAGP.Today's call will be hosted by Willie Chiang, Chief Executive Officer; and Al Swanson, Executive Vice President and Chief Financial Officer. Additionally, Harry Pefanis, President and Chief Commercial Officer; Jeremy Goebel, Executive Vice President, Commercial; and Chris Chandler, Executive Vice President and Chief Operating Officer along with other members of our senior management team are available for the Q&A portion of today's call.With that, I will now turn the call over to Willie.

Thanks, Roy. Good afternoon, everyone and thank you for joining us today. This afternoon we reported fourth quarter results that exceeded our expectations and we furnished financial and operating guidance for 2020 that is consistent with the preliminary guidance that we provided in November. I’ll provide a quick review of our 2019 performance, an overview of our 2020 guidance and plans for the future, including our 2020 and 2021 capital program and asset sales, as well as a recap of our portfolio optimization initiatives.Our adjusted EBITDA results in 2019 were 3.24 billion with in-line performance in our fee-based segment and significant market capture in our S&L or Supply and Logistics segment. 2019 was a year focused on executing during favorable S&L market conditions and positioning the partnership for more competitive environment in 2020.Throughout the year we maintained high levels of reliability and commenced operation on key projects. This allowed us to capture meaningful S&L profitability highlighted by strong pipeline utilization with or U.S. Gulf Coast long-haul lines running at capacity.We also advanced and sanctioned a number of strategic projects that strengthen our competitive positioning in legacy areas, while aligning ourselves with long-term industry partners. In addition to continuing to improve our safety and operating performance, we also advanced multiple initiatives to strengthen our operational, commercial, and financial positioning as we enter 2020.As highlighted on Slide 3 and further details on Slide 4, in 2019 we achieved and in certain cases materially exceeded each of the goals that we outlined for the year. We generated fee based results that represented growth of 9%, compared to 2018, which was in line with our guidance and we also exceeded expected capture of market opportunities through our S&L segment.As a result, we meaningfully exceeded our beginning in the year expectations and generated stronger per…

Thanks Willie. During my portion of the call, I’ll recap our fourth quarter and full-year results, review our current capitalization liquidity and leverage metrics, and share additional comments related to our 2020 financial positioning. I will also address one non-cash accounting related item.Our fourth quarter adjusted EBITDA of 860 million exceeded our expectations and was driven by a continuation of strong performance in our S&L segment and includes the seasonal benefit of our NGL business. I would not that $25 million to $30 million of this over performance was an acceleration of earnings originally expected to be generated in 2020 and this timing shift has been taken into account in our 2020 S&L guidance of plus or minus $75 million.Fee-based adjusted EBITDA for the quarter of $627 million was slightly ahead of expectations due to strong performance on our Cactus II pipeline and increased activity and lower cost in our facility segment.As shown on Slide 8 and consistent with our expectations, transportation segment results were down from the prior quarter. This was primarily due to long-haul movements on our basin, lower long-haul movements on our basin bridge tax and red river pipeline systems, partially offset by a full-quarter benefit of Cactus II being in service and volume growth on our broader Permian area systems.On a full-year basis, as Willie noted, we reported 2019 adjusted EBITDA of $3.24 billion, DCF per common unit of $2.99, diluted adjusted net income per common unit of $2.51, which exceeded our beginning of the year guidance by 18%, 16%, and 24% respectively. Our 2019 DCF and DCF per unit included maintenance capital investments of approximately $290 million, which was higher than expected in our guidance and consisted of several one-time projects that totaled approximately $40 million.Our 2020 maintenance capital forecast is $250 million. As shown…

Thanks, Al. So, 2019 marked a strong year of execution for Plains. We progressed operating commercial and financial initiatives that we feel position us for a more competitive environment, and we advanced our multi-year strategic capital program, which we expect to substantially complete over the next two years. We also continue to progress additional potential asset sales beyond those in our 2020 target, which if completed, will provide us additional financial flexibility for leverage reduction and after achieving our targeted leverage metrics support incremental return to shareholders.I'd like to publicly acknowledge the hard work and dedication of all of our employees in our 2019 results. Our collective efforts remain focused on achieving our 2020 goals as shown on Slide 10 and continuing to optimize our portfolio in gaining additional efficiencies across our organization. A summary of key takeaways from today's call is outlined on Slide 11. We look forward to providing an update on our progress during our conference call in May.With that, I'll turn the call over to Roy.

Thanks. Willie. As we enter the Q&A session, please limit yourself to one question and one follow-up question and return to the queue if you have additional follow-ups. This will allow us to address the top questions from as many participants as practical in our available time this afternoon. Additionally, Brett Magill and I plan to be available this evening and tomorrow to address additional questions.Kelly Ann, we're now ready to open the call for questions.

Thank you. [Operator Instructions] We'll hear first today from Jeremy Tonet with JP Morgan.

Hi, Jeremy.

Hi. I want to start off with the Felix acquisition here and just want to see if you could provide a little more color if this was in auction process or not. And when you're talking hitting those economics that you stated there, is there additional synergies needed or what type of EBITDA does it have on a stand-alone basis now? Just any color you can provide around that would be helpful.

Sure. It's an asset that's been tied to us. We've known the Felix guys for quite some time. It was originally auctioned, but it came back around us, and we looked at the opportunity and felt like the synergy did provide – it's an integration through the system. So, we're now having – with substantial near-term cash flow with a high PDP component, we're able to take that at a constant rig activity profile and pull through the system and meet the mid-level returns.We don't need anything extra beyond that, the rest of it is upside. So, we have a good model that fits us with the activity level that's on the programs, that's on the system today to meet the return thresholds we have, it's not a hockey stick profile like most of the ones that you see. And once again, we passed originally when we saw the deal and it came back to us and it's an opportunity we're excited about.

That's very helpful.

That was our, Jeremy. That was our Jeremy, Jeremy.

The first time around, it was a larger package, included what other assets besides [just deferred] was the primary driver for passing on the first part.

That's helpful. Thank you. And if I could just follow up with regards to guidance. Good to see this thing with the numbers you had provided previously. Just wondering if you could provide any color about your conversations with producers right now and I guess your expectations for the basin as a whole. Has it changed that much from when you first put out the guidance or any kind of color you can provide there seeing kind of some weakness with oil prices here? Just wanted to get a feeling for what you guys are seeing.

Sure. We stay in constant dialog with producers and obviously, the last two weeks, rather than everybody's forecast, but in November, there was a lot of the same sentiment that there is today, it was kind of a round trip that went back up because of the global tensions and then most recently come down, but in November, the sentiment was very similar to what it is today, and our discussions with producers led us to the Permian production growth that we talked about. I think largely in the last month, 25 additional horizontal rigs have been added to the Permian.So, our forecast is consistent to slightly higher than it was, but it's still moderated from expectation during the year. So, close to 400,000 barrels a day of growth. There is substantial opportunities. I think what we're seeing is a concentration of activity in the core block, so those with core acreage dedications will continue to see it with well-capitalized producers.So, there'll be haves and have-nots throughout this. I think more broadly in the U.S., we see flat, some up, some down, but the Permian will have close 400,000 barrels a day of growth. So, we see that pouring of activity. Now flat prices fall to $40, that could be a different thing, but all along, we expect that producer budgeting between $50 and $55 a barrel.

That's very helpful. That's it from me. Thanks.

Thanks Jeremy.

We'll hear next from Shneur Gershuni with UBS.

Good afternoon, everyone. Just a follow-up on...

Hi, Shneur.

Hi. Just to follow-up on the last question, just for a little bit of clarification. If I remember correctly, you had pretty low expectation versus industry experts on that $300,000 to $400,000 4Q to 4Q exit. Did you just say that it was tracking better than that? I just want to clarify that I heard that correctly, before I ask my two questions.

What I said was that it's tracking towards the higher end is simply on a constant activity basis, right? So, you had 375 horizontal rigs, then you have 390 horizontal rigs now. So, it would be toward the higher end, but it's not materially different expectations than we had before, just simply on a constant activity basis.

Okay. That totally makes sense. And just two quick questions here, with the first to guidance clarification here. During the last call, you talked about an $85 million sensitivity to the competitive environment. Has that changed at all? Have you been able to reduce that risk at all through some contracting activity? And also, can you clarify whether the asset sales that you're budgeting for are included or excluded from guidance?

Shneur, this is AI. No, as you could see, we did not adjust the 2.5 billion Fee-based. And so we did not materially change our view on the 85 million for this year, so you see a flat number. The asset sales are included, the 600 million in our estimate. The Felix acquisition roughly offsets it on a cash flow basis. That's early in the year, some of the sales will be in the second half, so that roughly offsets. That's why you see no change.

Okay. And one final follow-up question. When we are thinking about the Facilities segment and sort of thinking about the high natural gas storage levels that we're seeing, are there opportunities to see continued rate improvement for your – the old PNG business? Is there opportunity for more volumes there? Is that a business that can potentially outperform, given the unfortunate high-storage levels of natural gas these days?

So, we've been seeing natural gas storage rates increase over time. A lot of it is due to the activity and particularly the R&D activity at our own facilities. They've been rushing up a bit. When you look at 2020, we're highly contracted. So, the storage fee component of it, probably isn't going to change materially in 2020. The activity levels sort of ebb and flow, but that would be the only sort of upside activity in the PNG assets.

Alright. Perfect. Thank you very much. Really appreciate the colors there.

Thanks Shneur.

We'll move next to Christine Cho at Barclays.

Hi, everyone. When we think about your commentary for asset sales, what do you exactly consider non-core? And then with the strategic JVs, are we thinking for projects that are not yet in service or existing assets that are currently generating cash flow? And are you open to another partner on Red Oak?

Christine, this is Willie. Clearly, you've seen the playbook as far as strategic JVs. So, when we think about additional asset sales, it absolutely includes potentially additional partners on some of the projects we've got in other non-core asset sales, some of it is around making sure we are as efficiently as we can in some of our ownership positions up in Canada. And I think I'll just leave it at that.

Okay. And then just moving over to your 2020 guide, the volumes obviously up year-on-year, but the EBITDA per barrel continues to come down. So, just wanted to see if we could get more color on, is this just a function of more lower-margin short-haul intra-basin gathering volumes? Or did a lowering of tariff on existing long-haul pipes also play a role?

Al, why don't you take that?

Yes. I'll – Christine, I would say it's really kind of a combination of several different things. Most of it's just a business mix and growing volumes on pipes that have lower tariffs. I mean, we have certain pipes that have tariffs in the $0.20 to $0.30 range and some that are $4 plus. And so the business mix is a big part of it. Clearly, growing Permian intra-basin movements are generally lower tariff, right?So, that's what's driving a part of it. Also, when you look back at the prior year, we had some sales and some higher EBITDA pipes, like BridgeTex and one of our Rockies pipes. And then also there is some noise around involving Capline, where we had a consolidated undivided joint interest. Early this year, it became a equity investment and that created some noise. So, it's a little bit of combination of all three of them.

Okay. Helpful. Thank you.

And from Credit Suisse, we'll hear from Spiro Dounis.

Hi, good afternoon everyone. Maybe picking up on some of the contracting rates, one of your peers last week provided some data points around Permian long-haul contracting market. Just curious you're also seeing rates in that kind of $1.10 or $1.50 per barrel range, and if there's any appetite on your side to approach shippers about blending and extending some of those contracts.

Let me – Jeremy, Jeremy why don’t you take that?

Hi. This is Jeremy. We're constantly looking at our contract profile. What I would first say is that any of the recently sanctioned projects have or materially contracted for extended periods of time, but if there is available space, we'll constantly look to optimize. If – I can't speak to our peer for the market, but is that a reasonable estimate, sure, it depends on the term and the volume, and it depends on where that barrel originates from.We'll have the ability to move those barrels from further back in the basin, so the origin and destination will also matter when you consider that, but we're constantly looking to optimize our position and contract profile. We're not going to have meaningful roll-offs for the next several years, but when they do, we'll look at the blending and extending program, and we would actively look to manage that over time.

Got it. That's helpful. And then just on CapEx coming down over the next few years, certainly encouraging to see that from a capital discipline perspective, how should we think about minimum CapEx levels? Do you guys think you need to spend in order to maybe offset some of that re-contracting pressure over those next few years? And maybe more broadly, are you even looking at it that way or is the goal to really grow free cash flow and not to strictly grow EBITDA?

This is Al. I don't think we have an absolute mandate to just invest capital to try to offset declines or contracts and other spots. We don't have a significant amount of contracts that have short tenures to them as we had commented on the last call. Clearly, we're subject to some of the competitive pressures, volume growth, etc, but we don't have a kind of a minimum investment target. We do target returns – unlevered returns 300 to 500 of our cost to capital.We just think that the opportunity set and the infrastructure being deployed right now will create result in a situation where there is less requirement for us to build some of the larger long-haul pipes and that our CapEx will migrate meaningfully below the kind of the [900] we're expecting in 2021. We put that bar on the one chart to kind of show a step down.We think we will always have opportunities around our assets to continue to add debottleneck and extend to give more production etc. And Spiro, this is Willie. I would also add – we've – a conscious effort to increase our capital discipline and target projects at the higher end of the difference between the higher return range of our cost of – versus cost of capital. So, we've been pushing that pretty hard.

Understood. Thank you, gentlemen.

We'll hear now from Keith Stanley with Wolfe Research.

Hi. I wanted to ask on the dividend. I think maybe a year ago, might have been more, you had talked to targeting potentially plus or minus 5% growth after the step up last year. Is that still the plan looking forward for this year and beyond or to be determined?

Yes, Keith, we haven't changed any forward guidance on our distribution policy. It's consistent with what we talked about last time, and be jumping ahead of ourselves, if we try to discuss what we might do here in April – April-May. Al, do you have anything to add?

Yes, our public guidance hasn't changed from that plus or minus 5%, but clearly, we have – the decision will be for a few more months.

Okay. And then for Felix, you said it's not a hockey stick profile to get to the returns. Apologies if I missed this, did you say there is an expected capital need for that system? And then somewhat related, somewhat separate, with the asset sales you're planning now and the acquisition, when would you expect to get to your leverage target? Can it be achieved by next year, or is it more likely 2022?

This is, Jeremy. I'll take the first part of that and turn it over to Al. The Felix asset had substantial PDP component. There is a lot of public about the upstream component to that. The five-rig program that's on the system now has ratable growth, and there's a lot of inventory of built and uncompleted wells that will come on through the year. So, a lot of the ramp will occur by April of this year. And then, there is only modest growth over the next couple of years, and then basically assume flat.So, based on the acquisition that was just under the upstream, we're very consistent with what that looks like, and a lot of that ramp occurs through April this year. In addition, more of the contracting was claims into the first purchaser, barrels are now dedicated to our pipe for over 10 years. So, it's a pretty ratable cash flow profile. And by ensuring those barrels stay in our system and making sure that connectivity stays with Plains, we've now basically extended the contract term for all of those on our system, and it gives us the first shot of things we didn't put into the acquisition economics like further downstream tariffs and things like that.

With regards to the second part on leverage, we do not expect we will be inside of our target range by the end of 2020 nor did we expect it – we would be when we announced the financial kind of policy in April of last year. As you recall, we lowered our targeted leverage range by half a turn and made it to be without excess S&L, so to speak. Now granted we're entering a period of much lower S&L results.So, when we announced the – call it 11 months or 12 months ago, we didn't expect to – we don't expect to now. We expect to see leverage increase slightly this year, and then it will take several years for us to actually work it back down into that leverage. Clearly, there's transactions or things outside of that, that can accelerate that, but just under our base plan, we do not expect to achieve it this year, nor did we, like I say, a year ago.

This is Jeremy again. I didn't address one part of your question regards to capital. There is some upfront capital related to the PAA standards and to further integrate into our system, but after that, it's modest capital requirements because the backbone for the system has the capacities needed to meet the long-term production profile. There was minimal maintenance capital for the asset going forward.

And Keith, the increase is incorporated in the $1.4 billion that we target for 2020. And so, that's what raised that up a little bit versus what we had before.

Got it. Great, thank you. Thank you very much.

Tristan Richardson with SunTrust has our next question.

Hi, guys. Good afternoon. I appreciate all the background on the gathering transaction and the contracting. You talked about this environment, using your capabilities on gathering and in S&L to compete for share. It seems like this one was opportunistic, but is there a concerted effort to grow the footprint in basin to keep the long haul utilized or was this came to you and it was more of a reactive?

This is, Jeremy. This is more of an opportunistic that we don't necessarily have a function to go out and buy additional gathering systems. This was one that fit us extremely well from a food quality standpoint, from a location standpoint, from a contractual standpoint and from an alignment with the producer standpoint. So, I think this asset sits in the deepest, most higher pressure probably as part of the Delaware Basin, so there is some long-term attributes of the asset that we feel like will be developed.Our footprint largely fits everything that we need at this point and we're enhancing connectivity at midland and other places to make sure we have that liquidity and a lot of those can be done in low-cost of someone else's capital, not ours. So, we're going to optimize, anyway, this one was really more opportunistic than anything.

And Tristan, we actually had volumes. I think you probably know this already, but the existing contract we had this was an opportunity to extend the contract and just provide a more secure long-term fee-based part of our business.

That's helpful. And then, just a quick follow up. I appreciate the commentary on the earlier question about the $85 million of impact that you guys talked about previously, I guess we think of that as – there is a multi-year aspect to that. Is there a figure or a notion higher or lower about that sort of impact in further years, 2021 or otherwise?

This is Al. We plan to provide 2021 guidance or preliminary guidance in November. So, clearly, there is a number of things we'll monitor, as I had mentioned in the prepared remarks, between now and then and provide that update later this year.

This is Willie again. If you think about where we are right now, there's probably more variables than ever as far as trying to forecast what might happen, not only in what we control, but in regulatory, elections as well as global demand. So, I think there'll be a lot more resolution as we let some months passed by.

But Willie just to reiterate, this is Jeremy, one aspect that Al and I both brought up earlier, there is not meaningful contract roll-off until 2025 in the vast majority of our systems. So, a lot of the headwinds we get, some next year, but they are smaller in nature. So, we do have a period of high contracted capacity, margins have shrunk. Obviously, so spot capacity will be impacted, but some of that in 2020. So, it's not like we expect every year to have that roll off, but there will be as contracts roll off, but we had a material contract protection on a lot of our assets.

Very helpful. Thank you guys.

We'll hear next from Michael Lapides with Goldman Sachs.

Hi, guys. Just curious, actually thinking about the Permian in general and kind of what looks like it's going to be a surplus pipeline or take-away capacity. How do you think about across the industries where you're positioned your assets, your pipelines are positioned volume-wise versus kind of your competitive strength relative to kind of market participants may be that don't quite have your competitive positioning?

Well, I'll start and others can jump in. We spent a lot of time talking about our Permian position. So, if your question was really related to the Permian, it also sets the tone for the other regions that we operate in, but we've built our assets over decades. And so, we think about our business, it's an integrated asset mix. We've got gathering. We've got intra-basin long haul. We've got a lot of flexibility with storage tanks.So, if we think about our calling card, it's flow assurance, quality segregation, access to multiple markets. So, we do think the differentiator for us in the Permian and that's why you see us building on all the projects that we've got and strategic projects really help us further enhance that position. And if you think about the other regions that we operate in, it's a very similar business model trying to get aggregation, connectivity and access to multiple points.

Got it. Can you also talk about the contract status in terms of what percentage is contracted for both Red Oak and Wink to Webster?

This is Jeremy. We don't disclose publicly what our contracted status are, but we can say both of those are projects that we expect to hit the rate of return thresholds, obviously targeting the higher end and anything that's unutilized, we're going to look to optimize through strategic partnerships or whatever. Wink to Webster has five partners in it. So, you can understand we brought a lot of parties in who brought barrels, and we expect that to be full for a long time. Red Oak met our return thresholds, and we're going to continue to look to optimize through bringing in additional barrels, bringing in additional partners. So, we're not finished by any stretch to improve upon what already hits our base threshold.

Got it. Thanks, guys. Much appreciated.

We'll move next to Pearce Hammond with Simmons Energy.

Good afternoon, and thanks for taking my questions. My first is just a clarification from some earlier questions. Jeremy, when you were talking about 400,000 barrels a day of oil growth from the Permian, were you talking [this 2020 over this 2019] or are you meaning calendar year 2020 over calendar year 2019?

It was exit to exit, Pearce.

Okay. Thank you. And then, my follow-up question. The $600 million of divestitures, how do you see the market out there for divestitures? Are you seeing, kind of, a disconnect between private valuations versus where public companies trade as far as multiples? And how strong do you think it is?

So, Pearce, this is Jeremy, it's asset dependent, right. I think a lot of the assets we have are cash flowing assets and assets that their strategic value to different parties, and we're good at identifying ones that have natural counterparties and we look to do that. And a lot of these you might end up in trades, you might end up in outright sales. We're going to optimize our footprint by the end of this. And you've seen that $3 billion that Willie sold and we haven't missed a beat necessarily.We've – basically assets that don't fit are marketing pipeline, facilities and pipeline business all in one and not necessarily core. That's what we look to do. And we're going to look to be opportunistic and sell to counterparties who have a need. So, I think part of this is selecting. We don't want activity without accomplishments. So, we're going to work toward selling deals that have natural counterparties.

Thank you, Jeremy.

Yes.

And Becca Followill with U.S. Capital Advisors has our next question.

Thank you. My questions have been asked and answered.

Thank you. We'll move next to Jean Ann Salisbury with Bernstein.

Hi. Just a follow-up again on Spiro's earlier question about the blend and extend. Is the right interpretation of Jeremy your answer that you're basically saying that you're happy with your existing take or pay level out of the Permian, and don't feel a lot of pressure to firm up spot capacity at what shippers are willing to pay right now?

Jean Ann, this is, Jeremy. Yes, right – at this point, we're happy with what we have, but we'll always continue to look to optimize our portfolio. If we can extend term and do something, that's a win-win for our shippers. I think with Cactus II and Cactus I, our shippers have done really well what their opportunities, and they like to work with us. And so, we're going to continue to look and if there is a need on their end and it works for us, we'll do it, but we don't feel any pressure and more compelled to do anything differently than we're doing today.

And Jean Ann, Jeremy and his team have been very, very active in trying to increase the amount of term versus spot that we have. So, things like additional acreage dedications, some of the blend and extend. So, we've made a lot of progress in being able to increase the amount of term barrels that we move in the Permian.

Definitely, great. And then two just very quick ones, if I may, was there any update that you can share on the Western Corridor open season?

Jeremy?

We haven't provided a formal update. We'll talk with our partners and do so. We're looking to wrap all that up here shortly and will provide an update, probably on the next call.

Okay, perfect. And then just quickly on the Felix acquisition, I just want to clarify if the oil flows on your long-haul, would the uplift from that part be captured in S&L? I don't think I saw them taking out a contract on your long-haul in their lease?

We look at this more as a pipeline in that transportation deal. If there is additional benefit to S&L, that would be outside of this. I think we don't need any benefit from S&L to make this acquisition work.

Okay. Thank you.

Thank you, Jean Ann.

From Bank of America, we'll hear next from Ujjwal Pradhan.

Good evening, everyone. My first question is on buybacks. You had previously stated you could implement a buyback quickly, if the units presented compelling value in the last call. Can you update us on your thoughts on buyback today, given where the unit prices are? And is meeting the leverage target a hurdle before considering a buyback?

This is Al. I'll take a shot. With respect to kind of how we approach our thinking of capital allocation, clearly, we have a capital program that we've committed to, building strategic asset that we think over the long run will create meaningful value to our shareholders. So, that's – we got to do that, that's priority one. And leverage is our second focus. And so, implementing the share buyback really doesn't have the play today with where our share price is versus our prioritization of those two first objectives.We did comment that we've had dialogue with our Board. We do feel like, if we were in a position, and wanted to implement a program that we could move pretty quickly to do so, but the reality of it is, is we would want to do so in a way that didn't – was leverage friendly. Again, as I mentioned on one of the earlier questions, we're expecting to see our leverage increase this year, as we fund capital. And so, therefore, that will be a priority to make sure our leverage is in line before we try to implement a repurchase program.

Thank you. And for the second question, in 2020, are you able to share your fee-based EBITDA sensitivity to per barrel changes in WTI prices?

Barrel prices on what? I'm sorry.

WTI oil prices?

I can take a shot at it and somebody – this is Al. We don't have meaningful direct commodity price exposure. It's more of an indirect commodity price exposure. So, obviously, I think, earlier you heard one of us – if oil prices fell dramatically and rigs drop off, we would potentially see less volumes after a delay flowing through our systems. We do have some PLA and that type of thing, but we're a big consumer of diesel for our truck fleet. So, what we would leave you with is not a significant direct exposure, but more of an indirect exposure. So, what we would say is that, if oil prices fell from $55 to $50, you won't see [us saying] a meaningful change in our company cash flow at all.

It's more of a binary decision on whether or not producers continue to drill or not.

Got it. Thank you.

And Gabe Moreen with Mizuho Securities has our next question.

Hi, good afternoon, everyone. I just wanted to follow-up on questions on CapEx. The initial look at 2021, I guess, I'm just wondering, out of that plus or minus $900 million, how much of that might be in the intra-basin complementary Permian projects? And maybe if you can speak to just kind of what you view as sort of a baseline level over that sort of maybe gathering CapEx that you need to spend in year in year out, that's in your growth CapEx?

Chris, you want to take this?

Sure. Yes. Gabe, this is Chris Chandler. We're certainly investing in some large projects in 2020 and 2021, things like Wink to Webster, Red Oak and Diamond/Capline. If you think about the next 18 months, those projects will be in construction and start-up. And when those roll off, we do see our capital investment evolving over time toward less, large, long-haul pipes, and really more well hook-ups and gathering type projects.We've not forecasted or shared a base capital level around that gathering business. It really depends on the strategy our producers take. Do they utilize existing infrastructure that are already connected to and tighter new wells into that? Are they drilling in new areas that require new connections? But as others have shared today, we certainly expect meaningfully lower capital in 2021 and into 2022, and I think our slide package gives a rough illustration of that.

Thanks, Chris. And then kind of my follow-up. I appreciate that there is terminal sale in California. I think you've attempted a terminal sale in California before, and it ran into some regulatory issues. Can you talk about your level of confidence in closing that sale this time around?

Hi. Thanks for the question. This is Jeremy. We don't receive the same issues we had last time with respect to regulatory concerns. We still have PPUC approvals and HSR, but we don't see the HSR concerns we had in prior divestiture.

Thanks, Jeremy.

And Danilo Juvane with BMO has our next question.

Thanks, and good afternoon. Couple of quick ones for me. On the accelerated S&L earnings this year, curious as to why guidance remains effectively unchanged from your preliminary outlook.

Harry, you want to take that?

No. Just when we look into the first quarter, our strategies have been more and more successful in the first quarter than we had anticipated a few months ago. So, well, we accelerated some of the earnings and created additional earning capacity in this year.

Got it. And my follow-up is, can you comment on any potential impacts from a FERC ruling this year on liquid tax allowance and so forth on the guide for the year? Any risks there that you may see?

I think your question was on FERC indexing and just any anticipated...

I think, I mean, the – whatever FERC decides to do, if they decide to change anything on it, won't go into effect till mid-2021. So, it would have no impact on 2020 guidance. There is really no update from what we've said before, clearly us and the industry will work with FERC comments with them to try to make sure it's a logical implementation of what they plan to do with changing that index method, but there would be no impact on 2020.

Great. Those are my questions. Thank you.

Hi, Kelly, I think we'll take one more question and then – or one more participant, then we'll close out the call.

Okay. That will be from Harry Mateer with Barclays.

Hi, good afternoon guys. Al, you previously indicated that the preferred market could be one part of your funding toolkit for the year. Is that still the case? Or given the asset sales you guys are planning to do, do you think it's more likely you'll focus on just the straight debt market?

Yes, we had said that and we do think it's a tool. It was not kind of the primary tool that we're thinking about. We do look at asset sales as being a pretty good tool in the meantime, because we do get some business streamlining and that, we think we – ultimately that works as well. But clearly, it's a tool to where if we feel like we need to manage our cap structure, we've got a basket left. We think the market is pretty attractive. So, it's something we'll monitor, but it's not the first step on our tool list – toolkit.

Hi. Harry, this is Willie. When you think about what we're trying to do with the asset footprint that we have, a lot of what we're trying to do is do a transaction, which brings another partner in, adds volume, right, adds synergies. And so we think about a preferred, you lose that opportunity in many cases to do that. So, we're always trying to do more with strategics than we usually are on financials. Hope that helps?

Got it. Yes. Thank you.

Okay. We thank you very much for joining us today, and we appreciate you taking the time and look forward to updating you on our call in May.

Thank you.

And that will conclude today’s conference again. Thank you for joining us.