Western Midstream Partners, LP (WES) Q1 2020 Earnings Report, Transcript and Summary

Good day, and welcome to the First Quarter 2020 Western Midstream Partners Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Abby Dempsey, Investor Relations. Please go ahead, ma'am.

Thank you. I'm glad you could join us today for Western Midstream's first quarter 2020 conference call. I'd like to remind you that today's call, the accompanying slide deck and last night's earnings release contain important disclosures regarding forward-looking statements and non-GAAP reconciliations. Please reference Western Midstream's Form 10-Q and other public filings for a description of risk factors that could cause actual results to differ materially from what we discuss today. Relevant reference materials are posted on our website. With me today are Michael Ure, our Chief Executive Officer; Craig Collins our Chief Operating Officer; and Mike Pearl, our Chief Financial Officer. I now would like to turn the call over to Michael Ure.

Thank you, Abby, and good afternoon, everyone. I hope this call finds you and your family safe and healthy during these unprecedented times. I'd like to begin this call by thanking our employees for their continued focus, diligence and adaptability all of which directly contributed to our truly outstanding first quarter results. Our first quarter results are indicative of the operational and financial outperformance that our employees and assets are capable of delivering in a normalized environment. Our first quarter results not only show the capabilities that exist within our best-in-class assets that we expect will deliver repeatable future successes when we reach the other side of this ongoing pandemic, but these results also improve our debt metrics and demonstrate our ability to generate meaningful positive free cash flow. In light of the pandemic effect on commodity prices and producer activity, we recently announced capital and other planned cost reductions that we fully expect to realize in 2020, accompanied by a 50% reduction to our quarterly distribution. We believe these announced measures ensure our near-term financial health and allow us to emerge from the currently dislocated market opportunistically positioned with financial flexibility. The current market environment has forced us to reexamine every aspect of our operations, to identify incremental cost-saving opportunities and pursue efficiencies that will improve our profitability as the sector and overall economy improves. In short, we are focused and committed to delivering improved results with fewer resources by adopting an entrepreneurial mentality that emphasizes broadening employee skill sets and areas of responsibility. As anticipated, establishing WES as a standalone midstream company has furthered cost efficiency realizations and we have embraced the current environment to challenge our legacy corporate organizational structure and functions. The realizable value attributable to past activities investments and the overall reliance on the talent and creativity of our focused employee base to continue identifying efficiencies and cost savings. The current environment is far from ideal. But opportunistic for WES in the sense that it allows and forces us to focus on improving every aspect of our operations and related corporate functions. This has elicited actionable plans that are imminently capable of delivering incremental cost efficiencies for years to come. Notwithstanding our unbridled enthusiasm for our first quarter results and anticipated cost savings initiatives, we recognize the pandemic's adverse effect on worldwide economic activity and the related disruption to the energy sector. We were in early, proactive and constructive contact with all of our customers most of which communicated deferrals and cancellations of expected drilling campaigns. Our customers continued to revise drilling and completion activities and curtailment plans, which is prompting us to take steps to protect and strengthen our financial wherewithal. We recently announced a 45% or more than a $400 million reduction to our current year capital guidance, a $75 million reduction to current year G&A and operating and maintenance costs and a 50% reduction to our quarterly per unit distribution. As a result of these actions and up-to-date producer communications, we anticipate 2020 adjusted EBITDA between $1.725 billion to $1.825 billion, which we expect to result in meaningful 2020 free cash flow after distributions. This guidance reflects the best and current information we have at this time. We will continue monitoring producer activity levels and may adjust our 2020 guidance and future distribution levels based on incremental information that may be communicated to us by our customers in the upcoming months. Today, we believe the strength of our first quarter results and the most recent customer provided activity level information support our revised 2020 guidance. Our revised guidance announced cost savings initiatives and reduced quarterly distributions position us to generate free cash flow after distributions so that we can prioritize leverage reduction and assume a financially offensive stance once the current market dislocation abates. With that, I'll turn the call over to Craig who will discuss our first quarter operations and forecast 2020 in-basin activity and capital plans.

Thanks, Michael. First I would like to congratulate our team for its recognition by the GPA Midstream Association for outstanding safety performance in 2019, where we were awarded first place in the division one category for companies with greater than one million reported man hours. A sincere thank you to our employees for continued dedication to safety. Operationally, gas throughput increased by approximately 150 million cubic feet per day on a sequential quarter basis, representing a 3% increase. This increase was primarily driven by higher throughput, from our DJ Basin Complex and West Texas Complex. Also, the second Latham train commenced operations during the first quarter. And as a result of modifications that we made during construction and following performance testing, we expanded the processing capacity by 50 million cubic feet per day, for a total processing capacity of 250 million cubic feet per day. As you may have noticed in our recently issued financials, we now disclose metrics attributable to water separately from crude and natural gas liquids, for added transparency into our business, as a result of the water business becoming an increasingly significant portion of our portfolio. Our water throughput increased by approximately 105,000 barrels per day, representing an 18% sequential quarter increase. Our per barrel water disposal gross margin of $0.97 is consistent with the prior quarter. Our crude oil and natural gas liquids operated assets experienced a sequential quarter throughput increase of approximately 14,000 barrels per day, primarily as a result of increased throughput in West Texas. Annual cost of service rate re-determinations and increased Delaware Basin throughput supported an increase in our per barrel margin, related to crude oil and natural gas liquids throughput from the prior quarter, by $0.16 to $2.43 per barrel. Additionally the Front Range and Texas Express pipeline expansions were placed into service, at the beginning of April. Many of our customers already have taken steps to reduce drilling activity in the basins, in which we operate. Accordingly, much of the originally forecasted growth for this year will not materialize. Notwithstanding, our capital asset and spending profile is scalable relative to and in response to fluctuations in producer activity. Our capital plan allows us to reduce well connect, compression and gathering capital, rapidly and significantly, in response to reduced in-basin activity. This demonstrates the versatility and flexibility offered by our asset portfolio and furthermore underscores, the ongoing value attributable to our prior period investments into scalable, backbone infrastructure assets located in Premier U.S. onshore basins. Should in-basin activity ramp-up in 2021 and beyond, we likewise are poised to capture meaningful incremental value, by leveraging our existing backbone infrastructure to capitalize on intended economy of scale opportunities that are uniquely inherent to our asset portfolio. We continue to build out the fourth north Loving ROTF Train, with completion expected in fourth quarter 2020. This project is reflected in our most recent capital guidance. I will now turn the call over to Mike, to discuss our first quarter financial results and our financial focus for 2020 and beyond.

Thanks Craig. Yesterday, we reported an unequivocally outperforming quarter with adjusted EBITDA of $514 million and free cash flow of $215 million. The 15% sequential quarter increase in adjusted EBITDA, resulted from increased throughput across all products in the Delaware Basin and natural gas throughput in the DJ Basin. We believe that current broad-based market dynamics dictate that all companies, energy sector and beyond prioritize balance sheet strength. So that they are positioned to manage through cyclical downturns, including the existing and unpredictable pandemic fuelled market dislocation, that has turned all of our lives upside down. In light of evolving macroeconomic conditions, in the current state of the sector, we have pivoted to focusing on free cash flow as a financial performance indicator, as opposed to the conventional MLP standard metrics of distributable cash flow and distribution coverage. These legacy sector metrics continue to carry comparability value for a distribution focused enterprise. But lose significance as compared to a market standard free cash flow metric that is more germane to a total return-focused enterprise like WES that is positioned to withstand, economic downturns and poised to be opportunistic at any stage of the business cycle. Our recent distribution reduction was undertaken with a view toward becoming a sustainable, free cash flow, after distributions enterprise. Moreover the recently announced distribution cut, positions WES to generate free cash flow, after distributions as early as this year. Notably, if the currently applicable per unit distribution, was in effect for first quarter 2020, WES would have been free cash flow positive, after distribution. To-date capital investments have enabled our immediate shift to a free cash flow after distribution enterprise, which allows us to repay debt expeditiously, so that we are able to capture future value from deploying financial resources to execute on highly accretive opportunities, whether acquisitive or corporate finance in nature. Returning to first quarter results, low commodity prices and reduced producer activity, triggered the recognition of approximately $156 million of asset impairments, primarily related to Chipeta, and $441 million goodwill impairment. These non-cash charges do not affect, adjusted EBITDA or free cash flow. As we look past first quarter 2020 and expanding on Michael's earlier commentary regarding the COVID-19-inspired, WES retrospect, our $75 million reduction to current year G&A and operating and maintenance costs are absolutely realizable. We have altogether stopped discretionary spending, travel and the like. Suspended salary increases for all personnel for the remainder of this year. And continue discovering ways to operate in a more cost-efficient manner through the identification and elimination of non-value-added and non-productive expenditures. As we continue executing on lowering our input costs, we recognize the importance, strength and sanctity of our current gathering and processing contract. The contractual protections provided to us through the operative provisions of these contracts are a key component to our free cash flow equation and we have no current expectation of renegotiating or amending these contracts in any manner that materially prejudices our ability to generate free cash flow after distributions over the long-term. Our highly successful bond offering earlier this year, largely undrawn $2 billion revolver, lack of near-term debt maturities and our recent actions that reduced 2020 cash outflows by approximately $1 billion all contribute to our currently advantaged liquidity position. As we begin generating positive free cash flow after distributions, we will deploy excess cash to strengthen our balance sheet by reducing leverage. We continue to target leverage below 4.5 times by year-end 2020 and below four times by year-end 2021. These targets are necessarily aspirational as they are subject to the uncertain duration and severity of the ongoing economic downturn and related energy demand shot. Finally restoring our investment-grade credit ratings remains a priority for us and meaningfully reducing leverage aids in this endeavor. I now will turn the call back over to Michael for concluding remarks.

We recognize the difficult times in our industry and in our communities. I nevertheless remain encouraged by our first quarter outperformance, which again we consider indicative of our capabilities in a normalized economic environment. I remain confident that WES and the industry as a whole will emerge from this downturn stronger than before. And for WES that dictates a more efficient and cost-effective business model, the achievability of which currently is being demonstrated by real-time empirical evidence of cost savings and continued efforts by WES employees to improve overall efficiencies. In closing, I would like to thank our employees for their continued dedication and the frontline individuals in our communities that are working tirelessly to keep us and our families safe and healthy during this health crisis. With that, I would like to open the line for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Shneur Gershuni with UBS. Please go ahead.

Hi. Good afternoon everyone. Glad to hear everyone is safe. Maybe to start off a little bit. Your guidance isn't really down that much. And I was -- from where it was when you last updated us, I was just wondering if you can remind us what percentage of the EBITDA is protected by MVCs or take-or-pay contracts?

Yes, Shneur, this is Craig. We've got 65% of our gas volumes are supported by MVCs and cost of service agreements and 78% of our liquids volumes are supported by cost of service and minimum volume commitment obligations. So we feel quite secure given those contracts and the veracity of those contracts and we continue to look forward to working through this downturn that we're in and seeing volumes rebound with new development once that begins.

Great. Perfect. And maybe as a follow-up on the guidance and then I have another one after that. The guidance kind of surprised me frankly to the upside. When I sort of put it into context in sort of listening to your -- one of your biggest customers being Oxy, where it sounds like they have zero to very few rigs running right now. And when I think about wells having a decline rate by nature, is there a scenario where 2020 while it's being clearly a tough environment, but could that actually be the calm before the storm in 2021? And, I mean, is there a huge inventory that Oxy sitting on that they can offset the decline rate later this year? I mean, I'm just trying to figure out how they catch up in 2021 to offset the decline rates if oil prices go up if there are no rigs running. And so I'm trying to understand sequentially where we should be thinking about the balance of this year? And is 2021 is a material risk to 2020?

Yes, Shneur. Thanks for the question and actually appreciate the commentary around the positive surprise on the upside as it relates to our guidance. We also feel great about the first quarter and feel confident that we'll be able to adapt to the current environment. It's difficult to tell what 2021 is going to look like. We're -- we don't actually have guidance out into 2021 in light of the current environment as we sit today. And so I would hesitate to provide any specific guidance as it relates to the impact on to 2021.

I mean, if you're not able to provide guidance to 2021 and I do appreciate that. But I'm saying the conditions for 2021 to be flat down or up, it's going to be somewhat dependent on the inventory of drilled uncompleted wells that your key customers would have. I mean, if they're not drilling obviously they're not adding to that balance. So trying to understand what is the drilled uncompleted inventory today? That could at least be used for us to be thinking about directionally where '21 could go?

Yes. This is Mike. The DUC inventories since the day is contributing to what you -- I think you characterized as somewhat of a lighter decline in terms of guidance. But if we don't see activity levels in the market improve throughout the balance of 2020, I think it is safe to say that you'll see a more pronounced decline in 2021.

Okay. Fair enough. And then one last follow-up. The Sanchez bankruptcy, is there an impact on Western Gas and is that -- Western Midstream rather? And is that baked into your guidance at this stage right now?

So Sanchez is a 25% working interest owner at Springfield of which we own 50.1% of. Springfield has individual contracts with all of the working interest owners. We're connected at the wellhead. So, obviously that's important as you want to continue to flow volumes there. We feel very strongly and we've taken steps to preserve our rights related to that. And so, we have not actually forecasted any negative impact overall because of the dynamics that I just referenced.

All right. Perfect. I’ve got some more questions, but I'll step back into the queue.

Thanks, sir.

Our next question comes from Spiro Dounis with Credit Suisse.

Hey, good afternoon everyone. I wonder if you could walk us through the cadence for the rest of the year as you're thinking about volumes here and what customers have communicated to you. Imagine 2Q and 3Q will be among the worst hit. But I guess what's being communicated or modeled so far about the ramp-up into 4Q? And do you see any differences between a Delaware or DJ recover?

Yes. So as it relates to cadence, we have incorporated all of the feedback we've received up to this point into the guidance provided as it relates to any curtailments and activity levels. You would expect there to be -- and we do expect there to be an impact on EBITDA as you go through the year as a result of that limited activity and those curtailments. On the capital side, we would expect the capital in the second quarter to be relatively flat with the first quarter. And the dynamic there is, as you may recall it seems like forever ago but at the beginning of the year there was a very different perspective with regards to activity levels. We get ahead of our producing customers as it relates to that. And so, at the time of COVID-19 and the OPEC-plus meetings, a significant amount, the majority in fact of our current capital budget had already been spoken for at that point. And so, you would expect -- or we do expect second quarter capital to be relatively similar to first quarter, but it trailing off meaningfully through the remainder of the year. As we go into 2021, obviously we have greater flexibility in being able to modify that total CapEx spend if the continued conditions -- or the conditions continue. So, we do expect and have received feedback with regards to curtailments that will impact Q2 and Q3. The current information that we have is that things will likely return back to a level of normalcy as you start getting into Q4.

Okay. Understood. And then just thinking about that exit rate and kind of going back to Shneur's question just a little bit here, but maybe asking in the context of your leverage target of four times which Mike I think you pointed out was aspirational, which I think is sort of the right lever to kind of get to eventually. I guess, we're struggling with is the cash flow side of that and maybe what customers have communicated to you to suggest that it seems like that's going to necessitate growth in '21 versus '20 to get there. And so, as we're thinking about that exit rate that recovery in 4Q to the extent that's driven purely by a reversal of shut-ins, it sounds like to get to four times. I don't want to put the words in your mouth but just help me think about it. To get to four times, you're going to have to see some sort of increase in actual activity to get there throughout '21? Is that fair?

I think -- this is Mike. I think that's a fair comment, but also doesn't take into the account -- take into account the potential for us to divest of noncore assets to further reduce leverage and bring that ratio closer to for and when I say noncore, I mean anything outside of the DJ and Delaware including equity investments.

Okay. That all explained it, thanks everyone. Okay.

And Spiro, I would again comment that relates to the capital side, the increased flexibility into 2021 to be able to modify the capital program have greater flexibility in modifying the capital program bringing that CapEx down in the event that the activity levels don't return.

Appreciate the color. Thank you, gentlemen.

And our next question today comes from Jeremy Tonet of JPMorgan. Please go ahead.

Hi good afternoon. Just wanted to kind of clarify a little bit around the guidance here. And would you be able to kind of share with us I guess what type of rig activity is embedded in your guidance -- EBITDA guidance for the year here? And just, the trajectory of the EBITDA guidance for the balance of the year is it kind of like second quarter is a bit lower than first and then third is a bit lower and so on, or just any kind of color on that shaping would be helpful as well?

Yes. So in regard to your first question, there's very little to no activity that's forecasted into 2020 as it relates to the guidance that is embedded here. Again, you have as we talked about Q2 and Q3 you've got the impact of curtailments that might exist with fourth quarter I would call it unless there's a return in activity level relatively flat with Q3. So step down a little bit into Q2 as it relates to Q1 stepped down maybe a little bit further in Q3 and then Q4 roughly relatively flat with Q3.

Got it. That's helpful. And just wanted to get a better sense just for own modeling purposes. If no wells are connected to your system what type of PDP declines should we be modeling or thinking about -- just trying to get a better feel on how to model it?

Craig, do you want to take that?

Yes. I would say given the activity levels having already come down significantly, we're going to see the steepest decline over Q2 and Q3 and I would expect that decline to arrest a bit during the fourth quarter and beyond as those wells come off their hyperbolic decline. So frankly, it just varies based on the maturity of the developments by each of our customers. And so it's pretty difficult to stay on average decline rate. But I would expect most of that to be showing up in Q2 and Q3 of this year.

Got it. That makes sense. I will leave it there. Thanks for taking my questions.

And our next question comes from Derek Walker with Bank of America. Please go ahead.

Hey. Good afternoon. Thanks for taking my questions. Just want to get a better understanding of kind of the gross margin in natural gas segment. It looks like it was $1.16 meaningful step-up from the prior quarters. So I just wanted to see how much of that is the annual redetermination from the cost of service contracts? And should we think about that $1.16 number as sort of the run rate for the year?

Yes. Most of that increase in the gross margin on the gas side is attributable to the increase in volumes on a relative basis from the DJ and the Delaware basins given those are higher-margin gas molecules than the balance of the portfolio, which is on decline. So I would say that the first quarter margin for gas is probably reflective of what we'd expect the balance of the year as well.

Okay. Great. And then as far as -- I know it's early days here but as we do the next sort of annual rate redetermination and given sort of how you're thinking about things trying from a live perspective. How should we think about that rate in 2021?

Yes. We redetermine the cost of service rates at the end of the year, redetermined annually. And those rates are based on a function of capital, OpEx and volumes both actual volumes delivered as well as forecasted volumes and the associated capital that's required to support them going into the future. And so we'll work with producers and update those cost of service models at the end of the year. But it's -- it would be premature to anticipate what those rigs might look like.

Okay. And then maybe just a quick one on -- I think you brought Latham II on in the quarter. I guess, what are you guys seeing on utilization now? And sort of how do you -- what's kind of factored into your guidance?

Yes. Latham fits into our DJ complex of processing. And through the first quarter since that plant came online, it's effectively been full. It's obviously, a highly efficient plant. And so we preferentially will keep those efficient plants loaded. But it's been running at capacity -- both Latham I and II have been running at capacity. And some of the less efficient plants is where we've sourced some of that gas around. But we have ample processing capacity available. And I think the upshot of the environment that we're in is from a capital standpoint both in the DJ and the Delaware we're well-positioned for some time with respect to our processing capacity. And so in terms of lumpy capital going forward I think we -- we think we're in pretty good shape and not having to expand processing capacity which as we know is pretty significant chunks of capital. So we feel like our capital program going forward is very flexible and we can leverage that as activity levels change in the future.

Great. That’s it from me. Thank you, guys. Appreciate the time.

[Operator Instructions] Our next question today comes from Sunil Sibal with Seaport Global Securities. Please go ahead.

Yes. Hi. Good afternoon, everybody. And thanks for taking my question. I was just kind of curious, if you could talk a little bit about more recent trends that you're seeing in Midland as well as Delaware as far as the gas to oil ratios are concerned for the producers that you serve and also produced water to oil ratios? Are you seeing any significant changes in those trends as producers are modifying completions or shutting in wells?

No. We haven't seen any significant change in the complexion of that product mix across our producers. I would say over the next several months as volumes are curtailed. Clearly, we may see some shift in how that looks. But in terms of a shift based on completion designs and reservoir maturities, we haven't seen a material shift from where we've been.

And just a clarification Sunil, that would be just Delaware.

Just Delaware.

Right, we would not have insight into the Midland side.

Okay. Got it. And then on your guidance and then the MVCs et cetera, are there any of your assets which are currently flowing below MVCs?

We have some contracts where the producers are below their MVCs and are paying deficiency payments. We have others. In fact most of them, frankly, are flowing above their MVCs or have been following above their MVC. So that continues to be a changing dynamic as you would expect in this environment. But we're continuing to monitor what producers' volume expectations will be in the near-term and longer term.

Got it. And then one last one for me. Thanks for laying out your leverage expectations. I was just curious when you think about your different competing goals, especially if the recovery is slower than anticipated how would you put distributions versus leverage reduction goals in terms of order of priority?

Our - this is Mike. Our priority is leverage reduction full stop. So if and to the extent we don't see facts that comport with what we've put together in terms of our own expectations then we'll need to revisit distributions at that point in time. Now we're certainly not there. And I can tell you that a lot of analysis went into the financial information that we used to support the distribution cut that we did undertake. But, that doesn't mean that we can't be nimble if and to the extent we see the backdrop warrant us to take for -- recommend taking for further action.

Okay. Got it. I’ll leave it there. Thanks much for the color

Our next question comes from Chris Tillett with Barclays.

Hi, guys. Good afternoon. I guess first for me is on the MVC and cost of service contracts, are there any noteworthy expirations on those contracts in the next few years or so?

No. Those are all longer-term contracts that are averaging eight to 10 years and remaining tenor, so no near-term expirations for those.

Okay. Thank you. And then, maybe just to follow-up on some of the questions from earlier. Can you quantify in terms of EBITDA or operating income? What the level -- what percentage of earnings today are coming from MVC and cost of service contracts?

No, we don't have that available. No.

Okay. Okay. Well, I guess maybe sort of another way to think about it would be. Are the margins that are charged under those contracts either on the gas or the liquids side materially different than the margins that are seen on the volumetric contracts?

Again, I would say, we would -- we don't talk specifics as it relates to individual contracts and specific contracts. So, I'm afraid I can't really provide any insight to you on that specific question.

Okay. Understood.

Contracts obviously different that goes into the general question that you're asking there. So, given we don't actually talk about individual or even company-specific contracts, we would -- we just can't provide any real insight to respond to your question.

Our next question today is a follow-up from Shneur Gershuni with UBS.

Sorry guys to come back in. I remember when this call used to like 50 minutes, it’s turning longer than that. But I think in your response to Spiro's question you talked about, the decline rates would be bigger upfront into, let's say, 2Q and 3Q and then it would arrest. When you say arrest, are you saying it's a zero decline rate, or are you saying, it's just falling from like a 20% decline rate to let's say an 8% or 10% decline rate? Just trying to understand, what you meant by that comment.

Yeah. So, what I meant by that, again we were talking about, cash flows there. And again, the dynamic that I was trying to highlight is that, we do have dynamics that have been built into the model, based on feedback we received, from all of our customers. It relates to curtailments that would be taking place, for the most effect into Q2 and Q3. And so, we would expect a step down in EBITDA Q2 relative to Q1, potentially another step down into Q3. But the Q4 would potentially arrest that decline in part, because we're not currently forecasting the curtailments to continue into that period.

Okay. And I mean does that take into account Oxy's comments that -- I think they said, something like 9% or 10% of their wells are shut in. And it seemed rateable across the Permian DJ and international. And that some of them would actually never come back. Is that sort of baked into that kind of assumption?

Yeah. What's baked into the guidance is, direct information that we've received from all of our customers, including Oxy.

Got it. Okay. And one final question just on the balance sheet. You did some debt buybacks this quarter. Is that a strategy you expect to continue pursuing?

If we see the price arbitrage that makes sense to us, the answer is absolutely. I think, we're on record in several instances of commenting that we have no near-term, need to access the capital markets, which basically means, in terms of 2021 and 2022 maturities, we plan to pay those off. So if we see an opportunity here in the near-term to take those out for below par, we think it makes all the sense in the world to take it out early if we have the liquidity to do so rather than paying, full boat so to speak at maturity.

And I want to highlight Shneur, as it relates to that that, again the focus is on near-term maturity, that if you're repaying those below par, that it's actually liquidity enhancing overall.

No. I am completely agreed with that. I just wanted to clarify the strategy. Perfect. Thank you very much. I cover my follow-up.

Our next question is a follow-up from Jeremy Tonet with JPMorgan. Please go ahead.

Hi. Thanks. Just a couple of cleanups here, the OpEx, I think came in, a little light for the quarter, maybe versus expectations. And just wondering is this rateable, or is this some seasonal element here to lower O&M that we should be thinking about? What is the like kind of the cost savings that you guys were looking to achieve. And that's kind of baked into this level?

Yeah, Jeremy, we've identified a number of places where we can cost, save costs for this year. And I would say that, what you see in the first quarter OpEx is not particularly reflective of all those cost savings measures that we've identified. So we would expect to be able to save even more from the OpEx, relative to the first quarter OpEx numbers that we've reported.

Got it. That's helpful. And then, just wanted to think about the family relationship with Oxy here, obviously Oxy is under a bit more stress than they want to be. Is there room for kind of any level of deals with Oxy that could be win-wins on both sides, just seeing if there's anything left on that front?

We're always willing to do win-win transactions with any of our customers.

And I would just highlight that the interaction, the relationship overall with Oxy incredibly positive, very supportive, across the Board. So, clearly if there are win-win transactions that work for both of us that we would absolutely engage in those interactions and would expect that, we would have the same type of fulsome engagement that we received from Oxy throughout. And expect to have that continue.

That's helpful. That’s it for me. Thanks.

And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to Michael Ure, CEO for any final remarks.

Thank you everyone for joining the call. I wanted to again reiterate, just how excited we were for the incredible results that the team has been able to achieve. We have absolutely done a wonderful job in being able to adapt to this environment. So thank all of our team members in being able to do that. We wish everyone to continue to stay safe. And expect better and brighter things into the future. Thank you very much for joining the call.

Thank you. This concludes today's conference call. You may now disconnect your lines. And have a wonderful day.