EnLink Midstream (ENLC) Announces FY20 Guidance, Provides Update Regarding Financial Strategy

EnLink Midstream, LLC (NYSE: ENLC) (EnLink) today announced 2020 financial guidance, provided an update regarding its financial strategy, and declared its quarterly common unit distribution for the fourth quarter of 2019.

Highlights:

• Forecasting 2020 net income of $160 million to $230 million.
• Forecasting adjusted EBITDA growth in 2020 compared to expected full-year 2019 adjusted EBITDA, which is projected to be in line with previously announced adjusted EBITDA guidance.
• Resetting quarterly common unit distribution to $0.1875 per unit for the fourth quarter of 2019, facilitating excess free cash flow generation and enhanced financial flexibility.
• Expecting to fully self fund current program of 2020 capital expenditures, supporting modest 2020 adjusted EBITDA growth.
• Planning to allocate excess free cash flow to - in order of management priority - high-return projects in core areas, effectively managing leverage, and returning capital to common unitholders.
• Projecting adjusted EBITDA to continue growing in 2021, as compared to 2020, contributing to increased excess free cash flow generation.

"Building on our strong fourth quarter of 2019 adjusted EBITDA results, today we are taking action to further strengthen EnLink's financial position over the near and long-term," said Barry E. Davis, EnLink Chairman and Chief Executive Officer. "Our financial strategy affords us the ability to use cash flows from the business to self fund our current program of capital expenditures and distributions and to effectively manage leverage while enhancing our financial flexibility going forward.

"Our business generates significant, stable cash flows, with manageable capital needed to sustain and grow cash flows. Our diversified, integrated midstream business comprises two growth platforms, the Permian and Louisiana, and two strong, free-cash-flow-generating systems, Oklahoma and North Texas. We are confident our growth and cost-savings initiatives, supported by our financial strategy, will enhance our ability to deliver superior returns for investors."

Adjusted EBITDA, distributable cash flow, segment free cash flow, and excess free cash flow used in this press release are non-GAAP measures and are explained in greater detail under "Non-GAAP Financial Information and Other Definitions" below.

• Net income:
  • Projected to be in the range of $160 million to $230 million in 2020
  • Full-year 2019 projected net loss to be below previously issued guidance as a result of expected fourth quarter impairments of goodwill in North Texas and Oklahoma segments.
• Adjusted EBITDA, net to EnLink:
  • Projected to be in the range of $1.07 billion to $1.13 billion in 2020.
  • Expected seasonally strong fourth quarter of 2019 adjusted EBITDA provides momentum into 2020, with full-year 2019 projected to be in line with previously announced guidance.
  • Adjusted EBITDA expectations for 2020 include approximately $75 million of expected benefits from the previously announced plan to enhance profitability of the existing business and drive organizational efficiency. These enhancements include new commercial agreements signed across all segments, optimization of operating expenses and reductions in general and administrative expenses.
• Excess free cash flow:
  • Projected to be in the range of $10 million to $70 million in 2020.
  • Excess free cash flow is defined as distributable cash flow less distributions declared on common units and growth capital expenditures.
  • Excess free cash flow for full-year 2020 is expected to primarily be generated during the second half of 2020, with growth in excess free cash flow continuing throughout 2021.
• 2020 growth capital expenditures, net to EnLink:
  • Remains unchanged from the previously announced guidance of $275 million to $375 million.
  • Midpoint of 2020 growth capital expenditures represents an approximate 50% decrease from expected full-year 2019 growth capital expenditures.
  • EnLink expects to fully self-fund its current program of capital expenditures (including growth and maintenance capital) from internally generated cash flows, and does not expect to require external financing during 2020.
• Fourth quarter of 2019 distribution:
  • EnLink's Board of Directors declared a fourth quarter of 2019 distribution for EnLink's common units of $0.1875 per common unit.
  • The distribution reset is expected to provide financial flexibility and contributes to excess free cash flow generation during the second half of 2020 and beyond.
• Debt-to-adjusted EBITDA:
  • Debt-to-adjusted EBITDA is forecasted to be in the range of 4.0x and 4.3x, as calculated under the terms of EnLink's credit facility.
  • The company's long-term leverage target of below 4.0x remains unchanged.

Permian

• Segment profit is expected to range from $200 million to $220 million, with growth over full-year 2019 expected to be driven primarily by strong producer activity in both the Delaware Basin and Midland Basin.
• The Tiger natural gas processing plant expansion in the Delaware Basin is progressing well, and continues to be on track to become operational in the second half of 2020.
• A series of highly-efficient de-bottlenecking and capacity enhancement projects are planned for EnLink's Midland Basin natural gas processing plants.
• With the addition of the Tiger plant and capacity enhancements in the Midland Basin, total natural gas processing capacity in the Permian Basin is expected to exceed 1.1 billion cubic feet per day by the end of 2020.
• The Permian is expected to generate approximately 20% of EnLink's aggregate segment profit during 2020, with approximately 70% of EnLink's total capital expenditures being allocated to Permian growth projects. The Permian segment continues to experience significant growth, and capital spending is expected to exceed segment profit during 2020, as EnLink continues to invest in attractive growth opportunities.

Louisiana

• Segment profit is expected to range from $300 million to $320 million, with growth driven primarily by the natural gas liquids (NGL) business.
• EnLink's NGL system is expected to benefit from full-year contributions related to the recent Cajun-Sibon expansion, which became operational during the second quarter of 2019, as well as further system upgrades and throughput enhancements completed as part of EnLink's priority to enhance the profitability of its current business. EnLink expects seasonality trends in 2020 similar to those in 2019, given the nature of its NGL operations. Results in the second quarter of 2020 are expected to reflect the seasonal low, while results in the fourth quarter of 2020 are expected to reflect the seasonal high.
• Devon Energy Corp. recently announced the sale of its North Texas position to BKV Oil and Gas Capital Partners (BKV) in December of 2019. As part of the transaction, EnLink expects to enter into amendments of existing commercial arrangements that will enhance EnLink's NGL value chain in exchange for a modest reduction in processing fees related to BKV volumes.
• Segment profit contributions from EnLink's natural gas transport activities in Louisiana and from its Ohio River Valley operations are forecasted to decrease slightly as compared to expected full-year 2019 results.
• Louisiana is expected to represent approximately 25% of EnLink's aggregate segment profit in 2020, with approximately 15% of total capital expenditures expected to be allocated to Louisiana operations. Louisiana is expected to generate significant segment free cash flow during 2020. Segment free cash flow is defined as segment profit less gross segment capital expenditures (inclusive of maintenance capital).

Oklahoma

• Segment profit is expected to range from $435 million to $455 million, with results forecasted to be nearly unchanged as compared to expected full-year 2019 results. Devon's minimum volume commitment related to EnLink's dedicated acreage in Oklahoma's STACK play will provide cash flow support through the end of 2020.
• Devon recently announced a joint venture with Dow Inc. to continue development in the STACK, with drilling activity on the first 18 wells expected to commence during mid-2020. Volumes from the joint venture are not forecasted to begin benefiting EnLink's system until 2021.
• Oklahoma is expected to represent approximately 35% of EnLink's aggregate segment profit in 2020, with approximately 10% of total capital expenditures expected to be allocated to Oklahoma. Oklahoma is expected to generate significant segment free cash flow in 2020.

North Texas

• Segment profit is expected to range from $240 million to $260 million. The reduction in forecasted segment profit as compared to expected full-year 2019 results is due to volumetric decline in this mature basin, along with changes in business mix and the reduction in processing fees charged to BKV as it transitions into Devon's ownership position. The reduction in processing fees is expected to be more than offset by value chain enhancements to EnLink's Louisiana NGL business.
• North Texas is expected to represent 20% of EnLink's aggregate segment profit in 2020, with less than 5% of total capital expenditures expected to be allocated to related operations. North Texas is expected to generate significant segment free cash flow during 2020.

Quarterly Distribution Declared for Fourth Quarter of 2019The EnLink Board of Directors declared a cash distribution of $0.1875 per common unit for the fourth quarter of 2019. The cash distribution for the fourth quarter of 2019 will be paid on February 13, 2020, to unitholders of record on January 31, 2020.

2020 Financial Guidance and Financial Strategy Call DetailsEnLink will host a webcast and conference call on Thursday, January 16, at 8 a.m. Central time to discuss its 2020 financial guidance and financial strategy. The dial-in number for the call is 1-855-656-0924. Callers outside the United States should dial 1-412-542-4172. Participants can also preregister for the conference call by navigating to http://dpregister.com/10137557. Here, they will receive their dial-in information upon completion of preregistration. Interested parties can access an archived replay of the call on the Investors page of EnLink's website at www.EnLink.com.

An accompanying presentation will be posted on the Investors page at www.EnLink.com after market close Wednesday, January 15.

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