DCP MIDSTREAM ANNOUNCES DISTRIBUTION, CAPITAL, AND COST REDUCTIONS
March 23 2020 - 6:30AM
Today, in response to extraordinary and volatile market conditions,
DCP Midstream, LP (NYSE: DCP) announced the following decisive
actions.
First, the board of directors of its general partner approved a
plan to reduce quarterly distributions to its common unitholders to
$0.39 per unit or $1.56 annually, beginning with the first quarter
2020 distribution, payable in May 2020. This 50% distribution
reduction results in $325 million of cash that will be fully
utilized to reduce leverage and strengthen the balance sheet.
Second, DCP will reduce its 2020 growth capital program by 75%,
to approximately $150 million for the year, down from a guidance
midpoint of $600 million. This remaining capital spend is required
for necessary and strategic projects that are already underway. The
$450 million growth capital reduction includes the strategic
decision to defer a 30% ownership option in Phillips 66’s Sweeny
Frac 2 and 3 projects, which was projected to be exercised at the
end of 2020. Although DCP does not expect to exercise the option in
2020, Phillips 66 and DCP are considering an option in later years
that would be mutually beneficial for both companies. Additional
growth capital reductions have been made on a basin-specific basis.
Looking to 2021, DCP has provided a growth capital range of $50
million to $150 million and the company anticipates targeting the
low end of the range.
Third, through targeted cost and sustaining capital reductions,
DCP expects to minimize the negative impact of the commodity price
environment by approximately $80 to $100 million in 2020. To
achieve this goal, DCP plans to lower costs by at least $50 million
enterprise-wide, reduce sustaining capital by $30 million, and
further drive DCP 2.0 innovation efforts by up to $20 million to
improve cash flows.
DCP remains focused on the health and safety of its people,
customers, vendors, and communities as the company’s top priority
during the COVID-19 outbreak. DCP has implemented pandemic response
and business continuity plans to prevent illness and provide
reliable and safe operations, while maintaining regular
communication with customers.
“In response to current unprecedented market conditions, DCP has
taken aggressive action to optimize over $850 million in cash flows
to improve our leverage and liquidity, and position the company for
long-term success.” said Wouter van Kempen, chairman, president,
and CEO of DCP Midstream. “The decision to reduce our distribution
was not taken lightly, but with a focus on long-term value
creation, we believe it is in the best interest of our unitholders,
employees, and the company. Our business remains strong, with no
disruptions in operations, and these decisive actions will enable
DCP to maintain and strengthen our balance sheet and continue to
serve our customers well.”
With these actions, DCP anticipates liquidity of $700 million to
$1 billion at the end of 2020. DCP currently maintains more than
$500 million of liquidity, having recently extended and
strengthened its credit facility with decreased fees through 2024.
The company’s next bond maturity is not due until September 2021
and there are no foreseeable needs to access the equity or debt
markets. Additionally, for 2020, DCP previously announced that 31%
of the 2020 equity length is hedged at attractive pricing, and 24%
of the 2021 open position is now protected through DCP’s targeted
hedging program.
DCP’s customer base is well-diversified and within the company’s
top 20 customers, who represent 55% of revenue, approximately 75%
of the companies are investment grade, mostly A rated.
Additionally, where producers are delivering into DCP’s gathering
and processing systems, DCP is generally in a net payable position
where it holds the commodities or cash thereby limiting
counterparty exposure. DCP also maintains contract structures
with adequate assurance provisions to minimize credit exposure.
DCP expects to provide an update to its 2020 guidance during its
first quarter earnings call in May.
ABOUT DCP MIDSTREAM, LPDCP Midstream, LP (NYSE:
DCP) is a Fortune 500 midstream master limited partnership
headquartered in Denver, Colorado, with a diversified portfolio of
gathering, processing, logistics and marketing assets. DCP is one
of the largest natural gas liquids producers and marketers and one
of the largest natural gas processors in the U.S. The owner of
DCP’s general partner is a joint venture between Enbridge and
Phillips 66. For more information, visit the DCP Midstream, LP
website at
www.dcpmidstream.com.
FORWARD-LOOKING STATEMENTSThis document may
contain or incorporate by reference forward-looking statements
regarding DCP Midstream, LP (the “Partnership” or “DCP”) and its
affiliates, including projections, estimates, forecasts, plans and
objectives. Although management believes that expectations
reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove to be
correct. In addition, these statements are subject to certain
risks, uncertainties and other assumptions that are difficult to
predict and may be beyond our control. If one or more of these
risks or uncertainties materialize, or if underlying assumptions
prove incorrect, the Partnership’s actual results may vary
materially from what management anticipated, estimated, forecasted,
projected or expected.
The key risk factors that may have a direct bearing on the
Partnership’s results of operations and financial condition are
described in detail in the Partnership’s periodic reports most
recently filed with the Securities and Exchange Commission,
including its most recent Forms 10-Q and 10-K. Investors are
encouraged to consider closely the disclosures and risk factors
contained in the Partnership’s annual and quarterly reports filed
from time to time with the Securities and Exchange Commission. The
Partnership undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise except as required by
applicable securities laws. Information contained in this document
speaks only as of the date hereof, is unaudited, and is subject to
change.
Investor and Media RelationsSarah
Sandberg303-605-1626scsandberg@dcpmidstream.com
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