Oklahoma City-based Enable Midstream Partners, LP announced it is not only cutting its dividend payments this year but also reducing its 2020 capital expenditures by 48%. The 48% cut in capex totals about $115 million including an estimated $70 in maintenance capital.
“Due to the sharp decline in commodity prices and producer activity across our footprint and the future business uncertainty created by the coronavirus pandemic, we are taking decisive action to fortify our financial position, protect our balance sheet and ensure liquidity to navigate these unprecedented market conditions,” said Rod Sailor, president and CEO.
The announcement said as a result of the actions, the company expects to see a retained cash flow of nearly $450 million which will allow Enable to fully fund its business and also reduce total debt in 2020.
The company’s board of directors approved a 50% reduction in the partnership’s quarterly distribution per common unit from $0.3305 to $0.16525, a reduction that will result in Enable having nearly $290 million in additional cash on an annualized basis.
The company explained its 48% cut in capex will be from the top end of the previously provided outlook which included capital projects not expected to contribute revenues this year.
The remaining expansion capital expenditures primarily represent projects to serve incremental firm transportation commitments or to support expected levels of contracted producer activity.
Enable is removing costs from its business and estimates achieving approximately $35 million of savings in 2020, growing to run-rate savings of approximately $70 million in 2021 for operation and maintenance and general and administrative expenses. After considering its commitment to safe and reliable operations, technology investment and other projects, Enable expects a reduction in maintenance capital of $20 million, or 17%, from the midpoint of the previously provided outlook for 2020. Enable also expects to maintain this $20 million reduction next year.
“Enable has implemented a number of initiatives to respond to the risks created by this pandemic and is focused on protecting the health and safety of our employees, customers and the communities where we work and live while providing vital energy infrastructure services during this crisis,” added Sailor.
Enable has ample liquidity available under its $1.75 billion revolving credit facility. The partnership has no near-term senior notes maturities, with the next senior notes maturity not due until 2024. The partnership’s term loan and revolving credit agreements have scheduled maturity dates in 2022 and 2023, respectively, that could be extended.
The partnership still expects its gross margin to be over 90% fee-based or hedged for 2020.
Enable plans to provide an update to its 2020 outlook during its first quarter earnings call in May.
One of Enable’s main partners, OGE Energy Corp. responded with an announcement of support in the company’s capex reductions.
“Today’s action by Enable does not impact our growth plans at the utility,” said OGE Energy Chairman, President and CEO Sean Trauschke. “We purposefully built our balance sheet to withstand the rigors of the marketplace, and it remains strong today.”
OGE Energy is the parent company of OG&E, a regulated electric utility serving approximately 858,000 customers in Oklahoma and Western Arkansas. In addition, OGE holds 25.5 percent limited partner interest and 50 percent general partner interest in Enable Midstream Partners LP.
Source: Enable Midstream