Edited Transcript of CNNX earnings conference call or presentation 30-Oct-18 3:00pm GMT

Chad A. Griffith, CNX Midstream Partners LP - President of CNX Midstream GP LLC [4]

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Thank you for that introduction, Nick. I couldn't be more excited and honored to be in this new role, and I look forward to meeting many of you in the near future.

The future is brighter than ever for CNX Midstream. As Nick briefly mentioned and as many of you are already aware, CNX Midstream has gone through a series of transactions to get the company to where it is today. And now we are positioned to organically grow distributions per unit by 15% annually through 2023, and we can do so under our base plan without any drops and without accessing the equity markets.

In addition to the gathering agreement commitments that provide the foundation for this growth, our sponsor's strong hedge book and balance sheet give us confidence that they'll continue to execute on their plan. This level of protection differentiates us from our peers and makes this a very exciting place to be.

During the most recent quarter, CNXM had record throughput, driven in part by our sponsor's strong well performance. And our sponsor expects production to further increase during the fourth quarter.

In addition to supporting our sponsor's continued growth, we are laser-focused on expanding third-party business. In fact, my top priority as President of CNXM, behind only safety and compliance, is to expand our third-party customer base. We've had some recent success with third-party business and began moving those volumes during the third quarter. We believe that there are substantial additional opportunities where CNXM can and should be the gather of choice. To be clear, this additional third-party business is not in our projections or guidance, so similar to drops, this is all potential upside to our plan and for CNX Midstream unitholders.

We completed a series of pipeline projects during the quarter that included 2 pipelines in a dehydration facility in CNX's Richhill area and Southwest PA and 2 pipelines in the Shirley-Pennsboro area in West Virginia. We also commissioned our centralized liquid handling and stabilization facility in the Shirley-Pennsboro field during Q3, which was approximately 3 months ahead of schedule.

We are also ahead of schedule on the expansion of our Southwest PA system. Completing this expansion ahead of schedule will improve our system pressure sooner and result in improved throughput for CNXM. In support of that project, CNXM made a strategic land acquisition, which will maybe help shorten our pipeline route and will give us lots of options for later laydown yards and other surface-use needs. We also upsized and accelerated some segments of this expansion to accommodate improved well results from CNX.

While we have seen some price pressure from our contractors, we've been able to mitigate most of those increases by providing our contractors a longer line of sight on future business. And because we're building these systems quicker and larger than we originally forecasted, we are now increasing capital guidance net to the MLP to a range of $135 million to $145 million compared to the previous guidance of $100 million to $110 million.

Our operations had a very strong third quarter, and Don will talk about some of those details. But one thing I would like to highlight before turning it over is the success we saw this quarter in Health, Safety and Environmental. HSE is critically important and affords us the social license we need to operate this great company. We had an exceptional quarter in HSE. And despite having the highest monthly man-hour rates since 2015, we had 0 reportable injuries or notice of violations. That is a huge accomplishment, and congratulations to the team for achieving this result.

We look forward to executing on our development plans in conjunction with CNX and our third-party partners.

I'll turn it over to Don to go through some of the results of the quarter.

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Donald W. Rush, CNX Midstream Partners LP - CFO & Director of CNX Midstream GP LLC [5]

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Thanks, Chad, and good morning, everyone. We posted a short slide deck to the website, and I will reference a couple of these slides in my prepared commentary, starting with Slide 3.

As you can see, our average net daily throughput for the third quarter was the highest it has been since our IPO back in 2014. And on top of that, we posted our lowest-cost quarter across all metrics since the IPO. These phenomenal results drove a 32% increase in adjusted EBITDA in the third quarter of 2018 compared to the prior year quarter. And our cash distribution coverage ratio was a healthy 1.4x for the quarter.

Shifting to Slide 4. You can see we have made some updates to guidance. The first being we are increasing our EBITDA guidance to $160 million to $170 million compared to the previous guidance of $150 million to $165 million. This is possible due to the cost improvements we are seeing, which are also driving an increase to our distributable cash flow estimates for the year. And as Chad has already discussed, we are raising our 2018 capital guidance.

Slide 5 simply highlights the fact that Noble sold all of their LP units this past quarter. We view this as positive for all involved, and it removes a large overhang on the company. As you can see from the chart, the public now owns 41.9 million units.

I will end with Slide 6, which is a slide we have highlighted many times before. This is the inventory of growth opportunities that exists at our parent CNX. However, as Chad has already mentioned, none of these are assumed in the base plan, and none of this are needed to achieve our distribution growth targets. Any of these would be pure upside.

With that, I'll hand it back to Tyler.

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Tyler Lewis, CNX Midstream Partners LP - VP – IR [6]

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Thanks, Don. And operator, if you can open the call for Q&A at this time, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today will come from TJ Schultz of RBC Capital Markets.

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Torrey Joseph Schultz, RBC Capital Markets, LLC, Research Division - Analyst [2]

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Just first on the CapEx increase. I know you've pointed previously that 2019 is the peak year, so to speak, in CapEx, and you've now accelerated for, I guess, the second consecutive quarter. So 2 questions, really. Just as we think about 2019 as the peak year, just any changes to that spend in the context of some of the contractor price pressure. And then, is there any change to 2019 throughput expectations just given the accelerated spending?

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Chad A. Griffith, CNX Midstream Partners LP - President of CNX Midstream GP LLC [3]

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Yes. Thanks for the question. So when we think about capital budget, it's -- we obviously have a pretty big capital program underway, and we're really sort of -- it's a complete overhaul of our Southwest PA system. On top of that, CNX wells are really outperforming. And so some of the early work that we're doing is a little bit bigger and a little bit faster than we originally expected, which has shifted some of that capital into 2018. When we look at the capital program over the several years that it's going to take to get this done, we're still right on track. So as far as the specifics of 2019, I think we're going to sort of hold off on that until maybe January. And we're going to talk a little bit more in January about sort of what our revised capital is going to look like in '19 and what our expected throughput's going to be.