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Tallgrass Energy, LP (NYSE:TGE)
Q3 2019 Earnings Call
Oct 30, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the TallGrass Energy Q3 2019 Earnings Call. Today's conference call is being recorded.At this time, I would like to turn the conference over to Nate Lien, treasurer for Tallgrass. Please go ahead, sir.

Nate Lien -- Treasurer

Thanks, Corey, and good afternoon, and thank you for joining the Tallgrass Energy quarterly earnings call as we discuss TGE results for the third quarter of 2019, which were released through our press release, this morning, and 10-Q, this afternoon.Joining me on the call are David Dehaemers, chief executive officer; Bill Moler, president and chief operating officer; and Gary Brauchle, executive vice president and chief financial officer.Before turning the call over to David, let me remind you that this event is being recorded, and a replay will be available for a limited time on our website.Additionally, our comments today will include forward-looking statements and estimates. These forward-looking comments are subject to various risks and uncertainties, and reflect management's views as of October 30, 2019. Please refer to our filings with the SEC, which are available on our website, which provide discussions of factors that may cause actual results to differ from management's projections, forecast, estimates and expectations. Note that except to the extent required by law, Tallgrass undertakes no obligation to update any forward-looking statement.Please also refer to our earnings release and website for reconciliations between the non-GAAP financial measures, referenced in this presentation, and most comparable financial measure or measures calculated and presented in accordance with GAAP.With that, let me now turn the call over to David for his opening remarks.

David Dehaemers -- Chief Executive Officer

Good afternoon, everyone. Thank you for joining our Tallgrass Energy third-quarter earnings call.[Inaudible] that the outsell provide a brief -- brief update on the nonbinding take-private proposal from Blackstone, as I know it is the topic on everyone's mind. We'll not address anything beyond this update on the subject, even in the Q&A portion of the call.As most of you can appreciate, this is a very public and complex transaction in both sides, that being Blackstone and then the partnership or -- the Tallgrass' conflicts committee are working diligently in pursuit of a potential agreement. Given that the process is ongoing, we can't provide any update beyond that and it's not that we don't want to, but just that we legally can't.

This process cannot and should not be rushed. And as we've said before, we are confident in the rigor and integrity of the conflicts committee's process.As many of you know -- I know many of you want to hear about the recently filed Pony Express rates, status of our recontracting efforts, the Cheyenne Connector and hub enhancements, 7(c) certificates that we received, and then, the management side letters. We will get to all of that in a few minutes. But first, we're going to talk about the outstanding third-quarter financial results produced by our team in the company.Adjusted EBITDA was $264 million.

Cash available for dividends was $211 million, producing dividend coverage of 1.36 times for the third quarter. The performance drove TGE's 17th consecutive quarterly dividend increase.I guess, I would also just point out that since Blackstone bought the general partner in March of this year, and they have been in our board meetings and been part of that process, we've raised the dividend three times with them owning the general partner. And so it's $0.55 for the quarter or $2.20 annualized, which is a sequential increase of 1.9% from the second quarter of 2019 and an increase of 7.8% over the third-quarter 2018 dividend.With that, I'll turn the call over to Gary for additional comments.

Gary Brauchle -- Executive Vice President and Chief Financial Officer

Thanks, Dave, and good afternoon, everyone.Moving to the segment performance for the quarter. The Natural Gas Transportation segment produced adjusted EBITDA of $142 million in the third quarter of '19, which is roughly in line with the performance from the second quarter of '19. The primary driver of the performance in the segment was the distributions from our 75% interest in Rockies Express, which have increased in 2019, largely as a result of the lower interest expense at Rockies Express and the increased rate on the Encana contract.For the Crude Oil Transportation segment, adjusted EBITDA was $88 million for the third quarter, which was also roughly in line with the second quarter of '19, primarily as a result of continued strong average transportation volumes on the pipe.The quarter averaged approximately 365,000 barrels a day compared to 348,000 barrels a day in the second quarter. While deliveries were higher, adjusted EBITDA was relatively flat, primarily due to the use of prior shipper deficiencies as well as lower deficiency payments during the quarter.

So those two items contributed to the adjusted EBITDA being lower, although, volumes were higher. And again, that was prior -- use of prior shipper deficiencies and lower deficiency payments during the quarter.The Gathering, Processing and Terminalling segment generated adjusted EBITDA of $36 million for the third quarter, which was $12 million higher than the second quarter. This was primarily a result of the annual Casper and Douglas plant turnarounds that occurred during the second quarter as well as strong performance from both our Water and Terminal businesses in the third quarter.Now moving on to capital structure. At the end of the third quarter, our leverage was approximately 3.5 times based on the trailing 12-month adjusted EBITDA, calculated according to our credit agreement.

When including our 75% share of REX's just over $2 billion in debt, our consolidated leverage for the quarter would have been approximately 4.5 times.As expected, both figures are down from the second quarter due to continued EBITDA growth. And as for liquidity, today, we have an undrawn revolver capacity of about $825 million. Again, that's $825 million, representing ample liquidity to continue funding organic growth projects and additional bolt-on acquisitions that we may identify and execute on.With that, I'll turn it over to Bill for the commercial updates.

Bill Moler -- President and Chief Operating Officer

Thanks, Gary. The third quarter was, again, marked by very strong operational performance and a number of positive commercial developments that David alluded to in his opening comments. Let's jump right into it.As most of you may have seen through various publications in mid-September, we, finally, received our FERC 7(c) certificates for the Cheyenne Connector and REX Cheyenne Hub Expansion projects.Just recently, we received the associated notices to proceed on each project, and DCP has exercised its option to purchase a 50% interest in Cheyenne Connector, which we expect to close in the fourth quarter. In addition, we received an additional 200 million cubic feet per day contract on the Cheyenne Hub project, increasing our total commitments on that project now to 800 million cubic feet per day.Construction crews have been mobilized and work on both projects has begun in earnest.

We are very excited about these projects and what it means for our customers and the broader markets in the DJ Basin and at the Cheyenne Hub. While we are solidifying our final construction timeline and associated in service date, we currently anticipate that it will push past the end of the first quarter. That said, we expect completion in the first half of 2020.In addition to these positive developments at REX, we resolved the final outstanding issues with the TIGT rate case pre-settlement agreement and have also agreed in principle to a settlement with our Trailblazer shippers' and Trailblazer's rate case, both providing future clarity and stability for both of those assets.In the Crude Oil Transportation segment, we continue to experience very high utilization of the pipeline's available capacity, with average daily throughput for the third quarter of approximately 365,000 barrels per day, as Gary mentioned earlier. For October, we expect throughput to be near 380,000 barrels per day, running in excess of 420,000 barrels on a number of days during the month.

We also expect similar throughput for November based on our awarded nominations, and in December, we currently anticipate moving in excess of 400,000 barrels per day.Based on recent speed tests and work yet to be completed, we believe the pipeline will be capable of running in excess of 450,000 barrels per day on a consistent basis. In addition, we have made significant progress on contracting Pony Express since our last conference call, late in July. We currently have signed contracts in excess of 165,000 barrels per day for varying pass with average rates, plus or minus $2.50 and terms ranging from three to five years. In addition, we are in active and advanced discussions for agreements that could result in an additional approximately 70,000 barrels per day, with average rates also in that same range, of around plus or minus $2.50.Finally, as is the case with many other liquid pipelines in the country, we believe that certain existing shippers will ship under their valuable history they earned over the past five years at the newly posted uncommitted tariff rates as evidenced by our strong October throughput and November nominations.

I would emphasize that these posted rates are short-term incentive rates that are subject to change at any time.So in summary, as we recontract Pony Express, we are achieving our goal of contractual diversity with appropriate value for using our diverse system. What I mean by that is we are executing contracts for various paths, terms, rates with a diverse set of customers. Therefore, you can expect to see take-or-pay contracts, but also, other types of creative contracts that incentivize customers in different ways to use our pipeline.And finally, on this topic, we are pleased with the level of contracting and the rates our team has been able to achieve in a very competitive environment and remain confident that Pony Express will generate a significant amount of cash flow for Tallgrass going forward.Turning to BNN Water Solutions. Our team continues to pursue several acquisitions and organic growth opportunities within the basins we serve, inclusive of working to commercialize a large-scale pipeline project in the Utica that would serve many of our existing Rockies Express customers.Finally, for a quick update on Pony Express expansion, Seahorse and PLT.

We continue to make incremental progress on each, but are not yet ready to announce FID on any of the three at this time.And now, David will conclude our remarks ahead of Q&A.

David Dehaemers -- Chief Executive Officer

Thanks, Bill. So I'm going to conclude with remarks here, and then we'll go into the Q&A.I just want to say that given the recent interest in the letter certain members of management signed in conjunction with the March 2019 Blackstone transaction, I would like to take a few minutes on that topic before we move into Q&A.In hindsight, these should have been called retention and lockup agreements. Most critics are looking at these agreements with the benefit of hindsight, but without considering and learning all the facts and circumstances at the time. Let me remind everyone of some of those facts and circumstances.People are clearly entitled to their opinions.

They're not entitled to their own set of facts. And obviously, for some of these facts, you have to have a little bit of a reasonable deduction versus just blathering on.The sale of the general partner of Tallgrass was a private transaction between the owners of the GP and Blackstone. Those owners at the time were Kelso, EMG, myself and a few members of my team. The key factor in that transaction is that Blackstone desired to own 100% ownership of the general partner of Tallgrass in order to gain control of Tallgrass.

There is a value in control. And market transactions demonstrate that time and again. In this case, the price for the private general partner was, give or take, $480 million. $480 million had nothing to do with the price per share other than it just so happened to work out to about $4 a share.

For those of you that have to deal in pennies, that was $3.82 a share. If you take $26.25 and you subtract out $4, you get a net price for the LP shares that were sold of $22.25. Again, for everybody that wants to be more specific, $26.25, which was just a math add of $3.82, which we were paid for the general partner and $22.43 is what we were paid for our LP. No one other than Kelso, EMG and in my team owned any of the general-partner asset and was never entitled to any of that $4 so I want to make that clear.Blackstone also wanted certain protections around their significant investment in Tallgrass, primarily from specific members of the management team who also own part of the privately held GP.

Those protections, among other things, required those individuals, including myself, to retain a specific ownership interest in TGE to provide an incentive to grow the business. Non-solicitation agreement, noncompetition restrictions and lockup agreements relative to our ability to buy and sell our shares.So for example, I'll just talk about myself, I agreed to a three-year, non-compete agreement if I ever to leave Tallgrass, which is significant to me, I agree the 15-month lockup on not buying or selling any TGE, which, again, is significant to me. I'm unaware of any other shareholders out there who simply owned A shares who would give up their rights to work in this industry for that period of time or agree to not buy and sell shares for that period of time. So those were significant adders.As compensation for conceding valuable control and for agreeing to the other significant restrictions, Blackstone was willing for a short and defined period of time to purchase the retained ownership interest from these former owners of our general partner at the same price that was set with Blackstone in the March sale.

It should be noted that approximately 1.5 million of those shares were class B GP voting shares. Said another way, they were GP-controlled shares, owned by four members of management and approximately 3.2 million of other shares owned by two members of management who agreed in March to sell Blackstone all their Class B GP voting shares.Again, speaking only for myself, I will tell you that over the last seven years, aside from my GP ownership, I have accumulated over 2 million shares that I have bought. I've never sold a share until last March. I had numerous buys.

You all can see that. And that is unlike some of our largest holders in 2019. If you guys really want to get at the root of why the stock has performed the way it has. I would encourage you to go look at the Form 3F and Ds, Chris, is that right? 13? Form 13s?

Unknown speaker

Yep, Section 13 filings.

David Dehaemers -- Chief Executive Officer

The Section 13D filings and look at our largest institutional holders, the same ones who are complaining about the way this -- these types of things have come to be and look at what they have bought and sold. OK? Again, I accumulated over 2 million shares. I never sold a share, until last March. Furthermore, I was unwilling to complete that transaction, unless I was paid the same price for every share I owned, period.Here is another fact.

It did happen a couple of times after the plan -- after the Blackstone transaction that we traded well above the $22, $25, or again, for those of you to have the exact numbers, $22.43. In fact, on March 2019, we traded as high as $25.96 for an LP unit, or I should say, an A share. On May 22 this year, we traded up to $24.88. Stock price is down.

It was down to around $14 or $15 when Blackstone made their offer, and that was due to sellers, OK? That you could identify in the SEC filings, it had nothing to do with Blackstone selling. Blackstone hasn't sold a share nor as management since then.Furthermore, if a take private does not occur or is not signed within the specified time period, those members of management will only be paid the value of the control and of the other significant restrictions, which equates to the approximately $4 per share, $3.82 for their general partner ownership. And that would occur this coming March.We would all then own our TGE equity at the same market value that everybody else does. It should be mentioned that the retention and lockup agreements do not cover all the equity in TGE owned by the members of management, which include a significant number of A shares owned outright and also unvested equity participation shares, all having the value of what it is today, yesterday and tomorrow, equal to the traded market price.

I guess, again, I would note on a personal level, I've never gotten a share of restricted stock in this company. Gary, Bill, some of the other members here have, and that's what that paragraph is telling you. Their shares are valued at the same way your shares are valued.So in summary, any characterization that members of management are getting paid a higher value for giving up the exact same thing as LP owners is patently false as is any other characterization that management engineered something where they had nothing to lose in everything to gain. The fact is, we agreed to lengthy lockups, lengthy non-compete agreements and other valuable things that benefited all stockholders, not just Blackstone.Finally, regarding the Blackstone take private.

I will add one other thing. What investor, and I use investor very specifically, I recognize there are short-sellers in the market, but what investor, among all of us, does not want to buy at a lower price and sell at a higher price? Blackstone does not set the market price, period. In fact, I've already told you, the market sets it. We've had more sellers than we've had buyers, and you guys could easily build a picture of who the sellers have been.

Blackstone has made an offer for which they would like to buy the rest of the company and take it private. That offer may or may not be acceptable.I earlier said that I would give you a little bit more color later in the conversation about the conflicts committee. Let me tell you that we have three independent board members that are on the conflicts committee, negotiating with Blackstone or trying to come to some resolution on that. These three members, one of them I have known for over 40 years, has been on the Tallgrass Board since 2015 when we took TEGP public.

The other two have been on the Tallgrass board since 2013, one of which I've known for over 20 years.It is a very independent conflicts committee, and I know they will work hard to do the right thing. As always, I want to thank our employees for what they do every day to keep themselves and our community safe and our assets operating reliably.Thank you as well to our shareholders for their confidence in investing in TGE and to everyone in this call for your interest in our company.With that, operator, we'll turn it over to you to handle the Q&A portion of the call with Nate.

Questions & Answers:


Operator

Thank you. [Operator instructions]We will take our first question from Colton Bean with Tudor, Pickering, Holt & Company.

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

Good afternoon. So I appreciate the detail on Pony Express recontracting, and just two questions related to that. So the first, are those new contracts primarily tied to the Bakken, given that Northeast Colorado doesn't roll until next year? Or are they spread out geographically?

Bill Moler -- President and Chief Operating Officer

They're spread out geographically, Colton. We have some at Guernsey, which is both Powder and Bakken, and a few at DJ that are just new volumes coming on.

David Dehaemers -- Chief Executive Officer

Yeah, Colton, I think it's a good question, and Bill is right. I guess, you know that we had two tranche. I mean, you hit it exactly the Northeast Colorado stuff that we did contract for five years, doesn't come due until later next year. But having said that, without disclosing particular shippers and volumes and rates, it is a mix of locations, et cetera.We have more under contract than what we simply told you about.

We're just telling you about the new stuff.

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

Got it. In regard to those existing shippers that you mentioned, you expect them to continue, either on a walk up basis or maybe there's still potential to convert them to firm. Can you just characterize the scale of those shippers? Is that two to three large shippers? Or a multitude of smaller shippers?

Bill Moler -- President and Chief Operating Officer

Colton, we can't answer that question. We just can't answer that question. But I will tell you that they are shipping or will be shipping under history that they earned, and that history that they earned puts them in a regular-shipper category. I wouldn't categorize it as walk up.

They can ship on that history as long as they flow that history, and we suspect they will continue to flow that history for an extended period of time.

David Dehaemers -- Chief Executive Officer

Said differently, Colton, they have first rights on that volume to ship, whether they've contracted or not.

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

Got it. And just to clarify that, given the scaling of the volume incentive rates, the expectation is of that $2.50 that you've highlighted wouldn't change materially for those shippers.

David Dehaemers -- Chief Executive Officer

I think our highest walk-up rate would be $3.25 if you looked at our tariff really hard. So I think, we have three or four delineations depending on volume. And so I don't know that I would agree that you ought to just characterize it as using $2.50 across the board.

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

OK. And so -- but in regard to the scale, nothing to -- maybe to disclose there in terms of whether it would be higher or lower than that $2.50?

David Dehaemers -- Chief Executive Officer

Not at this time, Colton.

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

Got it. OK. And then on Cheyenne Connector, I appreciate the detail there. A positive that's moving to $800 million.

I think, as of Q4, so earlier this year, you had noted that you had recontracted about 30% of the West to East roll-off on Rockies Express. So with Cheyenne progressing, can you update us on where you stand there?

Bill Moler -- President and Chief Operating Officer

We can. We had an open season for the available capacity that is coming up and due in November. That open season is on our EBB and on our postings, fairly public document. We continue to have some recontracting from production in the Powder, some in the DJ and Defiance, but we're still working hard at it.

I think, when Connector gets completed and/or as it gets closer to completion, and especially the Hub, which, as a reminder, Colton, Hub has 800 million a day and the Connector has 600 million a day. So the Hub is capable of pulling gas from other pipes other than just the Connector. But that is going to be supply that is going to fill all those gaps. As a reminder, our average flow volume west to east in Q3 was 1.6 Bcf a day.

The West Coast issues have resolved themselves as they did in Q2, and we're back on path. The supply is there. There's a certain rate and term that we'll contract with, and we're looking forward to doing deals with our existing shippers and others.

David Dehaemers -- Chief Executive Officer

I'd just add a little bit to what Bill said and say, it may be just a little bit different way. We're coming into a good period, I think, relative to weather-wise, et cetera, and we're happy to let the situation play out for a number of months here. We have gotten rates that are very acceptable, albeit on a shorter tenor, but when the Connector and Hub go into service, that 800 a day is going to show up right at the doorstep of REX. And that, we believe, on a long-term basis, will fill the gap at something that works for us financially as well as our shippers.

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

Got it. And just the final one for me. So on Rockies Express, can you just frame how you're evaluating counterparty exposure now, given some of the movement we see in both debt yields and ratings among the natural gas producer community?

Gary Brauchle -- Executive Vice President and Chief Financial Officer

Yeah, Colton. It's Gary. We're continuing to evaluate potential counterparties the same as we always have and is allowed under our tariff. We take the exposure seriously.

And if it's a sub-investment-grade shipper on an existing pipe, our tariff regulates how much credit we can accept from them. And so we'll continue to deal with it in that regard. I think, you know on the east end of the pipe because we put a significant amount of capital into the ground, we were able to secure far more than what a normal existing infrastructure asset would allow in terms of credit, and we continue to hold that, again, according to our FERC tariff allowances. So we're watching it.

I can tell you that we talked last and disclosed last quarter about one particular very small shipper that did default on their obligation. But as we continue to review monthly obligations from our shippers, none of them are significantly past due or represent any problems at this point that we can see.

David Dehaemers -- Chief Executive Officer

So across all of our pipes, how much do we hold cash collaterals and equivalents, Nate? How much?

Nate Lien -- Treasurer

I don't have...

David Dehaemers -- Chief Executive Officer

You don't have it off the top your head? Again, I would supplement a little bit of what Gary says, particularly on the east end of REX. The rates were -- that people are paying us for east to west movements, Clarington West or actually very competitive and lower than a lot of other new build pipes where we just simply had to put in the compression and the new pump stations that we did. So that's a good fact. And I think the other factor is that most of our FT -- I mean, almost -- let's just say, 95% of our FT customers are moving 95% of their FT volumes in terms of actual molecule movements.

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

OK. Appreciate the time this afternoon.

David Dehaemers -- Chief Executive Officer

You bet. Thank you, sir.

Operator

Our next question comes from Michael Lapides with Goldman Sachs.

Michael Lapides -- Goldman Sachs -- Analyst

Hey, guys. Two questions, real quick. First of all, if you had to define, how close are you on the incremental 75,000 barrels for Pony Express in terms of signing up that customer and having a little bit more certainty around that? That's question one. Question two, can you kind of go around the different Pony expansion opportunities and just kind of give us a, hey, where are we on each of these? And we've been talking about these for six to 12 months, that's pretty normal in the industry.

When are you thinking you'll get closer to FID?

David Dehaemers -- Chief Executive Officer

So was your first question on really Seahorse when you talked about 75,000 barrels?

Michael Lapides -- Goldman Sachs -- Analyst

No. When you talked about the recontracting at $2.50 a barrel on existing Pony, you said there was an amount that was already signed. And then I thought you said that you had another 75,000 that you thought you were close with.

David Dehaemers -- Chief Executive Officer

Yes, I got you. And it was in the prepared comments, it was 70,000 barrels that we're close on agreements with. And let Bill take that second. Let me -- and Bill will probably supplement what I say on the first here.  If you look at what we've done from a macro standpoint, I think, in 2019, we -- not including what I'm going to tell you about now, but in 2019, we will have spent roughly $360 million on small tuck-in acquisitions and/or expansion projects.

Just this week, or actually, today, with the board, we approved somewhere roughly $75 million more in projects across the assets. Two of those projects were Pony-type projects. And so -- you want to kind of add on to that?

Bill Moler -- President and Chief Operating Officer

Yeah, Michael, I think that the 70,000 barrels, and you said it, it's been a very competitive environment. We have fought hard for barrels, and we have folks who were close to getting there. And I wish I could tell you exact timing. I wish it was tomorrow, but it's a moving target at this point.

Hard to say, exactly.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thanks, guys. Much appreciated.

David Dehaemers -- Chief Executive Officer

Yeah, sure. Thank you.

Operator

[Operator instructions]  We will take our next question from Ethan Bellamy with Baird.

Ethan Bellamy -- Robert W. Baird and Company -- Analyst

Hey, gentlemen. Good afternoon. There's been significant trepidation on The Street about a potential federal frac ban if certain democratic presidential candidate sort of win. What do you see as your indirect federal-land exposure of customers in Wyoming and Colorado? And how, if at all, concerned your customers appear to be about committing long term under some of that sort of existential threat that some of those candidates might represent?

Bill Moler -- President and Chief Operating Officer

Ethan, first, I'd like to say that your vote matters. So I'll put that out there for what that's worth. Who knows if they're going to end up doing that? We do have some producers in Wyoming, in particular, that is -- that are on federal land. We also have probably an equal amount of producers in Wyoming that are on state or fee-owned properties.

I don't know that federal outweighs the state and fee-owned, but we do have some. If there is a federal frac ban, I think it is primarily going to impact us somewhat in Wyoming, which is tied to Powder barrels and potentially Powder gas volumes. But I will tell you that Wyoming is a very oil-friendly state, and that seems like a -- I'm not saying it can't happen, but that seems like something that would have significant pushback by the state of Wyoming.

Ethan Bellamy -- Robert W. Baird and Company -- Analyst

OK. Thanks, Bill. I appreciate that. Dave, I appreciate you taking on the topic of the side letter directly.

Just to close the loop on this. If the GP math you ran through $3.82, I mean, that gives you, what, like $22 and change. And then the Blackstone takeout $19.50. So there'll still be a delta between compensating GP insiders versus where the stock is now, firstly? And then secondly, I mean, why structure that way at all? Why not just do cash-retention bonuses and sell the stock at the time of the deal?

David Dehaemers -- Chief Executive Officer

Yeah.

Ethan Bellamy -- Robert W. Baird and Company -- Analyst

I'm just kind of confused about why you guys did this, because mostly it doesn't work for you...

David Dehaemers -- Chief Executive Officer

I'm sorry, Ethan. What you did you say?

Ethan Bellamy -- Robert W. Baird and Company -- Analyst

I just said, cosmetically, at a minimum, it does not look great.

David Dehaemers -- Chief Executive Officer

Well, I can't help the cosmetics. I mean, it was a transaction between two private parties. And again, it's fine for you to think about the way you want to. You're entitled to that.

But we had two parties here. If I would had my way, it would have been a certain way, but we had to come to the middle. So the less $3.82, you're right. It should be $22.43.

Blackstone's offer $19.50. I have no control over where the market is and what Blackstone offered to that, OK?  We wouldn't be having this conversation if the stock was at $23, right? And Blackstone offered $23, plus a 10% premium? So I mean, trying to make you feel good about that isn't going to work. If you think that -- my most valuable asset for the March transaction with Blackstone in my life was my general partner ownership, OK? And I wasn't going to do the transaction with -- Blackstone wanted badly, badly for myself, Gary, Bill and others to continue to have ownership in the company. And we had Kelso and EMG, who are going to get totally cashed out.

And what we agreed to was we'll leave some equity in the company. But for a period of time, you'd have to give us kind of a put on that, particularly since you're demanding of us that we not compete with you if we leave for -- after a period of time, we leave, particularly since you won't let us buy or sell anything. I would have been I mean, again, history is hindsight, and you can choose whether to believe this statement or not. But I would love to have been buying a number of times here since March, just straight up.

And so that's pretty much all I got to say about it, Ethan. I did try to take it on directly. I told you the facts. Certainly, any selling that has occurred to drive the price down, like I said and I will reemphasize, has not been selling of Blackstone, or us, or GIC or Enagás.

Ethan Bellamy -- Robert W. Baird and Company -- Analyst

OK. One more fundamental question. Appalachian has been a real train wreck and most of the equity there have gotten punished and there's -- bond yields are inflated. Do you have any customer credit-quality concerns, either on the public or the private side? And how has the weakening environment there impacted REX?

David Dehaemers -- Chief Executive Officer

I'll take a stab, and Gary might jump in. I think Gary somewhat tried to answer that on a macro level relative to how we watch it. I mean, you're exactly right. We do have customers there that at a $2.25 gas price and the production profile and the FT commitments they've made.

We've tried to kind of answer that directly in what I said previously, which is, all of our FT customers and were sold out on the east end are moving 95% of our customers are actually moving 95% of the molecules. And they're making it pay. I'm not saying they're making a lot of money, and they may be actually, if they continue to drill, be losing money on a year-over-year basis, but they're able to pay the tariff and pay for their drilling costs, et cetera. It's not a great situation, but we just continue to monitor it and keep talking to them.

Do you want to add anything to that?

Gary Brauchle -- Executive Vice President and Chief Financial Officer

No. I mean, I think -- yes, I would. I mean, I think the things that I spoke of earlier, what we do, we also monitor the shipments, we monitor the receivable collectability. And in a situation of default, we have, obviously, legal things that we need to make sure that we comply with, but we have claims that we can make, we have mitigation and remarketing.

So those are all the things that we think of in terms of making sure that we get paid for the valuable transportation that we provide.

David Dehaemers -- Chief Executive Officer

It's nothing that a little -- there are so many different producers, right, some big, some small. I'm not telling anything you don't know. I'm just kind of vocalizing it here that, while we're not able to have cartels in this country, and -- but it's nothing that a little bit of a supply demand discipline wouldn't take care of.  I mean, our pipes are full. The gas is being used somewhere, but the fact of the matter is the reason the price is down is because there's too much supply.

And if there was some supply constriction, there would be a healthier price, and that might not be so bad for everybody.

Ethan Bellamy -- Robert W. Baird and Company -- Analyst

Thanks for taking my question, Dave. Appreciate it.

David Dehaemers -- Chief Executive Officer

You bet.

Operator

Our next question comes from Michael Blum with Wells Fargo.

Michael Blum -- Wells Fargo Securities -- Analyst

Thanks. Maybe just to continue along this last question that Ethan just asked. I guess, I'm curious, have you seen any of your northeast producer shippers on REX come to you and talk about some kind of renegotiation of the rates, blend and extend, anything like that?

David Dehaemers -- Chief Executive Officer

Mike, Bill can add to this. While we don't want to talk about specific customers, et cetera, it wouldn't be surprising to know that every customer that we have would always love to pay at lower rate, and so it wouldn't be surprising to know that from time to time, we get inquiries about that. But I wouldn't say it's anything that is -- that we a, can do and/or b, that has caused concern to us.  Do you want to add anything to that?

Bill Moler -- President and Chief Operating Officer

No. I think that's absolutely spot on.

Gary Brauchle -- Executive Vice President and Chief Financial Officer

And I would say it is not systemic either?

Bill Moler -- President and Chief Operating Officer

No, not at all.

Michael Blum -- Wells Fargo Securities -- Analyst

OK. But if I'm hearing you correctly, you're saying you're not really open to that at this point?

Bill Moler -- President and Chief Operating Officer

Yeah. Well, yes, I don't think that was really the question. Your question was, are we getting questions about that from our shippers? Are we open to it? Everything is an economic analysis.

Michael Blum -- Wells Fargo Securities -- Analyst

OK. And then the second question also on REX, but just more on the original legacy west to east contract. Just if you had any update on how those talks are progressing. Thanks.

Bill Moler -- President and Chief Operating Officer

I think, we answered this in -- with the first question but we continue to work west to east. We continue to sign contracts of size and term on the West to East. We had an open season. That open season post the available capacity that is on the system.

It's a public document. And we are working hard to get Connector and the Hub done to flood Cheyenne with an incremental 600 million to 800 million cubic feet more. And the closer we get to being done with that project, the more contracts, and ultimately, recontracting will be done when that's placed in service.

David Dehaemers -- Chief Executive Officer

In an effort to be helpful here, Michael, if you refer back to the presentation that we made in Las Vegas, last year, 2018, where we took a great deal of time to kind of lay out on one or two pages the differentials of EBITDA, perhaps, in REX's case, post '19, so 2020 and beyond, I would say that if you look at those carefully, we feel very comfortable that the two upper sides of that graphical representation are going to come to be.

Michael Blum -- Wells Fargo Securities -- Analyst

Great. Thank you.

David Dehaemers -- Chief Executive Officer

You bet.

Operator

Our next question comes from Selman Akyol with Stifel Nicholas.

Selman Akyol -- Stifel Financial Corp. -- Analyst

Thank you. Just slightly different on Gathering and Processing, those results came in well above what we were looking for. So I was wondering if you could just spend some time maybe discussing that, and then sort of your outlook for that segment.

Gary Brauchle -- Executive Vice President and Chief Financial Officer

Yes. Selman, it's Gary. The Q3 results, as you know, were very strong. I mean, there were -- first of all, we didn't have the turnarounds of Casper and Douglas in Q3 that we experienced in Q2.

So when comparing the two quarters, you need to just bear that in mind that Q2 was low because of that. We had the Grasslands and Guernsey terminals come into service and contribute in Q3. We also had a full quarter at one of the BNN acquisitions and are seeing continued strength in the Water assets, et cetera. And so those are the things that I would point you to relative to the very good quarter that GP&T delivered.

Selman Akyol -- Stifel Financial Corp. -- Analyst

And so then as you look forward -- I apologize.

David Dehaemers -- Chief Executive Officer

No, no, no. I was just going to, if I could, just add to Gary's comments, Selman. GP&T isn't just simply that relative to another company. As you might think about as a GP&T company, we do have Water in there, we do have the unregulated terminals for Pony.

We don't have 10 different business for segments, but that is a segment that has a lot of -- as we kind of view it really as our unregulated segment, in other words, and it's not just Gathering and Processing. And so two things: one, as Gary told you about Water, and then obviously, the new terminals at Pony that were additive to that. And then, I think, anticipating a little bit of your question, I don't know that I would say that, that is a -- that quarterly run rate is kind of an annualizable number, if that's where you're ready.

Selman Akyol -- Stifel Financial Corp. -- Analyst

I do appreciate that. And then, I guess, just on the Cheyenne Connector, just listening to you guys, it sounds like it's going to ramp very quickly once it comes online. Is that correct?

David Dehaemers -- Chief Executive Officer

Oh yeah. Oh yeah.

Selman Akyol -- Stifel Financial Corp. -- Analyst

Right. Very good. Thank you.

David Dehaemers -- Chief Executive Officer

 You bet. Thank you.

Operator

[Operator instructions]  At this time, there are currently no questioners in the queue.

David Dehaemers -- Chief Executive Officer

Yeah. I know, operator, that you asked just now, but if you could just give another 30 seconds here and then ask one more time, we'd appreciate that.

Operator

Yes, sir.

David Dehaemers -- Chief Executive Officer

Operator, would you ask one more time, please?

Operator

[Operator instructions] And there are currently no questioners in the queue, sir.

David Dehaemers -- Chief Executive Officer

Yeah. So I would like to end with one thing. I kind of put one of our guys here, Nate, on the spot a little bit earlier about asking what kind of credit -- cash and cash equivalent credits we have on our shippers. We did find an answer in the meantime on that.

We have well in excess of $200 million in collateral on REX that is kind of in cash postings and LCs kind of cash equivalents. So that's not an unmeaningful number. And so anyway, I hope that's helpful. Really appreciate everybody's time.

We took a great deal of care trying to give as much information as we felt comfortable on this call, and we hope it's helpful to you all and do appreciate everybody's interest in Tallgrass. So with that, everybody, have a good evening.

Operator

[Operator signoff]

Duration: 49 minutes

Call participants:

Nate Lien -- Treasurer

David Dehaemers -- Chief Executive Officer

Gary Brauchle -- Executive Vice President and Chief Financial Officer

Bill Moler -- President and Chief Operating Officer

Unknown speaker

Colton Bean -- Tudor, Pickering, Holt & Company -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

Ethan Bellamy -- Robert W. Baird and Company -- Analyst

Michael Blum -- Wells Fargo Securities -- Analyst

Selman Akyol -- Stifel Financial Corp. -- Analyst

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