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Shell Midstream Partners LP (NYSE:SHLX)
Q4 2020 Earnings Call
Feb 19, 2021, 10:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to today's webcast for Shell Midstream Partners. [Operator Instructions]

I would now like to turn the call over to Jamie Parker, Investor Relations Officer. You may begin your conference.

Jamie Parker -- Senior Investor Relations Officer

Thank you, Angela. Welcome to today's webcast for Shell Midstream Partners. With me today are Kevin Nichols, CEO; Shawn Carsten CFO; and Steve Ledbetter, VP Commercial and Business Development.

Slide 2 contains our Safe Harbor statement. We will be making forward-looking statements related to future events and expectations during the presentation and Q&A session. Actual results may differ materially from such statements, and factors that could cause actual results to be different are included here, as well as in today's press release and under Risk Factors in our filings with the SEC.

Today's call also contains certain non-GAAP financial measures. Please refer to the earnings press release and Appendix 1 of this presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

We will take questions at the end of the presentation.

With that, I'll turn the call over to Kevin Nichols.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Hey. Thanks, Jamie. Good morning, everyone and welcome to our fourth quarter earnings webcast. And even though we're already halfway through the month of February, let me start by saying that after a difficult 2020, I hope that you and your families have had a healthy start to the New Year. And for those of you that are affected by the current winter storm and are dealing with power issues, we hope that you are safe, you stay warm and things return for you to normal quickly.

I'll begin today by offering my reflections on 2020. I'll then pass the call over to Steve, who will provide a few operational updates. And finally, Shawn will walk you through the financials for the quarter.

2020 will forever be remembered as one of the most difficult periods in recent history, with a pivotal shift in the ways we interact and do business. As a society, we experienced illness and unfortunately, the loss of lives due to COVID-19, a terrible pandemic that has had a profound impact on people, the global economy and local businesses. The oil and gas sector was not immune to these impacts, as we have dealt with unprecedented supply and demand imbalances, as well as temporary demand destruction across the hydrocarbon value chain, which we are still navigating today. In the latter half of the year, we've dealt with an active hurricane season, resulting in multiple producer shut-ins that impacted production flow through many of our assets.

Against this backdrop, Shell Midstream continue to deliver value to unitholders in 2020, generating $767 million of EBITDA and $658 million of cash available for distribution. This value delivery is evidence that our portfolio remains strong and in 2020, we were able to showcase our resilient framework and diverse portfolio, which serves vital production and manufacturing hubs.

[Technical Issues] we closed on our latest transaction acquiring certain logistics assets at the Shell Norco Manufacturing Complex and an interest in the Mattox pipeline, both of which added de-risked cash flows and further diversified the portfolio. With this transaction, we also eliminated our partners incentive distribution rights, aligning our structure with our unitholders interest. As we close that transaction, we continue to look for ways to make the Company more sustainable for the future. We performed a deep dive into our structure and our processes to reduce operational costs. Now, these are sustainable cost reductions, initiatives to reduce our operational costs without sacrificing long-term value and optimizing the size of the organization in a responsible way, allowing us to safely run our assets, while maintaining our financial performance.

To give you a little color on some of the initiatives to lower our operating costs. On the operational side, we've been able to utilize new digital technologies to gain insights into our spending and develop new innovative ways to reduce routine costs. Further on this path, we have fundamentally changed how we use contractors and procure goods and services. And finally, we are cross-training our organization to optimize how work gets done on a daily basis. These are just a few examples around sustainable cost savings, all of which will ensure we are well positioned for the future.

As part of the optimization and reduction in the size of the organization, we took severance charges during the year for redundant staff. And I can report the reorganization was substantially complete, and we stood up the new organization at the end of October. So what does this mean? It means for 2020, we achieved our target of lowering our costs by $10 million on an annualized basis. And as we continue these initiatives into 2021, we expect to grow this level of annual savings to between $30 million and $40 million. Overall, I am pleased with how the business has performed under such challenging circumstances. Our staff has continued to rise to the challenge to keep America's energy moving, all the while finding ways of working and managing through this difficult year, both personally and professionally. While we hope for a better 2021, the business is well positioned to operate safely, reliably and cost-effectively, and we continue to manage the ongoing macroeconomic impacts of COVID-19.

So with that, I'll pass it over to Steve to provide some operational updates and shed some light on management's priorities for 2021. Steve, over to you.

Steven C. Ledbetter -- Vice President, Commercial

Hey, thanks, Kevin. Look, I can agree more with the points that you made, 2020 was an unprecedented year in many ways, but despite all of the challenges, our organization truly prevailed.

In the offshore, the Partnership saw an overall increase in throughput of 14% when compared to the prior quarter, which is primarily related to our producers returning to normal levels following the hurricanes and planned producer turnarounds. One benefit of our corridor strategy is connectivity to as many sources and destinations as possible. And as you will see, Poseidon and Auger benefited from increased volumes this quarter. This was due to our ability to accept barrels at various connection points and allow producers to flow as another Gulf pipeline underwent repairs from storm damage.

As we move to the onshore, Zydeco volumes increased in the fourth quarter, primarily related to offshore production coming back online following the hurricane season. However, our refined product systems continued to see impacts related to the pandemic, as we experienced continued lower than normal throughput in the fourth quarter. Now, we remain optimistic and expect that when demand improves across the US, our system throughput will recover as well.

Now, to briefly touch on the news coming out of Washington, as it pertains to the Gulf of Mexico. As I'm sure you know, there has been a department of interior order and executive order signed, which are intended to address leasing and permitting on federal lands and waters. And both our team and the larger Shell team are currently engaging with the relevant government authorities and industry members in an effort to learn more about the orders and assess any impacts. That being said, it's still too early to understand exactly how all this will play out. And currently, no production has been impacted and we still hold a positive view on the Gulf and its ability to provide cost-effective supply to meet the hydrocarbon needs of the United States. All of this said, we have a long history of working safely in the Gulf of Mexico, across many administrations, and through changes to the leasing and permitting processes in the past. While we work to gain clarity on any long-term impacts, I believe we are set up to continue to attract volumes in the Gulf as new products come online.

Our corridor strategy is robust and over time, we have built the mainline interstates across the region. As such, when new production comes online, either via a tieback like PowerNap or a host by Vito, we have the ability to offer customers attractive options. And all of this is that little to no capital to the Partnership.

In closing, I want to remind everyone that our ability to continue delivering value to unitholders in this challenging quarter and year speaks to our operational capabilities and the resilience of our assets and our team. And as we move into 2021, Shell Midstream looks to continue demonstrating this resilience.

With that, I will now hand the call over to Shawn. Shawn?

Shawn Carsten -- Director, Vice President and Chief Financial Officer

Thanks, Steve. As I reflect on the fourth quarter and the full-year, I'm pleased with our assets have performed in a very difficult macroeconomic environment. So first, let me cover a few of our key financial metrics for the quarter. Our total revenue was $130 million, an increase of $20 million from the third quarter. Now, this increase was primarily related to increase throughput on the Zydeco system, as well as lower impacts from hurricanes and planned turnaround in the fourth quarter.

Our operating expenses were $82 million, up about $7 million from the prior quarter, mostly related to the timing of Norco maintenance expense and the severance accrual as we continue to advance our cost savings initiatives.

Income from equity investments was $87 million, down about $22 million from the prior quarter, mostly related to the continued impacts of both hurricanes and planned producer turnaround activity.

With all of this, adjusted EBITDA attributable to the Partnership was $188 million and after interest expense, maintenance capital and other adjustments, total cash available for distribution was $162 million. Our Partnership declared a distribution of $0.46 for LP unit. This resulted in a coverage ratio for the quarter of 1 times.

Finally, we incurred $2 million of maintenance capex in the fourth quarter, mostly related to Zydeco.

So now, let me turn to the Partnership's balance sheet and liquidity. As of December 31, the Partnership had total debt outstanding of $2.7 billion, which equates to a debt-to-EBITDA ratio of 3.6 times based on an annualized Q4 adjusted EBITDA. We're comfortable with our balance sheet and we believe it allows us the desired flexibility to continue to effectively navigate these turbulent times.

So now, let me turn to guidance for the year. In the offshore, we expect to have several producer turnarounds during the year. Now, based on the current planned turnaround schedule, we expect an impact to both net income and cash available for distribution of approximately $10 million, primarily in the second quarter.

In the capex space, we plan to spend about $21 million in 2021, of which about $4 million will be growth capital related to our continued expansion of the Permian gas gathering system. And looking forward, as mentioned previously by Kevin, we anticipate exiting 2021 with -- between $30 million to $40 million reductions in our operating cost run rate.

And as I close, we're pleased to have a suite of high-quality midstream assets, which provide affordable and stable cash flows from which to work. And we believe that these assets, coupled with our strong balance sheet, enables us to weather the uncertainties in the current markets, as we work to make Shell Midstream Partners sustainable for years to come.

So with all of that, let me hand the call back over to Kevin for some closing remarks. Kevin?

Kevin M. Nichols -- Director, Chief Executive Officer and President

Thanks, Shawn. As many of you know, at the end of March, I'll be retiring from Shell after more than 29 years with the Company. I must say that it's been a true privilege for me personally to have had the opportunity to lead Shell Midstream Partners over the last three years. And I'm really proud of what we've been able to accomplish in that time. In my opinion, we've built an incredible Company and we're delivering against a well-founded strategy. I believe we have the right management team in place to lead into the future and I have the utmost confidence in Steve and Shawn to do that. I truly believe that the best days for Shell Midstream Partners are yet to come.

And lastly, I'd like to say thank you to you all, our investors and the investment community. It's been a pleasure to get to know you and to build relationships over the past few years, and I just want to say thank you for that and your support.

So, it's time to turn the range over to Steve and to -- let Steve take Shell Midstream Partners' forward. So Steve, any closing remarks.

Steven C. Ledbetter -- Vice President, Commercial

Kevin, on behalf of the Partnership and honestly, the entire team, I want to thank you for your leadership and guidance that you've given us over the last several years. And as you've mentioned, Shell Midstream Partners has grown considerably and we really have achieved a lot. You've helped set a solid foundation on which we can grow, and I look forward to leading Shell Midstream into the future.

So with all that, we will now take your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Shneur Gershuni with UBS. Please go ahead.

Shneur Gershuni -- UBS -- Analyst

Hi. Good morning, everyone. First, to start off, Kevin, congratulations on your upcoming retirement, well-deserved and hope you enjoy it well and be safe out there.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Thanks.

Shneur Gershuni -- UBS -- Analyst

Maybe to start off a little bit, I kind of wanted to go back to the beginning of your prepared remarks, where you were talking about the cost savings achieved and how you've stood up a different organization. When I sort of like put all the pieces together here, right? You had a lot of changes last year, in negative impacts, obviously from COVID in the byproducts, the hurricanes. Trying to understand without asking for a specific guide, what are the normalized environment looks like when refined products return, whatever quarter that is or whatever year that is? Do the cost savings achieved become permanent and provide a push and if the new normal is a little different than the old normal? Could the new normal run rate of earnings [Phonetic] actually be higher because of these cost savings? Just any color that you can give on this hypothetical and not tying it to a specific guide if possible?

Kevin M. Nichols -- Director, Chief Executive Officer and President

Hey, Shneur. [Speech Overlap] Go ahead. [Speech Overlap] Yeah. I'll start that one, Steve, and then I'll get it back to you. I think without giving you specific guidance, the sustainable cost savings on a like-for-like basis, truly would be incremental to the business under the normal operating conditions against all of the systems and the rest. These are costs that we've taken out of the business, finding ways to operate more efficiently, effectively without sacrificing the long-term value or without taking away growth.

Steven C. Ledbetter -- Vice President, Commercial

Yeah. I think just to add to that, Shneur, this is Steve. This is not a one-time go after this without looking at the long time under -- long-term underlying sustainable approach. And while we've made great progress, as mentioned earlier, with the $10 million, we do expect to be in the $30 million to $40 million range exiting 2021. But we have to go do the work and ensure that we can run safely and responsibly and that these things can be done and are sustainable. And so, I would expect that to be a sustainable outcome moving forward as we get to the end of 2021.

Shawn Carsten -- Director, Vice President and Chief Financial Officer

And Shneur, this is Shawn. Just to pipe in as well. I think, look, we're not going to provide any future guidance, of course. But if you think about it, we have a Mars growth coming on in 2022, which is positive. We do have this $30 million to $40 million, we expect to take out through the course of this year. And then, of course, indeed, we expect our clean product systems to return to more of a normal run rate once COVID is behind us. But it's still much early to say when kind of balance goes back to the US and European [Phonetic] markets.

Shneur Gershuni -- UBS -- Analyst

Yeah. I know, it was a hypothetical really, it was just trying to think about adjusting for Zydeco and everything else, like, could we end up in a better position? And it sounds like you're saying whenever that quarter happens, it potentially could be. So appreciate the color there.

And then maybe it's a follow-up question, sort of a longer-term discussion. In your conversations with Shell in the -- from a parent to Shell-X relationship. What's the direction going forward once we stabilize and if we operate in a post-COVID world, are there going to be more assets available for Shell-X to acquire? Is that kind of the path that we should be thinking about? Or alternatively, one of your peers recently made an offer to buy in their MLP? Just kind of wondering how that discussion is currently unfolding within the RDS Shell-X world.

Steven C. Ledbetter -- Vice President, Commercial

Hey, Shneur, this is Steve, and I'll take -- there's a lot to unpack on that one, so I'll try to take it bite by bite. As it relates to the announced market roll up, look, that's a decision that would take place at the sponsor level and not a conversation that we would be part of. But I'm certainly not aware of any discussions taking place at this time. What we are focused on is, continuing to drive the competitiveness nature and the cost out, making sure that these things are sustainable and moving forward on a longer-term basis and opportunistically looking at growth and leveraging our strategic footprint, both onshore and offshore and our refined products systems and believe in the capability the underlying assets.

As it relates to a drop, at this point, the current environment doesn't necessarily make sense for that right now. But we still believe that that's one of the advantages we have access to growth alongside our sponsor and where there's an infrastructure need, we stand ready to take a play in that.

Shawn Carsten -- Director, Vice President and Chief Financial Officer

And I might just bolt onto Steve's comment Shneur is that, we do have -- and we've always operated fairly conservative balance sheet. And this also gives us plenty of opportunity and firepower to look for small value-added kind of bolt-ons from third-parties or opportunistic growth capex. So, I think we're in a relatively good position as we go forward. As Steve highlights, we're really focused on just driving the business and making this base business work for us.

Shneur Gershuni -- UBS -- Analyst

Got it. That makes perfect sense. Really appreciate the colors today, guys. Stay safe and Kevin, once again, congrats on getting retirement.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Thank you.

Operator

Your next question is from the line of Derek Walker with Bank of America. Please go ahead.

Derek Walker -- Bank of America -- Analyst

Good morning, everyone. And again, I'll echo the same comments, Kevin congrats on your retirement. It's pleasure working with you, and Steve congrats on the role, and certainly, look forward to continuing working with you.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Thanks.

Derek Walker -- Bank of America -- Analyst

Maybe just to start off with an ESG question. I guess, how you guys looking at on the Scope 1 and Scope 2 emission, where do you see some of the opportunities and where do you really see some of the challenges in and around your asset base?

Jamie Parker -- Senior Investor Relations Officer

Derek, you broke up a little bit. Could you state the question, again, please?

Derek Walker -- Bank of America -- Analyst

Sure, Jamie. Just on ESG, I guess, as far as reducing Scope 1 and Scope 2 emissions, where do you see some of the opportunities across your asset base and where do you see some of the challenges?

Steven C. Ledbetter -- Vice President, Commercial

Yeah. Derek, this is Steve. I'll take that one. We continue to look to make sure that we're operating in an environmentally responsible manner to the extent that we can improve and ensure that we don't have any unplanned or fugitive emissions. We're looking at opportunities to improve how we -- what our footprint really looks like. And that's from, not only technology, but looking at alternative source to go power some of our things. We continue to have that as a cornerstone for what we're doing moving forward. And we feel confident in our ability to continue to play an environmentally and safely responsible manner.

Derek Walker -- Bank of America -- Analyst

Got it. And then [Speech Overlap]. Go ahead.

Shawn Carsten -- Director, Vice President and Chief Financial Officer

Sorry, Derek. I just also add that, look, there is no more environmentally friendly way to transport hydrocarbons through the pipeline system versus moving on a truck. So, we also feel good about this, it kind of fundamental for the infrastructure.

Derek Walker -- Bank of America -- Analyst

Makes sense. And then maybe just a quick one on the $10 million of DCF impacts related to planned turnaround. Is that -- any of that coming from maybe shifting of activity from 2020? And, I guess, when do you actually expect to see that $10 million impact? Thank you.

Steven C. Ledbetter -- Vice President, Commercial

Yeah. That's not any from shifting from last year. We expect the majority of that to be a second quarter.

Derek Walker -- Bank of America -- Analyst

Yeah. I appreciate it. I'll hop back in the queue. Appreciate it, guys. Thank you.

Shawn Carsten -- Director, Vice President and Chief Financial Officer

Thanks.

Operator

Your next question is from the line of Theresa Chen with Barclays. Please go ahead.

Theresa Chen -- Barclays -- Analyst

Hi. I'd also like to congratulate Kevin on your retirement. And express my thanks for your substantial insight and guidance and hard work over the years in shepherding this partnership and growing it over time. We wish you the best.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Thanks.

Theresa Chen -- Barclays -- Analyst

And congratulations -- you're welcome. Congratulations, also to Steve for stepping into the new role, we look forward to continuing to work with you.

Steven C. Ledbetter -- Vice President, Commercial

Thank you, Theresa.

Theresa Chen -- Barclays -- Analyst

Sure. I just have one quick question for Shawn actually, related to the uptick in opex and your comments from the prepared remarks on the Norco maintenance, the severance accruals. Just looking at the step up from $39 million to $53 million, how much was each piece? How often does the Norco maintenance pop-in [Phonetic]? Are there other lumpy maintenance items we should think about in 2021? And as we move forward from the $53 million, what should be a ratable quarterly run rate for this item?

Shawn Carsten -- Director, Vice President and Chief Financial Officer

Yeah. So Theresa, without providing a kind of forward guidance, look, this is -- it's much more ratable as we move forward, part of the Norco piece was, of course, the severance accrual was one-time event, so we right-sized our organization. The Norco maintenance was partly due to COVID and kind of things getting pushed because of mix [Phonetic] being safe in the plant. And so, I think we'll probably see a much more smooth kind of opex as we go forward, assuming COVID or we get past this COVID challenge.

Theresa Chen -- Barclays -- Analyst

Got it. And when you say smooth opex going forward, are we talking about kind of like the 40s range that we've seen in second quarter, third quarter as an average? Is that a good rule of thumb?

Shawn Carsten -- Director, Vice President and Chief Financial Officer

Yeah. I'll look for [Phonetic] times, but I'll -- you can always talk to Jamie, and he might be able to help you think through whatever model you're working on.

Theresa Chen -- Barclays -- Analyst

Thank you.

Operator

Your next question is from the line of Joe Martoglio with J.P. Morgan. Please go ahead.

Joseph Martoglio -- J.P. Morgan -- Analyst

Hi. Good morning.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Good morning.

Joseph Martoglio -- J.P. Morgan -- Analyst

I guess, just kind of thinking about the distribution going forward and wondering if you can talk about, based on your internal forecast, whether you expect to maintain kind of sufficient distribution coverage as the partial waiver expires this year. And also kind of, if not, would you be willing to run sub one-time coverage if you're kind of have a good visibility to growth and recovery for the remainder of the year?

Steven C. Ledbetter -- Vice President, Commercial

Hey, Joe, this is Steve. Yeah. Thanks for the question. Look, I can appreciate the need for you and the market to have clarity on forward guidance. But given the uncertainty and the volatility in the operating environment, we -- the Board just feel at this point, we're not going to go out with guidance and it's the best course of action to manage the business on a quarter-by-quarter basis.

Now, having said that, we're comfortable in our underlying business. We're going to be focused on the competitiveness measures, taking cost out, make sure that's sustainable, the growth around some of our strategic footprint in areas like the Gulf, where we had the expansion going on ahead of Vito and PowerNap. And in the onshore looking at opportunities, where the evolving landscape fits nicely into our concentration of assets and then taking some opportunities in our ventures.

And then the other thing, I'd say is, we feel very good about our balance sheet and the available liquidity to help us weather turbulent times, whatever they may be.

Joseph Martoglio -- J.P. Morgan -- Analyst

Got it. That's helpful. Thank you. And then also just kind of maybe a high-level question. I think refinery rationalization has been topical the past year or so and I recognize Shell-X maybe doesn't have as much exposure to some others. But kind of can you just talk about how refinery rationalization kind of you think will impact Shell-X, both over the near-term with any impact from the Convent refinery closure and also kind of over the long-term and how your assets are positioned there?

Steven C. Ledbetter -- Vice President, Commercial

Yeah. I'll start, maybe Shawn if you want to come in. As far as the refining rationalization goes, that's a very tricky one in terms of production, not only from different basins and in the refinery needs to meet customer demand and where that makes sense. But what we see is, we stand in a very good position with our exposure to the current basins who have weathered the storm very well with resilient base exposure from the Gulf of Mexico despite the demand patterns and having a good portion of refinery cuts. And then we also have access and investment in the refined products -- the premier refined products systems that can go efficiently, competitively compete to fill those customer needs.

Shawn Carsten -- Director, Vice President and Chief Financial Officer

And I think the only thing I might add to Steve's comments is that, look, it's hard to know where rationalization might happen, but certainly, the refiners that are along the Gulf Coast are some of the most complex and most cost competitive in the world. And so, I would think that you'll probably see more activity elsewhere outside the Gulf Coast, and I think that positions us very well.

Joseph Martoglio -- J.P. Morgan -- Analyst

Okay, great. Thank you for taking my question.

Operator

[Operator Instructions] And your final question is from the line of Michael Blum with Wells Fargo. Please go ahead.

Michael Blum -- Wells Fargo Securities -- Analyst

Thanks. Good morning, everyone. I hope everyone and their families are safe and have power during this pretty crazy week for you guys.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Yeah.

Michael Blum -- Wells Fargo Securities -- Analyst

So I had a few questions. One, just as it relates to -- going back to an earlier question, as it relates to the waiver that you're receiving now, I believe runs through the first quarter of this year. Does that signify anything in terms of timing? Like in other words, you and the sponsor need to make some sort of decision around that at the end of that quarter, whether that be around structure or distribution or just really anything?

Shawn Carsten -- Director, Vice President and Chief Financial Officer

Yeah. Michael, this is Shawn. Good to hear from you. I think, no, actually there's -- you shouldn't read anything into it. At this point, we're just continuing to run the business. I guess, you're correct, the waiver does go off after the first quarter of this year, but there's -- we have no further guidance. And as Steve highlighted earlier, we do have a very good balance sheet. We have $1.2 billion of liquidity and should there ever be a shortfall, we can always pull from that, so.

Michael Blum -- Wells Fargo Securities -- Analyst

Okay, great. And then, I'm wondering if you can just provide some details on how you plan to achieve this -- the $30 million to $40 million of cost reductions, I guess, $20 million to $30 million of incremental, if you look at it like that.

Steven C. Ledbetter -- Vice President, Commercial

Yeah. Michael, this is Steve. I'll take that. It's a combination of things. As we looked at and we took this on -- this challenge on about 18 months ago in terms of getting competitiveness and driving more value to the Partnership. We had to go really look at how we make sure we manage our business in a sustainable and environmentally friendly fashion, but at a competitive level that allows us to go thrive in the market. And that really came with a few things. One was, how do we better leverage data? I think we heard people -- we heard some comments about that earlier, having real-time insights to be able to make clear decisions on what is absolutely needed and why. How we go procure goods and services? We had some opportunities to go leverage people to multi-skill and grow their own personal remit and have the capability to go do those things.

We've actually gone out and been able to say whether or not we need certain third-party work to be done or those skills that we could do in-house. It has a range of things. And then as we've done that, we've stacked up the needed activities and right-sized our organization associated with that. So, we're making great progress on that. And there's still more work to be done, and we will be laser focused on that in 2021 to ensure we deliver what we've committed.

Michael Blum -- Wells Fargo Securities -- Analyst

Great. Thanks for that. And my last question, so at the RDS Strategy Day, they clearly articulated an energy transition plan going forward, reducing upstream and downstream oil and gas, more emphasis on renewables, etc. My question is, how does the MLP fit into this shift in strategy and basically, how do you see the Partnership playing a role here?

Steven C. Ledbetter -- Vice President, Commercial

Yeah. It's a good question. And it's the one that's on quite a few people's minds. This transition is one that's going to take time. This is not going to happen overnight. And it's been clearly articulated that Shell is not moving away from hydrocarbons. They will be an important part of the mix in any scenario. And we have midstream assets that support our integrated value for Shell. And the assets that we do have or have exposure to some of the most competitive, cost advantage and efficient basins in the portfolio. So we see large opportunities still within the US and that's not only -- as it relates to our business, not only as it relates to Shell, we also have exposure to some very large customers offshore who continue to put capital to work in these areas that will allow us to attract that business, such as BP and Chevron. So, this is a longer-term time and it's going to move with the pace of society and we feel very good about our ability to be competitive and moving the hydrocarbons that are needed for the United States.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Yeah. And Steve, I'll add. The deepwater area is a core focus for Shell in that aspect, in the Gulf of Mexico part of that, and there'll be significant -- while it's more focused spend on hydrocarbon and exploration, it will receive the investment in the Gulf of Mexico and projects like Whale and other discoveries are still being progressed in the Gulf of Mexico even during the energy transition.

Michael Blum -- Wells Fargo Securities -- Analyst

Great. I appreciate all the answers. Have a good weekend, everyone.

Steven C. Ledbetter -- Vice President, Commercial

Thanks a lot.

Kevin M. Nichols -- Director, Chief Executive Officer and President

Thanks, Michael.

Operator

Thank you. We have no further questions. I will now turn the call back over to Jamie Parker.

Jamie Parker -- Senior Investor Relations Officer

Yeah. Thank you very much for your interest in Shell Midstream. If you have any additional follow-up questions following today's presentation, please feel free to call me directly. My contact information can be found on the presentation materials, as well as on our website, shellmidstreampartners.com.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Jamie Parker -- Senior Investor Relations Officer

Kevin M. Nichols -- Director, Chief Executive Officer and President

Steven C. Ledbetter -- Vice President, Commercial

Shawn Carsten -- Director, Vice President and Chief Financial Officer

Shneur Gershuni -- UBS -- Analyst

Derek Walker -- Bank of America -- Analyst

Theresa Chen -- Barclays -- Analyst

Joseph Martoglio -- J.P. Morgan -- Analyst

Michael Blum -- Wells Fargo Securities -- Analyst

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