Barry Davis is chairman and CEO of EnLink Midstream, a firm endowed with attractive assets when it formed in early 2014 through a combination of Crosstex Energy and the midstream operations of producer Devon Energy Corp. The firm serves producers in some of the nation’s most promising regions, including the Permian Basin, the Midcontinent shale plays and the Louisiana Gulf Coast. Its business success placed it No. 17 on the Midstream Business Midstream 50 list for 2015. In a wide- ranging interview, the dynamic CEO emphasized that pipelines, processing plants and terminals only achieve success when coupled with the most valuable asset that any organization can hold: talented and dedicated employees.


MIDSTREAM From a career standpoint, what attracted you to the midstream?

DAVIS When I was young, I had “an encourager,” a friend who was about six years older than me, whom I aspired to be like. He went into the energy industry, so I followed him by joining an E&P company right out of college. I quickly realized that mid- stream was a new, exciting segment of the business that was changing rapidly.

Midstream as we know it today evolved out of deregulation that started in the early ’80s, which coincided with the start of my career in the industry.

I was on the forefront of an evolving part of the business where people weren’t just doing things the same old way. It took an innovative, creative approach to thrive in midstream; it was the entrepreneurial opportunity I had hoped for.

MIDSTREAM A lot has happened in the midstream since you first visited with Midstream Business five years ago when you were with Crosstex.

DAVIS When we spoke five years ago, EnLink didn’t exist. Crosstex had a long relationship with Devon, but the merger hadn’t occurred yet. Since then, Devon and Crosstex formed one of the largest and best midstream com- panies in the industry. Our scale and diversification allow us to capitalize on the significant opportunities in the midstream industry.

Today, we have 10,000 miles of pipe and around 1,500 employees. We’ve been through an incredible transfor- mation. And we aren’t done yet. EnLink is in the top 15 now of midstream companies, but we’re striving to be top five, which I know we can do. Yet, through all of this, there are still some things that haven’t changed—our values are still the foundation upon which everything we do is based.

MIDSTREAM What were your challenges in putting together Crosstex and Devon’s midstream operations into one company? How did you overcome those obstacles?

DAVIS The key to the success of the merger and to EnLink’s continued success is our focus on people and re- lationships. Relationships mean every- thing. When you look at what EnLink has been able to do as a company— every transaction, every event—they all come down to a specific relationship. Usually it’s a one-on-one relationship, not just a company-to-company rela- tionship, but individual to individual.

When we first started discussing the merger, we knew that relationship depth and level of trust were essen- tial to allow our companies to come together and do something big. For- tunately, we had been working with Devon for about 10 years, going back to when we jointly acquired assets from Chief Oil & Gas in May of 2006. Our relationship and trust level with Devon was exceptional.

Having solved that part of the equation, we were able to focus on the complex and difficult technical aspects of integrating workforces and combin- ing systems—both physical systems in the field and our corporate systems and processes. We were able to execute those things very efficiently and quickly grow the platform we created. I’m proud to say that since the inception of EnLink in March of 2014, we have invested $4.5 billion in new assets to create a premier position in several high-growth areas.

Our history with Devon is an exam- ple of what focusing on doing the right thing, caring about the success of your customer and really knowing that cus- tomer can do for a company. Devon is just one example. They may be our largest customer, but we strive to treat every customer as well as we do our largest customer.

MIDSTREAM Devon and another one of your producer customers made recent asset trades that the analysts believe will be incrementally positive for you. Will these moves change field operations or capex decisions?

DAVIS There are so many dynamics that come into play today. When you look at what it takes to maintain a successful business, especially in a downturn, who you do business with matters.

We are very fortunate to have Devon represent about 50% of our business. Devon recently sold non- core assets, including some in Martin County [Texas] where we have oper- ations, to Pioneer Natural Resources. We are pleased to see that Pioneer has immediate plans to develop acre- age that had been a quiet area for us. We have capacity for that new gas to come into our system immediately and, in time, will build additional processing capacity to support their development program.

Moving to Oklahoma, the asset sales allowed Devon to accelerate its devel- opment program. They are currently operating two rigs and plan to go to six rigs by the end of the year. As a result, EnLink has accelerated what we call our Chisholm II processing plant and will now move the start of its operation to the first half of 2017 vs. the end of the year 2017. It’s all very promising.

This is consistent with our strategy of partnering with the right companies in the right places. Our customers are largely investment-grade, quality customers, and we aim to deliver best- in-basin services to them, even when acreage changes hands.

MIDSTREAM Speaking of your customers, what do you feel producers need most from midstream partners?

DAVIS We focus on providing in- novative, creative solutions for our customers’ challenges. Typically, a producer’s challenge is that they pro- duce products in places where they cannot be consumed. EnLink makes their products marketable and moves them to the right market centers with the best price possible back to the producers.

Experience is a big differentiator for midstream companies. I’m proud to say that we were there in the beginning of the shale play revolution as one of the leading midstream providers in the Barnett Shale in the late 1990s/ early 2000s. Today, we have a strong, growing position in the [Oklahoma] Stack, which I believe is the latest basin to be developed. So many of the basins have been developed between the Bar- nett and the Stack, and we have gained experience from being a part of many of them.

MIDSTREAM EnLink enjoys an investment-grade credit rating and outperform ratings by numerous ana- lysts. The analysts seemed to be happy coming out of your second-quarter earnings, and one of them wrote, “We continue to look at EnLink as an unap- preciated midstream story.” What do investors expect to see in a successful midstream firm?

DAVIS Investors want companies with stability and growing cash flows, and I believe that no one is better positioned than EnLink for stability and growth.

The master limited partnership structure was originally built to be a yield investment—a cash-distribut- ing entity done in a very tax-efficient way. This model has worked well for EnLink, as we have shown stability and growth since our creation. Even through the current industry down- cycle, we have continued to generate strong financial results, and we’ve maintained our distributions with good coverage. In fact, we have 1.06 coverage year-to-date for 2016.

Again and again, we’ve shown the stability of the company we built. But the growth opportunity that we have today is what’s really exciting. EnLink is positioned to continue the develop- ment we started in Central Oklahoma, the Permian’s Midland and Delaware basins, and the Louisiana Gulf Coast, and we’re ready to capitalize on new opportunities that are on the horizon.

MIDSTREAM EnLink emphasizes certain core values; you even have them posted in your office lobby. What are they and how do they tie into your business strategy?

DAVIS Core values differentiate one company from another, and, for EnLink, our core values differentiate us very positively in the industry. We have five core values: focus on peo- ple, be ethical, strive for excellence, deliver results and be good stewards. These aren’t just words to us. Each of these values connects directly to our business strategy.

Our values are the foundation upon which everything we do is based. It al- ways starts with people. At EnLink, we focus very intently on making sure that we hire the right people. Only then can we focus on the four values that fol- low. When you have the right people, they’re going to do the right things, and they’re going to be ethical in the way that they do business. They’re also going to strive for excellence, pursuing ways to be better every day.

Next, our people focus on results because we know, at the end of the day, results are what allow us to stay in the game—and this is a game we love play- ing, and we have to deliver results to continue to do it. That means that we have to deliver best-in-basin services at a competitive cost.

Finally, good stewardship simply defines who you are as a person. Do you take care of what you have been given responsibility for? We feel like we are stewards of EnLink for a time. En- Link will last for a very long time, but there will be future stewards who come after us. We’re creating a company built to last.

MIDSTREAM You personally have been active in the community, and EnLink encourages its employees to get involved in their communities. How does that emphasis tie into the core values?

DAVIS It goes back to our compa- ny’s original mission. In 1996, the mission statement of our predecessor, Crosstex, included two words that continue to hold weight for our em- ployees. Those two words are “more life.” We do what we do to give more life to our employees. One of the key things that gives more life to people is doing good for others.

At EnLink, I’m happy to say that al- most 100% of our people are involved in some way in our community out- reach programs. As a result, they have pride in what they do at EnLink. Our employees have true ownership—what I would call heart ownership—of EnLink because they value what we do. They see the company and themselves as important parts of the community.


MIDSTREAM What has EnLink done to weather the lower-for-longer downturn and be prepared for the turnaround, which you know will come someday?

DAVIS I’ve said many times that we didn’t predict this downturn, but we were certainly prepared for it. When we completed the merger in 2014, Devon contributed $5 billion worth of assets and the company incurred no new debt, so we were well-positioned before the downturn. At the beginning of this year, we realized that this was a lower-for-longer scenario, and we had to focus very specifically on what needed to be done in 2016 to ensure our company continued to not only survive but thrive in this environment.

We developed a plan that we called our Focus And Execution plan. The plan has several strategic initiatives that we are executing daily.

The first strategy is to continue to do what’s most important—be safe. Every day, that has to be our primary objective because our customers want to do business with safe people and— most importantly—our families want our employees to come home at night.

Our next strategy is to continue liv- ing our values. People can be tempted to compromise in difficult times, so it was important to emphasize ours.

We’ve learned that downturns happen in life; everything is cyclical. Your val- ues have to guide you through both the good and bad times.

Next, we must continue to deepen customer relationships. Our customers are also in this downturn, and they need us to deliver now more than ever. We’re focusing on being responsive and finding solutions that will help us get through this to the other side of the cycle—together.

Two of our strategies go hand-in- hand: to drive out costs and maximize cash flows. We’ve done a terrific job of optimizing and driving costs out of our business. We’ve also looked to maximize cash flows across all of our assets because we know that cash flow is critical in a long and sustained downcycle. Look at North Texas for an example. The Barnett Shale is a mature play but it still generates sig- nificant cash flow for us. By focusing on reducing operating expenses and the optimization of our assets, our North Texas team was able to offset declines from 10% to 7%.

Coincident with the challenging environment, EnLink has one of the greatest growth opportunities in our history. Recognizing this opportunity, we knew that we couldn’t be distracted from realizing our growth potential, so another initiative was to execute with urgency in our core growth areas: the Permian, Central Oklahoma and the Louisiana Gulf Coast. The battle for the basins is being fought right now in the Permian and in Central Okla- homa’s Stack. We can’t wait until the cycle improves to fight for business in those areas.

Finally, our long-term plan is to be one of the top midstream com- panies. Top midstream companies deliver best-in-basin services at the lowest cost, so that’s our last strategy. Through each of the strategies of our Focus And Execution plan, EnLink is able to really differentiate ourselves, even in this downcycle.


MIDSTREAM The impact of the downturn has been seen across the industry, but EnLink seems to have weathered it better than others, as seen by your most recent earnings report. What’s the secret to the resiliency of your business model?


DAVIS Our business model has always been to have predictable and growing cash flows—I think that’s essential to being a successful master limited partnership. Our stability comes from, first of all, the quality of our customers. Over 90% of our reve- nue comes from our top 50 customers, which are all investment-grade.

Second, it comes from strong contracts; 95% of our margins are fee-based. Third, over 80% of our contracts have minimum-volume commitments.

So our business model, first and foremost, emphasizes stability of cash flow and stability of our business. I think what we’ve seen through 24 months of a down-cycle is that this works and that stability is of great value in the marketplace.

MIDSTREAM The commodi- ty-price downturn hit midstream stocks hard even though most, in- cluding EnLink, have only limited commodity price exposure. What can midstream executives do to differenti- ate their firms to investors?

DAVIS EnLink has always been at- tractive to investors because of our business model. That’s important, but it’s just the beginning. The quality and position of your assets is essen- tial to getting opportunities that can grow your company, and growth is very important to investors. EnLink’s volumes are growing across all of our systems on a cumulative basis quarter over quarter, even in this very dramatic commodity downturn.

Our company has recognized the importance of stability and growth for some time, which is why we worked hard to position ourselves in diverse, economic basins. Now, we’re refining our focus to accelerate growth in the most active, highest-return basins of the Permian and the Midcontinent. EnLink has a proven strategy of getting a foothold in a promising basin and then growing off of it. That’s what we’ve done in the Midland and Delaware Basins of the Permian, and that’s what we’re doing in the Stack.


MIDSTREAM EnLink has been doing a lot in the Permian; why are you so focused there?

DAVIS The industry has known for many years that the Permian is a tremendous basin. In fact, it has been producing for so long that some people thought that it might have seen its best days. The reality is that the Permian had a new awakening. Many now be- lieve it is second to none, not only in our country but in the world.

Because EnLink realized the im- portance of the Permian years ago, we focused on building our position and becoming a major player in the basin. We started with an organic project, the Deadwood facility in the Midland Basin, which we did as a 50-50 part- nership with Apache but now fully own. We have a strategy of acquiring a position in a high-potential basin and expanding it through organic growth and strategic acquisitions. We created a significant position in the North Mid- land Basin—the core of the core—and today, we have one of the largest asset positions there.

More recently, we have been in- volved very early in the evolution of the Delaware Basin, having acquired an existing plant and gathering system there, the Lobo System. In August, we announced the Lobo II expansion of that system, along with a strategic joint venture with Natural Gas Partners [NGP Natural Resources XI LP] to accelerate our growth in the Delaware. We see the battle for the basin happen- ing now in the Delaware, and EnLink is positioned to win. Our JV with NGP will help us get there quicker.

Overall, we are quickly becoming a major player in the Permian across all commodities. We’re doing gas gather- ing and processing and crude oil gath- ering. We have a logistics operation that is handling about 70,000 barrels per day of crude. In addition to that, we announced our Greater Chickadee Crude Oil Gathering System in July, which is an $80-million system that will include about 150 miles of pipeline delivering to major market centers.

EnLink has capitalized on great opportunities to gain this position in the Permian, and I believe we will continue to grow and evolve to be the best midstream provider there.

MIDSTREAM The Permian seems to be the industry’s most active area right now but EnLink’s investor presen- tations show you’re also excited about your prospects in Oklahoma’s Cnow, Scoop, Cana/Woodford and Stack. Can you talk about what you see happening in these Midcontinent plays?

DAVIS The Stack seems to stand above all other plays in Central Okla- homa, and, in fact, it is one of the top plays in the entire country as far as having the greatest return and the best performance. It’s still early in the Stack’s development, but we’re seeing well results that are getting better every day.

Our partner, Devon, is the largest operator in terms of acreage, with 430,000 net surface acres concentrated within the most economic portions of the Meramec and Woodford plays. We have a unique perspective to see the quality of that play that we get through our Devon relationship. The performance of the Stack is very similar to the Delaware Basin and to the North Midland Basin. No one else but EnLink has the premier platform that we have in all three areas, and we see great op- portunities in each.

MIDSTREAM You did a bolt-on acquisition with Tall Oak Midstream early this year, increasing your pres- ence in the Stack. How has that inte- gration worked out?

DAVIS The integration of Tall Oak into our Central Oklahoma system has gone extremely well. All of the assumptions we made, with the exception of commodity prices, have exceeded our original expectations. So, while the per- formance to date has been right on tar- get, we expect the long-term prospects for this area to be even greater than we projected because of the production rates and additional drilling locations we’re now seeing.

As I said, Devon announced that it is increasing rigs on our dedicated acreage from two to six. Due to this and other positive conversations we’ve had with our customers in the area, we are accelerating our Chisholm II expansion, which is a 200 MMcf/d [million cubic feet per day] processing facility supported by long-term con- tracts from investment-grade produc- ers. No one is better positioned than EnLink, especially in the Stack, and be- cause of this position of strength, we’re able to capitalize on what’s in front of us, like Chisholm II.

MIDSTREAM You also have some key assets in Louisiana that could become increasingly valuable as new petrochemical capacity comes online and exports grow along the Gulf Coast. How is that region doing for you?

DAVIS I love our Louisiana position, and I love our people there! They al- ways do a tremendous job. The average employee that we have in Louisiana has been working with our assets for 25 to 30 years, which provides us great lon- gevity and continuity.

MIDSTREAM Do you expect M&A activity to accelerate in 2017?

DAVIS In order to see acceleration, the first thing we have to see is a capital market that is constructive and avail- able. We’ve seen a debt market that is open today to master limited part- nership players, but we still don’t have an equity market that is accessible.

We’ve seen small equity transactions but nothing of the size that would be required in a major M&A transaction. All of this is to say, yes, I do anticipate M&A activity will increase. I think it will be a combination of access to capi- tal markets and people will look up and realize they need to do something for the long term, not just survive through this cycle.

The good news for EnLink is that the same things that have helped us through this downcycle are what set us up for the long term. The things we’re doing today—executing with urgency—will set us up for lasting success.

MIDSTREAM Do you have any projections on commodity prices?

DAVIS People who have been in this business very long know that this is a very cyclical industry. Every downcycle is followed by an upcycle, and then that upcycle is followed by another down- cycle. We have to be prepared to get through those cycles to stay in the game long term. And at EnLink, we are.

My crystal ball is no better than anyone else’s. I expect prices to re- cover, but it’s the timing that’s difficult to predict. No matter what, EnLink
is prepared. We have the stability to execute through all cycles and are ex- tremely well-positioned to grow.

MIDSTREAM Do you have any pre- dictions about the next five years?

DAVIS We’ve worked hard to get to where we are, but EnLink is on the road to something even better. Our ultimate goal is to be one of the top midstream companies in the industry, and that will require greater scale and capabilities than we have today. I truly believe that we can do it. No one is better positioned than EnLink, no one has better people to do it, and as far as I can see, the possibilities are endless.