WFS--- Key Takeaways. Q2 EBITDA was in-line. We’re lowering our 2020 and 2021 EBITDA by 3% and 1%, respectively, to primarily reflect lower Zydeco contributions, partially offset by cost reductions. Net of these changes, we’re lowering our 2020 DCF/unit estimate to $1.68 from $1.71.
SHLX intends to maintain its distribution in Q3’20 but would not provide guidance beyond Q3. We’ve conservatively assumed a 30% distribution cut in Q1’21, which improves long-term coverage to 1.3x and allows SHLX to generate FCF after distributions and capex. Consequently, we’re lowering our PT by $1 to $13/unit. We maintain our Underweight rating given the partnership’s tight coverage, limited growth outlook, re-contracting risk on Zydeco, and potential exposure to a Biden presidency (a pot’l ban of new permits on federal lands and waters).
Q2 Adjusted EBITDA In-Line; DCF Beat. Q2 Adjusted EBITDA of $192MM was in-line with our estimate of $197MM and Consensus of $192MM. Higher than expected distributions from equity investments were offset by lower wholly-owned contributions.