Q2 2020 Energy Transfer LP Earnings Call

August 5, 2020

[music].

Greetings and welcome to energy transfer second quarter earnings call.

This time, all participants Arnie listen only mode.

A question answer session will follow the formal presentation.

If anyone should be quite operate assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, disc ops is being recorded.

Now I'd like to turn the conference over to today to Mr., Tom long CFO. Thank Sir you may begin.

Thank you operator, and good afternoon, everyone and welcome to the energy transfer second quarter 2020 earnings call and thank you for joining US today I'm also joined today by Kelcy Warren Mackie Mccrea and other members of the senior management team who are here to help answer your questions. After our prepared remarks.

Hopefully you saw our press release, we issued earlier this afternoon as well as the slides posted to our website. As a reminder, we will be making forward looking statements within the meaning of section 21. The other Securities Exchange Act of 1934.

These statements are based on our current beliefs as well as certain assumptions and information currently available to US and are discussed in more detail in our quarterly report on our form 10-Q, and a second quarter 2020.

I'll also refer to adjusted EBITDA distributable cash flow our DCF.

And distribution coverage ratio all of which are non-GAAP financial measures.

You will find a reconciliation of our non-GAAP measures on our website.

And we expect our 10-Q to be filed Tomorrow August six.

Let me start today with a short update regarding our operations decoded 19 pandemic continues to impact how we go about our daily lives and how business is conducted however, I am pleased to say that today, our field operations have continued uninterrupted.

This is a testament to the hard work of our employees, who remain focused on the safe and efficient operations of our assets during the stressful times.

Now turning to the second quarter 2020 highlights.

We generated adjusted EBITDA of $2.44 billion and DCF attributable to the partners of BT as adjusted of $1.27 billion and our coverage ratio for the quarter was 1.54 times, which resulted in excess cash flow after distributions.

$448 million during the second quarter, the cobot 19 pandemic and the associated drop in crude oil prices led to significant volume shut ins throughout many of the producing regions in the country.

We have also seen a reduction in spreads on our crude and natural gas pipelines from the Permian to the Gulf coast as well as crude spreads from the Bakken to the Gulf Coast.

Offsetting these headwinds our NGL segment continued to set records during the second quarter with our transportation volumes, reaching new highs, primarily driven by record volumes on our Mariner east system as well as strong volumes across our Texas, NGL pipelines and our fractionation volumes reached another record during the quarter.

Due to the addition of Frac seven earlier this year.

In addition, gathering and processing volumes on our Midland Basin system also reached new highs near the end of the second quarter now turning to our 2020 outlook as the energy industry continues to face demand destruction and other challenges associated with the cobot 19 pandemic due to the uncertainty of the pace of recovery we.

We are revising our 2020 adjusted EBITDA guidance range to 10.2 billion to $10.5 billion. This reflects our latest expectations. During these unprecedented times, including a slower recovery.

Then initially forecasted.

Although we believe that we reached the bottom during the second quarter, our revised guidance reflects a more conservative ramp up than our previous expectations. We are encouraged by the signs of recovery that we are experiencing as current production volumes in the Midland basin through our processing plants volumes across the Mariner east comp.

Flex and volumes through our Texas NGL fractionation assets.

Our all currently above pre co bid levels.

As we look ahead, we continue to expect are fully integrated diversified asset base, along with contributions related to the addition of the Semgroup assets the ramp up of Mariner East Frac, seven and Panther too as well as the projects that went into service in 2019 to.

To help offset some of the impacts from lower volumes in certain basins.

Narrower spreads and lower commodity prices.

Operationally, we continue to seek out opportunities to leverage our extensive infrastructure to drive operational efficiencies and optimize our assets where possible.

As we mentioned on our last call we have undertaken cost reduction measures both in our corporate offices as well as our field operations.

Year to date, we have already recognized approximately $200 million in DNA and Opex savings and we now expect to achieve cost savings of approximately $400 million for full year 2020 relative to our budget.

We also continued to carefully evaluate our growth capital expenditures.

Given the current state of our industry and the number of assets that are not fully utilized across the midstream space today.

Our evaluation process for new projects is very stringent and our threshold for returns is the highest it has ever been.

That being said upon further review of project spend today completion dates and the economic impact of delaying particular projects. We now expect our twentytwenty growth capital expenditures to be approximately $3.4 billion. This represents a reduction of $200 million from our previous guidance.

Or a total reduction of $600 million from our original guidance of $4.0 billion and is primarily related to did lighting some growth capital spend.

Approximately 80% of the growth capital spend in 2020 will be spent on projects that are expected to be in service in 2020 or early 2021.

This includes Mariner east the Lone Star Express expansion and the orbit and other NGL export projects at Needham.

As we think about our future capital spend we currently expect our 2021 growth capital expenditures to be approximately $1.3 billion and we now expect growth capital in 2022, and 2023 to be in the range of $500 million to $700 million per year, we remain.

Committed to generating free cash flow and still expect to be free cash flow positive in 2021 after growth capital and equity distributions.

Looking more closely at our growth projects I will now walk you through recent developments.

We continue to move forward with the Bakken pipeline capacity optimization. The initial phase of the optimization above the pipes current capacity of 570000 barrels per day will accommodate the volume commitments made by shippers during recent open seasons.

We now expect this additional capacity to be in service in the third quarter 2021.

Next the Ted Collins link is an efficient way to increase the utilization of existing assets, while providing market connectivity between our neighbor Island and Houston terminals.

It will ultimately allow us to transport up to 275000 barrels per day of crude oil from West, Texas, a needle in to our Houston terminal and is expected to be in service in the fourth quarter of 2021.

Moving to Mariner East system.

I'm pleased to say that we saw the highest average quarterly volumes yet through the Mariner East pipeline.

With volumes for the first half of 2020 up nearly 50% over the first half of 2019.

Utilization of our Mariner pipelines and our Marcus Hook terminal continues to increase with record amounts of propane and butane transported through the pipelines.

We're also seeing strong ethane utilization, which is expected to grow in the fourth quarter of this year. The system continues to demonstrate flexible optionality for shippers with multiple.

Local market connections for ethane propane and butane.

Customers at Marcus Hook are currently taking advantage of this flexibility by placing barrels for the upcoming winter season into local markets.

Additionally, our Mariner system will have the ability to bring natural gasoline to Marcus hook for gasoline blending and local consumption by early twentytwenty, one or both.

Both domestic and international demand for all natural gas liquids has remained strong even while motor fuel demand has waned because of coated 19.

We are eagerly awaiting the net significant phase of the Mariner East project, which we now expect to be in service by the end of this year with the final phase completed in the second quarter of 2021.

Also our 50000 barrels per day expansion at the Marcus Hook terminal will provide additional chilling and storage capacity and is expected be in service in the first quarter 2021.

The Mariner east system in conjunction with the Marcus Hook terminal continues to provide the most efficient transportation route for liquids in the northeast and provides customers the optimal way to reach the best markets further product.

Now looking at moving the Lone Star and looking at Frac seven was placed into service in the first quarter of this year and began ramping up all seven of our Fracs are running full today.

We're in the final stages of the construction on our 24 inch 352 mile Lonestar Express expansion.

Which will add over 400000 barrels per day of NGL pipeline capacity from the Permian Basin to the Lone Star Express 30 inch pipeline South of Fort Worth Texas.

We continue to expect the expansion to be in service in the fourth quarter of 2020.

Also we have converted some of our underground storage facilities at Mont Belvieu to allow the storage of significant amounts of natural gasoline and diesel to take advantage of the profitable contango opportunities.

LPG demand has remained strong and our LPG expansion projects in New Zealand will bring our total export capacity to approximately 500000 barrels per day by the end of 2020.

Further integrating our Mont belvieu assets with our needle in assets.

Construction of our orbit ethane export joint venture with satellite petrochemical who is a great partner is nearing completion. This 180000 barrels per day project will be ready for commercial service in the fourth quarter of this year with the first ships arriving in November for commissioning.

Now, let's take a closer look at our second quarter results consolidated adjusted EBITDA was $2.44 billion compared to $2.83 billion for the second quarter of 2019.

The change from the prior period was primarily due to the impact of lower volumes and prices among several of our core operating segments.

DCF attributable to the partners as adjusted was $1.27 billion for the second quarter compared to $1.6 billion for the second quarter of 2019. This is primarily due to the decrease in adjusted EBITDA.

Distribution coverage ratio for the second quarter was 1.54 times.

In July energy transfer announced a distribution of 30.5 cents per common unit for the second quarter.

Or $1.22 per common unit on an annualized basis.

This distribution is consistent with the first quarter of 2020 and will be paid August 19 to unit holders of record as of the close of business on August 7th.

Looking at our results by segment for NGL and refine products adjusted EBITDA was $674 million compared to $644 million for the same period last year. This increase was primarily due to record NGL transportation and fractionation volumes, which were partially offset by decrease in terminal.

Services margin.

NGL transportation volumes on our wholly owned and joint venture pipelines increased a 1.4 million barrels per day compared to 1.3 million barrels per day for the same period last year. This increase was primarily due to record volumes on our Mariner east pipeline system as well as increased throughput.

On our pipelines out of the Permian Basin, and North Texas regions as result of higher liquids production from both wholly owned and third party gas plants.

Second quarter average fractionated volumes increased to 836000 barrels per day compared to 701000 barrels per day for the second quarter of 2019.

Now for our crude oil segment, adjusted EBITDA was $519 million compared to $752 million for the same period last year.

This was primarily due to lower volumes on the Bakken pipeline and our Texas crude pipelines as result of unprecedented shut ins as well as a decrease in our crude oil acquisition and marketing business related primarily to wells shut ins, leading to unfulfilled producer supply commitments and unfavorable.

Pricing conditions.

These items were partially offset by contributions from the Sim group assets as well as a positive inventory valuation adjustment of $14 million compared to the second quarter of 2019.

For midstream adjusted EBITDA was $367 million compared to $412 million for the second quarter 2019.

This was primarily due to lower NGL and gas prices, which impacted results by $39 million as well as a decrease related to volume shut ins in south and North, Texas, which were partially offset by $23 million reduction in operating expenses.

Gathered gas volumes were $13 million MBT use per day compared to $13.1 million MPD used per day for the same period last year.

Lower volumes in South and West, Texas, where nearly offset by volume growth in the northeast and the addition of Semgroup assets in the mid continent Panhandle region.

In our Interstate segment, adjusted EBITDA was $403 million compared to $460 million for the second quarter 2019.

This was primarily the result of additional revenue recognized in the second quarter of 2019.

As well as lower rates own LNG that we mentioned on our last call and less capacity, so on our Panhandle and trunkline systems.

These were partially offset by increased margin from the transwestern system due to increased demand in firm transportation.

As for our intrastate segment, adjusted EBITDA was $187 million compared to $290 million in the second quarter of last year.

Our merely due to lower revenue from the pipeline optimization activities as a result of these significant drop in spreads.

Beginning in 2021, we expect to have less exposure to spreads as we have locked in additional volumes under long term contracts with third parties.

Moving onto a capex update.

For the six months ended June Thirtyth 20, twinning energy transfer spent approximately $1.8 billion on organic growth projects, primarily in the NGL and refine products and midstream segment.

Excluding sun and USA see Capex.

And as I mentioned earlier for full year 2020, we now expect to spend approximately $3.4 billion on organic growth primarily in the NGL and refined products in midstream segments of which approximately 80% will be on project expected to be in service in 2020 or early 2021.

And we currently expect our 2021 growth capex expenditures to be approximately $1.3 billion.

And growth capital in 2022, and 2023 to be between 500 $700 million per year.

Looking briefly at our liquidity position as of June Thirtyth 2020, total available liquidity under our revolving credit facilities was approximately $2.9 billion and our leverage ratio was 4.29 for the credit facility. As a reminder, we have no additional maturities in 2020 and looking ahead.

Ed we have a very manageable maturities of $1.4 billion in 2021.

We continue to target a rating agency leverage ratio of four to four and a half times.

In conclusion, the second quarter, we saw challenges who was some volumes picking up across a number of our assets and our Mariner East pipeline recently, reaching new highs. We expect this positive momentum to continue as we entered the second half of the year.

Throughout the remainder of 2020, we will continue to look for efficiencies and optimization opportunities across our footprint and are fully integrated multiproduct assets are well positioned as our industry works toray recovery.

In addition, we anticipate further ramp up of our recent projects to contribute additional near and long term value.

However, we know that it is imperative to remain disciplined when it comes to spending and as our growth capital reductions demonstrate our capital expenditure approval process is increasingly stringent we remain committed to our investment grade rating and improving our leverage metrics as we navigate through the current market disruption.

And above all we continue to emphasize safety and project execution and we are continually impressed by our employees dedication and resilience during these challenging times.

This is Tom Mason, the general counsel of energy transfer and what to inform you that we just received the decision related to our motions to stay from the court of Appeals. We are still reviewing this decision that the good news is that the court of appeals granted our state of the portion of.

District Court order that required Dakota access to shut the pipeline down in Mt of oil.

For the quarter Appeals also denied a state of the other part of the District Court order, which vacated the easement for the pipeline at Lake law.

As a result, no court order soft Dakota access from continued to operate the pipeline.

In court of Appeals contemplates further proceedings at the district Court following determination by the Army Corps under its regulations regarding the continued operation of the pipeline.

In light of the ease of being vacated according to feels also ordered an expedited schedule for determining the merits of the appeal by the Army Corps in Dakota access as to whether environmental impact statement will be required.

This really is expected by the end of the year.

We will continue to review the substance of today's court decision.

And we will lead to run the course with this litigation we believe our legal positions are strong and we're confident that pipeline will continue to operate.

With this I turn it over to the operator.

Opened our first question.

Thank you at this time, we will conduct a question answer session if you'd like to ask a question. Please press star one on your telephone keypad.

We can point indicate your line is in a question Q.

Do you make prestart too if you like to remove your question from the Q.

Participants you the speaker equipment, it may be necessary to pick up your handset before presence. This dark Keith once again thats our want to ask a question at this time.

One moment why we pull for our first question.

Our first question is from Shneur Gershuni with you'd be act. Please proceed with your question.

Hi, good afternoon, everyone.

I realize the good news is very fresh.

It sounds like your update was pretty straight forward. There. So I will elaborate on maybe the to pivot a little bit here.

The guidance update that you provided today.

Tom I was wondering if you can give us a little bit more color on what's moving the guidance Dale underline what are the puts and takes and was there anything related to dapple as part of this are really doubtful decision. Just came in as you are basically hitting the ascend button on the press release.

You bet, let's start with the last part a last part of your question generic first off.

Nothing related to dapple was.

Pertaining to the guidance updated guidance that we had I will say that when you really look look out of what we were.

What caused our probably what drove the reduction was really the basically the volumes and the spreads we were looking at the assumptions.

We were looking at the assumptions and the forward curve. When you really look out so I'd say that probably drove it as much as anything you can see really from a crude oil as well as the.

Intrastate, where the two primary segments.

Okay fair enough and immediate a follow up question.

Yeah heading into this year.

There was a path for de leveraging the goal was four and a half times, obviously, Colgate and Opac of time of the rail debt.

Can you talk about your payoffs to how you think you'll get there on a go forward basis.

How you're thinking about distribution versus the investment grade credit rating. If we were hit that crossroads, just kind of interested in year overall thoughts with respect to boroughs.

You bet clearly investment grade rating is very important but I think it's also important to highlight the various levers we have to pool and the capex reductions that we announced today. We're obviously have a big big part of that we're going to continue to work with the rating agencies were going to continue to work towards bringing out.

Leveraged down and clearly the distributions or a topic when we discuss how to get the leverage now.

Okay Fair enough and then maybe one last question just since you brought up the Capex.

The commentary you put out today was for gearing material step down in Capex for 21 and into 22 in 23, you've already touched 600 million so far this year.

And it sounds like in your prepared remarks Mariner East two is actually moving ahead faster than expected.

It is.

I realize that's a lot.

We've accomplished.

But are there any opportunities to cut capex further and I was sort of thinking along the lines all your contracting and labor cost Hello, Dale or is there equipment costs could there are still be a little bit more to go in terms of lower costs and lower capex.

We're going to continue to to evaluate it but I would not guide you to to lower lower amounts at this time, but clearly as we continue through the rest for the year, we'll update as we go but right now wouldn't I wouldn't guide you to any lower numbers.

Perfect.

Obviously have a lot more questions what all let's step back into the queue really appreciate your time today safe day.

Our next question comes from Jeremy Tonet with JP Morgan. Please proceed with your question.

Hi, Good morning. Good afternoon here just wanted to follow up with the the credit side and just.

Curious what you calculate your leverage is on a rating agency basis.

And I want to get better color on kind of the path of how long it takes you to get into that.

Well as you as you know each agency has their own metrics they use for how they calculate that.

We depending on which agency you look at as you know we're in and around that five number we're going to continue to look out not just for this year, but for next year and we're going to highlight the fact that we're running into our free cash flow period for 2021 with the Capex I announced so I think when you look at.

Got it.

You can see that any dollars that are left over will be allocated toward debt pay down and that's what we're looking at which will then bring that leverage down, but I would calibrate you to that to the five five ish.

Fiveish range, depending on which.

Five to five and a half depending on which agency you're looking at scale.

Got it.

That's helpful. Thanks, and then just.

Want to make sure as we're thinking about it for modeling purposes. When you think about kind of contango.

Or other opportunistic gains you might have.

Recognized in the quarter did they all show up in Twoq or could they show up over the balance of the year as well just trying to think of how that might be booked.

Yes, Jimmy this is Mackie no. We did recognize some of the contango in the second quarter. However, there are substantially more contango that we will recognize the second half of this year and there's also some contango as Tom mentioned in his remarks around some new storage facilities that were taking advantage of the Mont belvieu around deep.

Yes may take advantage of those later this year, if the opportunity arises otherwise those who will take advantage of those in the first quarter of next year.

Great. That's helpful. Thank you very much.

Our next question comes from Wacko crude on with Bank of America. Please proceed with your question.

Good afternoon, guys. This as well thank Mike Thanks for taking my question.

First one wanted to touch on cost savings.

You'd noted.

Approximately 400 million in savings that you expect realizing.

80, 20, just wanted to get a sense of how much of that is a function of just.

Newer volume driven expenses.

Really tried to get at how much of that would be reasonable going forward.

You bet when you really look at it say, it's a combination of both DNA as well as operational expenses.

As far as being able to continue with that clearly that's that's what our plans are is to be able to to look at this but.

As the assets continue to ramp up as we look into next year et cetera. The operational expenses will go along with that but I would say that at want to commend all the all the energy transfer team on what they've done to be able to bring down bring down these cost, but it is a blend of both like I said DNA as well as.

Operation expense.

Got it thanks Tom.

Second question.

Trying to get your thoughts on the asset Monetizations at this point as one of the numbers for de levering.

Appetite Gruber, which have been under consideration in the past does should the profile.

Nat gas pipelines that have recently treated.

Would you be able to comment on it or what your thoughts are on how you see the market today and your level of interest in using the school.

Well, we will not comment on specific asset like that but I will say, we've been pretty open about.

Our compression by investment in USA compression, we're not going to do anything that would ever harm the value of of the units, but that is something that we continue to evaluate as far as that position goes the units that we hold as well as the general partner.

But overall, we we don't have really along other list of assets that were working on that we're evaluating from that standpoint.

Understood. Thanks very helpful.

Okay.

Our next question comes from Pearce Hammond with Simmons Energy. Please proceed with your question.

Hi, good afternoon, and thanks for taking my questions I just want to follow up on the prior question.

More specifically in light of the Berkshire Hathaway Dominion transaction do you see an attractive environment to divest assets is there more interest or his kind of cope with thrown a wet blanket on that.

Okay.

It's interesting because prior to the downturn that that we've experienced flick. The coated impact. We've had there was clearly a lot of calls that came in.

With various levels of interest around assets, but I will tell you that that has that has slowed I think multiples have come down as far as assets and what's what they trade far leased from what were seeing.

Okay. Thank you Tom and then as a follow up are you hearing from your customers are they actively look into blend and extend contracts and so what's the environment like for lab.

This is mackie.

There are some of those out there and we've made it public that we've been pretty aggressive over the last year or two of doing that.

That's kind of hit us little bit and this year, because we took took away a little bit revenue. This year for extended contracts that were ending in the next year to extend those out several years, but I would say that were not as focused on that right now.

Primary focus right now for from a commercial standpoint is getting all these assets online in the northeast and and neither Len and filling them up as quickly as possible. So we're really not looking at a lot of the blend and extend at this point in time.

Thank you Mackie.

Okay.

Our next question comes from GE sounds Levy with Bernstein. Please proceed with your question.

Hi, there release referenced with a reduction of $117 million accrete segment in the quarter due to the Bakken pipeline, but I was under the impression that Apple with Thomas fully constructed on that question. Rob there were at the well shut ins I guess, a valid reason not tan take or pay.

This back again no. Your impression is correct. We the 570000 barrels a day, we have sold that out. However, it has different components to it it does happen MVC component and it also has a flex component for a lot of our foundation shippers and of course it has the walk.

Capacity.

And then the way our it impacts our revenues is depending on how the customers use that flat.

Capacity. It does it has some impact from quarter to quarter, depending on the the amount of volume that they actually flow.

Okay.

Hey.

And then eventually or is that more of that.

Yes, yes, they havent MVC amount that they required to pay us where they flow it or not but they have the ability to flex it and they can flow anup.

A month.

Our a quarter past the quarter that were in but but yes. There is a set volume that there are guaranteed to pay on annual basis, regardless of what they flow.

Okay. So some of that flex should check hopefully come back in the next couple of quarters.

Thats correct.

That's helpful. Thank you.

And then I know you it sounded like from your commentary that satellite project was still on track for everything that summer sites, but I just wanted to confirm that and also just see how you expect the ethane volumes to ramp over time on their side. My understanding is that they're building one of the cracker the share and then one next year, so it'd be kind of us.

Ramp on the inside that wanted to confirm that.

Yes, we're so excited about to our ethane projects you probably saw here three or four days ago, we lowered our first VLCC up at Marcus Hook facility.

Almost 800000 barrels of ethane.

As far as satellite goes in Netherlands, Everything's on track they've done a tremendous job getting their facilities built getting their ships ordered and ready to go. So we're very excited about that project.

We will have a cracker on by the into this year as you heard earlier, we will be commissioning of our facility with a ship of theirs in November is our expectations and then yes.

The latter part of the first quarter first part of the second quarter I believe there second crackers coming on so.

As we say retirement, what great partners, they've been a pleasure to deal with they've done everything they said they would do.

And now for the first time at needle and we'll be bringing on 180000 barrels per day of ethane capacity primarily for them. However, we are chasing other markets. We do anticipate sell on ethane to other third parties.

As early as the first quarter of of next year, and we'll do everything we can to fully utilize that facility on daily basis, depending on what satellite actually pulls on daily basis.

Perfect. Thanks, a lot.

Our next question comes from Spiro Dounis with Credit Suisse. Please proceed with your question.

Afternoon, guys first question just want to go back to the 2022 plus capital spending wondering how you described the nature that spending is that part of larger scale multiyear projects that are flowing through his years or is it really more blocking and tackling type capex trying to get a system. If this is something that can keep keep the system full of EBITDA up.

Or at least flat or is it something like actually grow your EBITDA base.

Yes. This is mackie again.

As you see there's a range there so there are.

Projects that are in the works and we will be.

Building those we have contracts that back home, but we also have a cushion there that gives us ability to grow with some opportunities that we already see out there some very synergistic opportunities with assets that we already have built so.

Hence the range of five to 700, the combination of deals that have already done there about a contracts and expectations of new deals.

Got it and then just on NGL volumes pretty impressive, especially under the circumstances are you guys are able to quantify how much of that was that the recovery versus pulling down some inventory and I guess, how ratable would you say that is going forward.

This mackie again.

Yeah. We're so excited about our NGL segment, both in the northeast with Mariner Marcus Hook franchise up there and as well as what's going on it at need or land.

As far as the ethane go certainly as the ethane prices, having increased and weve recover more ethane it benefits our of our NGL system. So that no doubt it's been a a shot in the arm.

We have the capability it depending on where ethane prices go where we can also reject ethane and that's a benefit to our.

Residue pipelines, but.

Where we're makes most sense is what we'll do and it's made a lot of sense over that much of this year to go into full recovery for the weekend.

Received the benefits from both transportation and fractionation of those.

Products and also of the marketing of those products in a tailgate our fracs.

Thanks, Matt that's it for me.

Our next question comes from Keefe Sandy with Wolfe Research. Please proceed with your question.

Hi, Thank you.

First I just wanted to clarify.

The remarks at the end of the prepared remarks on dapple. So.

Assuming the Army Corps allows the pipeline to continue operating without these men.

I think I heard you say could that decision now be challenged by the environmentalist set the district court.

Second on the timeline just want to confirm you said you would expect a decision on the need for and environmental impact statement I'd ended the year.

And then third just does the Army Corps still work on the is in the meantime, with the goal of getting it done by the middle of next year or.

Are they kind of on pause pending.

Appeals process.

Right.

As far as the as preparation this Thomas again.

If it's the Army corps kind of bailiwick too.

To do that work in.

At this point.

Yes, as Dakota access, we're not certain as to whether they've started that process or not.

Certain amount of prep work that could have been done, but that's I think we've kind of waiting for these decisions before really pressing on that so.

I think we're still confident that will win on the appeal process in EMEA as will be required so.

Really hadn't been on top of the burner in terms of pushing on that from our perspective as far as the field itself being hurt by the end of year I think thats.

The briefing schedule that.

It was in the order.

I think contemplates a decision pretty quickly it may well be before the of the year.

So so I think thats.

That's probably pretty certain as far as the challenge of the Army Corps decisions I think this as we all litigation the loose everything gets challenged.

Whoever wins on on the motion to run the decision so I think everything's kind of.

In flux in terms of what's going to happen next that appeals to support normal process. So.

That is your questions.

That does that's very helpful. Thank you.

Second.

Second question I guess, the company and Kelcy in particular emphasize the importance of gross as an MLP.

And today, you're coming out in giving multiple year is pretty low capex numbers. So it's really a lot tougher to grow organically with that type of capital budget. So I guess, how do you think about that and then what are the key criteria you would look for in a potential acquisition candidate and I guess most.

Importantly, I'm I'm interested in acquisitions are one of the levers you would look at for your balance sheet strategy.

To reduce leverage if you were to buy a business or company, that's less levered and can generate synergies from that.

I guess Kelsey.

You're right I mean that its largest we are those those growth capex numbers are low and that's a that's frustrating to me, but that's that's what we need to do is the right thing to do at this time due to our credit metrics.

However, I will remind everyone. It's been it's been brought up in these discussions but the the backlog of growth that's going to be coming on in the fourth quarter and into the early part of 2021 is huge and and the dollars that are going to follow that are likewise huge mackie address some of that.

With the Ngls, but theres, but theres others as well. So so we are we went through a very aggressive growth spurt and it's been it's been painful because its lasted longer than we expected and cost more than we expected, but now it's about over and and we are believed that it is as far as M&A.

I think I think most people in the sector believe that consolidation is necessary.

It is very difficult for us to even contemplating that they were really because because our units are trading. So poorly. It's just it's just hard to do however.

As I've said in the last quarter. It would certainly if any M&A that we contemplated or ultimately did I guess would would need to be de leveraging.

We would not undertake anything that was not.

Thank you.

Thank you my next question.

Michael No Peters with Goldman Sachs. Please proceed with your question.

Hey, guys just cash flow question.

The dramatic reduction in Capex I mean.

$2 billion next year in terms of lower growth Capex in it and another big chunk down or big step down in 20 to 23, assuming that slipped out how do you think about how you actually you.

EBITDA would have remained somewhere in the trajectory of where 2020 the guy it yeah.

Like where on the debt side of the balance.

Deploy and what the most optimal way to deploy it on the debt side of the balance sheet and is that the right way to think about it.

You bet, that's actually a very very very good question.

We're excited to be on a free cash flow status for next year and I will tell you that that free cash flow is earmarked toward reduction in debt.

Okay.

Yes.

Michael that answer your question I'm, just trying to tell you that you know the various buckets that you have and it's it's earmarked for that when you go type referred to free cash flow, but same in 22 and 23 meeting not just the free cash flow next year, but are you thinking about it that you're in a multi year de leveraging process.

For me the guide.

I know you're not going to give both your EBITDA guidance, but let's say, we're within the realm of where we all right. Now you have scenario flattish EBITDA are you in two or three years of continue with debt pay down with your free cash or do you think of it is at 2021 event then after that.

Let's wait.

I see this is more of the multi year like what you started the question with meaning that it's a 2021 is maturities come up next year.

Remind you once again very manageable maturities for next year of 1.4 billion, but we do have some drawn on the credit facility. So we will likewise bring that balance down but when you look at it 20 to 23 I would see that is continuing.

A lot of that goes back to the target that we've got on leverage ratio of that four to four and a half tops.

Got it thanks, how much appreciated.

You bet.

Our next question comes from Becca Followill with U.S. Capital Advisors. Please proceed with your question.

Good afternoon.

Back on dapple, assuming that the court maintains a decision not an easy I ask this required how do you guys kind of handicapper view that development.

On July potential Biden administration.

This time as again you know, it's it's really hard to speculate on that it's.

It's probably has different opinions on what might happen. So it's just it's just hard to speculate.

Okay. Thank you.

Okay.

At this time I would like to turn the call back over to Mr., Tom long for closing comments.

Once again, we thank all of you for joining us today, and we really look forward to answering your questions follow up questions. After this call.

Thanks, so much.

Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and thank you for your participation and have a great day.

[music].

Greetings and welcome to energy transfer second quarter earnings call at this time, all participants Ronnie listen only mode.

Question answer session will follow the formal presentation, if anyone should be quite operate assessed warnaco Fritz. Please press star then well on your telephone keypad.

A reminder, this conference being recorded.

Like the trying to call today to mid to long CFO.

Thanks, Sir you may begin.

Thank you operator, and good afternoon, everyone and welcome to the energy transfer second quarter 2020 earnings call and thank you for joining us today.

I'm also joined today by Kelcy Warren Mackie Mccrea and other members of the senior management team who are here to help answer your questions. After our prepared remarks.

These statements are based on our current beliefs as well as certain assumptions and information currently available to US and are discussed in more detail not quarterly report on our form 10, Qs and the second quarter 2020.

I'll also refer to adjusted EBITDA distributable cash flow our DCF.

And distribution coverage ratio all of which are non-GAAP financial measures.

We'll find a reconciliation of our non-GAAP measures on our website.

And we expect our Kent you to be filed Tomorrow August six.

Let me start today with a short update regarding our operations. The cobot 19 pandemic continues to impact how we go about our daily lives and how business is conducted however, I am pleased to say that today, our field operations have continued uninterrupted.

This is a testament to the hard work of our employees, who remain focused on the safe and efficient operations of our assets during the stressful times.

Now turning to the second quarter 2020 highlights.

$448 million during the second quarter, Kogan, 19, pandemic and the associated drop in crude oil prices led to significant volume shut ins.

Many of the producing regions in the country.

We've also seen a reduction in spreads on our crude and natural gas pipelines from the Permian to the Gulf coast as well as crude spreads from the Bakken to the Gulf Coast.

Offsetting these headwinds our NGL segment continued to set records during the second quarter, whether transportation volumes, reaching new highs, primarily driven by record volumes on our Mariner east system as well as strong volumes across our Texas NGL pipelines.

And our fractionation volumes reached another record during the quarter due to the addition of Frac seven earlier this year.

In addition, gathering and processing volumes on our Midland Basin sets them also reached new highs near the end of the second quarter now turning to our 2020 outlook as the energy industry continues to face demand destruction. Another challenges associated with the cobot 19 pandemic due to the uncertainty of the pace of recovery we.

We are revising our 2020 adjusted EBITDA guidance range to 10.2 billion to $10.5 billion. This reflects our latest expectations. During these unprecedented times, including a slower recovery.

And initially forecasted.

Its current production volumes in the Midland basin through our processing plants volumes across the Mariner east complex and volumes through our Texas NGL fractionation assets.

Our all currently above pre co bid levels.

To help offset some of the impacts from lower volumes in certain basins.

Narrower spreads and lower commodity prices.

Operationally, we continue to seek out opportunities to leverage our extensive infrastructure to drive operational efficiencies and optimize our assets where possible.

As we mentioned on our last call we have undertaken cost reduction measures both in our corporate offices as well as our field operations.

Year to date, we have already recognized approximately 200 million dollarss and GE in a and Opex savings and we now expect to achieve cost savings of approximately $400 million for full year 2020 relative to our budget.

We also continue to carefully evaluate our growth capital expenditures.

Given the current state of our industry and the number of assets that are not fully utilized across the midstream space today.

Our evaluation process for new projects is very stringent and our threshold for returns it's the highest it has ever been.

That being said upon further review of project spend today completion dates and the economic impact of delaying particular projects. We now expect our 2020 growth capital expenditures to be approximately $3.4 billion. This represents a reduction of $200 million from our previous guidance.

Alright, total reduction of $600 million from our original guidance of $4.0 billion and is primarily related to delaying some growth capital spending.

Approximately 80% of the growth capital spend in 2020 will be spent on projects that are expected to be in service in 2020 or early 2021.

This includes Mariner east the Lone Star Express expansion and the orbit and other NGL export projects at Nadler.

As we think about our future capital spend we currently expect our 2021 growth capital expenditures to be approximately $1.3 billion and we now expect growth capital in 2022.

2023 to be in the range of $500 million to $700 million per year.

We remain committed to generating free cash flow and still expect the free cash flow positive in 2021 after growth capital and equity distributions.

Looking more closely at our growth projects I'll now walk you through recent developments.

We now expect this additional capacity to be in service in the third quarter 2021.

Next the Ted Collins link is an efficient way to increase the utilization of existing assets, while providing market connectivity between our neighbor Island and Houston terminals.

Moving to Mariner East system.

I am pleased to say that we saw the highest average quarterly volumes yet through the Mariner East pipeline.

With volumes for the first half of 2020 up nearly 50% over the first half of 2019.

Utilization of our Mariner pipelines and our Marcus Hook terminal continues to increase with record amounts of propane and butane transported through the pipelines.

We're also seeing strong ethane utilization, which is expected to grow in the fourth quarter of this year. The system continues to demonstrate flexible optionality for shippers with multiple.

Local market connections for ethane propane and butane.

Customers at Marcus Hook are currently taking advantage of this flexibility by placing barrels for the upcoming winter season into local markets a.

Additionally, our Mariner system will have the ability to bring natural gasoline to Marcus.

Our gasoline blending and local consumption by early 2021.

Domestic and international demand for all natural gas liquids has remained strong even while motor fuel demand has waned because kogut 19.

We are eagerly awaiting the net significant phase of the Mariner East project, which we now expect to be in service by the end of this year with the final phase completed and the second quarter of 2021.

Also our 50000 barrels per day expansion at the Marcus Hook terminal will provide additional chilling and storage capacity and is expected to be in service in the first quarter 2021.

Now looking at moving the Lone Star and looking at Frac seven was placed into service in the first quarter of this year and began ramping up all seven of our Fracs are running full today.

We're in the final stages of construction on our 24 inch 352 mile Lonestar Express expansion.

Which will add over 400000 barrels per day of NGL pipeline capacity from the Permian Basin to the Lone Star Express 30 inch pipeline South of Fort Worth Texas.

We continue to expect the expansion to be in service in the fourth quarter of 2020.

LPG demand has remained strong and our LPG expansion projects in the.

We'll bring our total export capacity to approximately 500000 barrels per day by the end of 2020.

Further integrating our Mont belvieu assets with our needle in assets.

Construction of our orbit ethane export joint venture with satellite petrochemical who is a great partner is nearing completion.

It's 180000 barrels per day project will be ready for commercial service in the fourth quarter of this year with the first ships arriving in November for commissioning.

Now, let's take a closer look at our second quarter results consolidated adjusted EBITDA was $2.44 billion compared to $2.83 billion for the second quarter of 2019.

The change from the prior period was primarily due to the impact of lower volumes and prices among several of our core operating segments.

DCF attributable to the partners as adjusted was $1.27 billion for the second quarter compared to $1.6 billion for the second quarter 2019. This is primarily due to the decrease in adjusted EBITDA.

Distribution coverage ratio for the second quarter was 1.54 times.

In July energy transfer announced a distribution of 30 and a half cents per common unit for the second quarter.

Or $1.22 per common unit on an annualized basis.

This distribution is consistent with the first quarter of 2020 and will be paid August 19 to unit holders of record as of the close of business on August is setup.

Looking at our results by segment for NGL and refined products adjusted EBITDA was $674 million compared to $644 million for the same period last year. This increase was primarily due to record NGL transportation and fractionation volumes, which were partially offset by decrease in terminal.

Services margin.

On our pipelines out of the Permian Basin, and North Texas regions as a result of higher liquids production from both wholly owned and third party gas plants.

Second quarter average fractionated volumes increased to 836000 barrels per day compared to 701000 barrels per day for the second quarter of 2019.

Now for our crude oil segment, adjusted EBITDA was $519 million compared to $752 million for the same period last year.

Pricing conditions.

These items were partially offset by contributions from the semgroup assets as well as a positive inventory valuation adjustment of $14 million compared to the second quarter of 2019.

For midstream adjusted EBITDA was $367 million compared to $412 million for the second quarter 2019. This was primarily due to lower NGL and gas prices, which impacted results by $39 million as well as a decrease related to volume shut ins and so.

In North, Texas, which were partially offset by $23 million reduction in operating expenses.

Gathered gas volumes were $13 million MBT use per day compared to $13.1 million MMP do use per day for the same period last year.

Lower volumes in South and West, Texas, where nearly offset by volume growth in the northeast and the addition of Semgroup assets in the mid continent Panhandle region.

And our Interstate segment, adjusted EBITDA was $403 million compared to $460 million for the second quarter 2019.

This was primarily the result of additional revenue recognized in the second quarter of 2019.

As well as lower rates on LNG that we mentioned on our last call and less capacity, so on our Panhandle and trunk line systems.

These were partially offset by increased margin from the transwestern system due to increased demand and firm transportation.

As far intrastate segment, adjusted EBITDA was $187 million compared to $290 million in the second quarter of last year.

Merrily due to lower revenue from the pipeline optimization activities as a result of these significant drop in spreads.

Beginning in 2021, we expect to have less exposure to spreads as we have locked in additional volumes under long term contracts with third parties.

Moving onto a capex update.

For the six months ended June Thirtyth 2020 energy transfer spend approximately $1.8 billion organic growth projects, primarily in the NGL and refine products and midstream segment.

Excluding sun and USA see Capex.

And as I mentioned earlier for full year 2020, we now expect to spend approximately $3.4 billion on organic growth primarily in the NGL on refined products in midstream segment of which approximately 80% will be on project expected to be in service in 2020 or early 2021.

And we currently expect our 2021 growth capex expenditures to be approximately $1.3 billion.

And growth capital in 2022 at 2023 to be between 500 and $700 million per year.

Looking briefly at our liquidity position as at June Thirtyth 2020, total available liquidity under our revolving credit facilities was approximately $2.9 billion and our leverage ratio was 4.29 for the credit facility. As a reminder, we have no additional maturities in 2020 and looking ahead.

Ed we have a very manageable maturities of $1.4 billion in 2021, we continue to target a rating agency leverage ratio of four to four and a half times.

In conclusion, the second quarter, we solve challenges with some volumes picking up across a number of our assets and our Mariner East pipeline recently, reaching new highs. We expect this positive momentum to continue as we entered the second half of the year.

Throughout the remainder of 2020, we will continue to look for efficiencies and optimization opportunities across our footprint and are fully integrated multi product assets are well positioned as our industry works towards a recovery.

In addition, we anticipate further ramp up of our recent projects to contribute additional near and long term value.

And above all we continue to emphasize safety and project execution and we are continually impressed by our employees dedication and resilience during these challenging times.

This is Tom Mason, the general counsel of energy transfer and what to inform you that we just received the decision related to our motions to stay from the court of Appeals.

We are still reviewing this decision, but the good news is that the court of Appeals granted our state of the portion of District Court order they required to go to access to shut the pipeline down in Mds oil.

The court of Appeals also denied a state of the other part of the District Court order, which vacated the east for the pipeline Lake Hawaii.

As a result, no court order South Dakota access from continued to operate the pipeline.

The court of Appeals contemplates further proceedings at the district Court following determination by the Army Corps under its regulations regarding the continued operation of the pipeline.

In light of the either being vacated the court of Appeals also ordered an expedited schedule for determining the merits of the appeal by the Army Corps and Dakota access as to whether environmental impact statement will be required.

This really is expected by the end of the year, we will continue to review the substance of today's court decision.

And we will need to run the course with this litigation we believe our legal positions are strong and we're confident that pipeline will continue to operate.

With this I turn it over the operator.

Opened our first question.

Thank you at this time, we will conduct a question answer session if you'd like to ask a question. Please press star one on your telephone keypad.

Commission on indicate your line is on a question Q.

You May press star too if you like to remove your question from the Q.

For participants you. This week, we equipment it may be necessary to pick up your handset before present this dark Keith once again, that's all I want to ask a question at this time one month, while we pull for first question.

First question is from Shneur Gershuni with you'd be act. Please proceed with your question.

Hi, good afternoon, everyone.

I realize the good news is very rational.

It sounds like your update was pretty straight forward, there so I won't be labor it.

Maybe to pivot a little bit here.

The guidance update that you provided today.

Tom I was wondering if you can give us a little bit more color on what's moving the guidance down what are the puts and takes and was there anything related to dapple as part of this I really dapple decision just came in as you are basically hitting the send button on the press release.

You bet, let's start with the the last body last part of your question generic first off.

Nothing related to dapple was.

Pertaining to the guidance updated guidance that we had I will say that when you really look look out of what we were.

What caused our probably what drove the reduction was really the basically the volumes and the spreads we were looking at the assumptions.

We were looking at the assumptions and the forward curve. When you really look out so I'd say that probably driven as much as any you can see really from a crude oil as well as the.

Intrastate, where the two primary segments.

Okay fair enough.

Maybe a follow up question the heading into this year.

There was a path for de leveraging the goal was four and a half times, obviously, Colgate and Opac is kind of the rail dad.

Can you talk about your path for how you think you'll get there on a go forward basis.

How youre thinking about distribution versus the investment grade credit rating. If we were to hit that crossroads, just kind of interested in year overall thoughts with respect to Bose.

Leveraged down and clearly the distributions or a topic when we discuss how to get the leverage now.

Okay Fair enough and then maybe one last question just since you brought up the Capex.

The commentary you put out today was for Gary material step down in Capex for for 21 and into 22 in 23, you've already touched 600 million so far this year.

And it sounds like in your prepared remarks, Mariner East II is actually moving ahead faster than expected.

Yes.

I realize that's a lot.

We've accomplished.

But are there any opportunities to cut capex further and I was sort of thinking along the lines of your contracting and labor costs, telling Dale or is there equipment costs could there are still be a little bit more to go in terms of lower costs and lower capex.

We're going to continue to to evaluate it but I would not guide you to lower lower amounts at this time, but clearly as we continue through the rest of the year, we'll update as we go but right now would or wouldn't guide you to any lower numbers.

Perfect.

Obviously have a lot more questions, but all let's step back into the queue really appreciate your talk today six day.

Our next question comes from Jeremy Tonet with JP Morgan. Please proceed with your question.

Hi, Good morning. Good afternoon here just wanted to follow up with the the credit side and just kind of curious what you calculate your leverage is on a rating agency basis.

And I want to get better color on kind of the path of how long it takes you to get into that.

Well, let you as you know each agency has their own metrics they use for how they calculate that.

Got it.

Fiveish range, depending on which.

Five to five and a half depending on which agency you're looking at scale.

Got it.

That's helpful. Thanks, and then just.

Want to make sure as we're thinking about it for modeling purposes, only thinks about kind of contango.

Or other opportunistic gains you might have.

Recognized in the quarter did they all show up in Twoq or could they show up over the balance of the year as well just trying to think of how that might be booked.

Yes may take advantage of those later this year, if the opportunity arises otherwise those who will take advantage of those in the first quarter of next year.

Great. That's helpful. Thank you very much.

Our next question comes from local food on with Bank of America. Please proceed with your question.

Good afternoon, guys. This is as well thank Mike Thanks for taking my question.

First one wanted to touch on cost savings.

You'd noted.

Approximately 400 million in savings that you expect realizing.

80, 20, just wanted to get a sense of how much of that is a function of just.

Your volume driven expenses.

Really tried to get at how much of that would be reasonable going forward.

You bet when you really look at it it's a it's a combination of both.

DNA as well as operational expenses.

As far as being able to continue with that clearly that's that's what our plans are is to be able to to look at this but.

As the assets continue to ramp up as we look into next year et cetera. The operational expenses will go along with that but I would say that want to commend all the all the energy transfer team on what they've done to be able to bring down bring down these cost, but it is a blend of both like I said DNA as well as.

Operation expense.

Got it thanks.

Second question.

Trying to get your costs on the asset Monetizations at this point as one of the levers for de levering.

Appetite lowber, which have been under consideration in the past does.

Profile.

Nat gas pipelines that have recently treated.

Would you be able to comment on what your thoughts are on how you see the market today and your level of interest in using the school.

Well, we will not comment on specific asset like that but I will say, we've been pretty open about.

Compression.

Investment in USA compression, we're not going to do anything that would ever harm the value of the units, but that is something that we continue to evaluate.

As far as that position goes the units that we hold as well as the general partner.

But overall, we we don't have really all along other list of assets that were working on that we're evaluating from that standpoint.

Understood. Thanks very helpful.

Our next question comes from Pearce Hammond with Simmons Energy. Please proceed with your question.

Good afternoon, and thanks for taking my questions I, just want to follow up on the prior question.

But more specifically in light of the Berkshire Hathaway Dominion transaction do you see an attractive environment to divest assets is there more interest or his kind of covert thrown a wet blanket on that.

It's interesting because prior to the downturn that that we've experienced flick. The coven impact. We've had there was clearly a lot of calls that came in.

Okay. Thank you Tom and then as a follow up are you hearing from your customers are they actively look into blend and extend contracts and so what's the environment like for lab.

This is mackie.

There are some of those out there and we've made it public that we've been pretty aggressive over the last year or two of doing that.

That's kind of hit us little bit and this year, because we took took away a little bit revenue. This year for extended contracts that were ending in the next year to extend it goes out several years, but I would say that were not as focused on that right now.

Primary focus right now for from a commercial standpoint is getting all these assets online in the northeast and and the need or Len and filling them up as quickly as possible. So we're really not looking at a lot of the blend and extend at this point.

Thank you Mackie.

Okay.

Our next question comes from GE sounds Levy with Bernstein. Please proceed with your question.

Hi, I thoroughly reference with a reduction of 117 million in the Crane segment in the quarter due to the Bakken pipeline, but I was under the impression that Apple with almost fully constructed on that in person Ron they're worried that well shut ins I guess, a valid reason to not town take or pay.

Okay.

This back again no your impression is correct Wi.

570000 barrels a day, we have sold that out however, it has different components to it. It does have an MVC component and then it also has a flex component for a lot of our foundation shippers and then of course that has the walk up capacity.

And then the way our impacts our revenues is depending on how the customers use that flat.

Capacity it does have some impact from quarter to quarter, depending on the the amount of volume that they actually flow.

Okay are the only pay you for the component eventually or is that more of that.

Yes.

Yes, they havent MVC mouth that they required to pay us where they flow it or not but they have the ability to flex it and they can flow and up a month.

Our a quarter past the quarter that were in that but yes. There is a set volume that there are guaranteed to pay on an annual basis, regardless of what they flow.

Okay. So some of that flex should check hopefully come back in the next couple of quarters.

That's correct.

Okay. That's helpful. Thank you.

And then I know you it sounded like from your commentary that satellite project, but still on track from customer sites, but I just wanted to confirm that and also to see how you expect the ethane volumes to ramp.

Over time on their side my understanding is that they're building one of the cracker the share and then one next year, so it'd be kind of a slow ramp on the up inside but wanted to confirm that.

Yes, we're so excited about the our ethane projects.

You probably saw here three or four days ago, we lowered our first VLCC up at Marcus Hook facility of almost 800000 barrels of ethane.

As far as satellite goes in Netherlands, Everything's on track they've done a tremendous job getting their facilities built getting their shift ordered and ready to go. So we're very excited about that project. They will have a cracker on by the into this year as you heard earlier, we will be commissioning of our facility with a ship of theirs.

In November as our expectations and then yes.

The latter part of the first quarter first part of the second quarter I believe there second crackers coming on so.

As we say retire what great partners, they've been a pleasure to deal with Theyve done everything they said they would do.

And now the first time and needle and we'll be bringing on 180000 barrels per day of ethane capacity primarily for them. However, we are chasing other markets. We do anticipate fill on ethane to other third parties.

As early as the first quarter of next year, and we'll do everything we can to fully utilize that facility on daily basis, depending on what satellite actually pulls on daily basis.

Okay. Thanks, a lot.

Okay.

Our next question comes from Spiro doing this with credit Suisse. Please proceed with your question.

Afternoon, guys first question just want to go back to the 2022 plus capital spending wondering how you described the nature that spending is that part a larger scale multiyear projects that are flowing through his years or is it really more blocking and tackling type capex trying to get a system. If this is something that keep keep this system full of EBITDA.

Or at least flat or is it something that can actually grow your EBITDA base.

Yes. This is mackie again.

As you see there's a range there so there are.

Projects that are in the works and we will be.

Building those we have contracts that back home, but we also have a cushion there that gives us the ability to grow with some opportunities that we already see out there some very synergistic opportunities with assets that we already have built.

So.

Hence the range of five to 700 is the combination of deals that are already done that are backed by contracts and expectations of new deals.

Got it and then just on NGL volumes pretty impressive, especially under the circumstances are you guys are able to quantify how much of that was that the recovery averse pulling down some inventory and I guess, how ratable would you say that is going forward.

This mackie again.

Yeah. We're so excited about our NGL segment, both in the northeast with Mariner Marcus Hook franchise up there and as well as what's going on it at need or land as far as the ethane go certainly as ethane prices, having increased and weve recover more ethane its benefits are up our NGL.

System, so that no doubt it's been a shot in the arm.

We had the capability it depending on where ethane prices go where we can also reject ethane and that's a benefit to our.

Residue pipelines, but.

Where we're makes most sense is what we'll do and it's made a lot of sense over much of this year to go into full recovery. So that we can.

Received the benefits from both transportation and fractionation of those.

Products and also of the marketing of those products in the tailgate our fracs.

Thanks, Matt that's it for me.

Our next question comes from Keith Standing with research. Please proceed your question.

Hi, Thank you.

First I just wanted to clarify.

The remarks, the end of the prepared remarks on dapple so.

Assuming the Army Corps allows the pipeline to continue operating without these men.

I think I heard you say could that decision now be challenged by the environmental instead the district court.

Second on the timeline.

Just want to confirm you said you would expect a decision on the need for an environmental impact statement by the end of the year.

And then third just does the Army Corps still work on the is in the meantime, with the goal of getting it done by the middle of next year or.

Are they kind of on pause pending the appeals process.

As far as the has preparation this Tom thanks again.

It's the Army Corps kind of bailiwick too.

To do that work in.

At this point.

Yes.

Good access we're not uncertain as to whether they started that process or not.

Certain amount of prep work that could have been done, but that's I think we've kind of been waiting for these decisions before really pressing on that so.

I think we're still confident that will win on the appeal process and EMEA as will be required so.

It's really hadn't been on top of the burner in terms of pushing on that from our perspective as far as the field itself being hurt by the end of year I think thats.

The briefing schedule that.

As in the order.

I think contemplates a decision pretty quickly that may well be before the of the year.

So so I think thats.

That's probably pretty certain as far as the challenge of the Army Corps decisions I think as with all litigation the loose everything gets challenged.

Whoever wins on on an emotional decision so I think everything's kind of.

In flux in terms of what's going to happen.

That appeals to support the normal process. So.

That answer your questions.

That does that's very helpful. Thank you.

Second.

Second question I guess, the company and Kelcy in particular emphasize the importance of growth as an MLP and today you're coming out.

Giving multiple year is pretty low capex numbers. So it's really a lot tougher to grow organically with that type of capital budget. So I guess, how do you think about that and then what are the key criteria you would look for in a potential acquisition candidate and I guess, most importantly, I'm interested in.

Acquisitions are one of the levers you would look at for your balance sheet strategy.

To reduce leverage if you were to buy a business or company, that's less levered and can generate synergies from that.

Yes Chelsea.

You're right I mean that for its largest we are those those growth capex numbers are low and that's a that's frustrating to me, but that's that's what we need to do is the right thing to do at this time due to our credit metrics.

However, I will remind everyone. It's been it's been brought up in these discussions but with the the backlog of growth that's going to be coming on in the fourth quarter and into the early part of 2021 is huge and and the dollars that are going to follow that are likewise huge mackie address some of that.

The Ngls, but theres, but theres others as well. So so we went through a very aggressive growth spurt and it's been it's been painful.

Yes, its lasted longer than we expected in costs more than we expected, but now it's about over and and were believed that it is as far as M&A.

I think I think most people in the sector believed that consolidation is necessary.

It is very difficult for us to even contemplate anything really because because our units are trading so poorly. It's just it's just hard to do however.

As I said of the last quarter. It would certainly if any M&A that we contemplated or ultimately did I guess would would need to be de leveraging.

We would not undertake anything that was not.

Thank you.

Thank you. My next question comes from Michael No Peters with Goldman Sachs. Please proceed with your question.

Hey, guys, just a cash flow question.

With the dramatic reduction in Capex I mean.

$2 billion next year in terms of lower growth Capex center, and another big chunk down or big step down in 20 to 23, assuming that slipped pipe out how do you think about how you actually you.

EBITDA would have remained somewhere in that trajectory of where 2020 the guy it how do you actually.

Like where on the debt side of the ballot.

Deploy it what's the most optimal way to deploy it on the debt side of the balance sheet.

And is that the right way to think about it.

You bet, that's actually a very very very good question.

We're excited to be on a free cash flow status for next year and I will tell you that that free cash flow is air mark toward reduction in debt.

Okay.

Yes.

Michael that answer your question I'm, just trying to tell you that.

Various buckets that you have and it's it's earmarked for that when your type referred to free cash flow, but same in 22 and 23 meeting not just the free cash flow next year, but are you thinking about it that you're in a multiyear de leveraging process.

EBITDA.

I know you're not going to give more your EBITDA guidance, but let's say, we're within the realm of where we all right now.

Scenario flattish EBITDA are you in two or three years of continue with debt pay down with your free cash what do you think of it is at 2021 of that and then after that so let's wait and see.

I see this is more of the multi year like what you started the question with meaning that it's a 2021 is maturities come up next year.

I remind you once again very manageable maturities for next year of 1.4 billion, but we do have some drawn on the credit facility. So we will likewise bring that balance down but when you look at it 20 to 23 I would say that is continuing.

A lot of that goes back to the target that we've got on leverage ratio of that four to four and a half tops.

Got it right how much appreciated.

You bet.

Our next question comes from Banco follow with US Capital Advisors. Please proceed with your question.

Good afternoon.

On dapple, assuming that the court maintains a decision not at the I ask this required how do you guys kind of handicapper view that development.

Potential Biden administration.

This time, it's again, it's it's really hard to speculate on that it's.

It's probably has different opinions on what might happen. So it's just it's just hard to speculate.

Okay. Thank you.

Okay.

At this time I would like to turn the call back over to Mr., Tom long for closing comments.

Once again, we thank all of you for joining us today, and we really look forward to answering your questions follow up questions. After this call.

Thanks, so much.

Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and thank you for your participation and have a great day.

Q2 2020 Energy Transfer LP Earnings Call

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