Q1 2021 Plains All American Pipeline LP and Plains GP Holdings LP Earnings Call
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Good day, and thank you for standing by welcome to the PAA and PAGP first quarter 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session and from there, but they're supposed to ask a question you will need to press star one on your.
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If you're a speaker today, where a lumber. Please go ahead. Thank.
Thank you Joseph Good afternoon, and welcome to Plains, All American its first quarter of 2021 earnings call. Today's slide presentation is posted on the Investor Relations website under news and events section of Plains, All American Dot Com, where audio replay will also be available following today's call.
Later this evening, we plan to post our earnings package to the Investor Kit section of our IR website, which will include today's transcript and other reference materials important disclosures regarding forward looking statements and non-GAAP financial measures are provided on slide two of today's presentation, a condensed consolidating balance sheet for PAGP and other reference materials are located in the appendix.
Yes.
Today's call will be hosted by Willie Chiang Chairman and CEO and Al Swanson Executive Vice President and CFO. Additionally, other members of our executive team are available for the Q&A portion of today's call, including Harry Bufano, President, Chris Chandler Executive Vice President and Chief operating Officer, and Jeremy Goebel, Executive Vice President and Chief commercial officer as a.
Well, it's Chris herbal senior Vice President and Chief Accounting Officer with that I will now turn the call over to William Thanks.
Thanks, Ryan and thanks to each of you for joining US. This evening, we plan to keep our prepared comments brief a.
We continue to make solid progress on our plants reporting first quarter results that exceeded our implied expectations by roughly $50 million generating strong free cash flow maintaining full year 2021, adjusted EBITDA guidance at plus or minus 2.15 billion and advancing a number a key objectives on.
Note that our full year guidance incorporates an estimated 25 million net benefit from winter storm Winter storm Yuri Al will provide more detail on our results and outlook in his section on the call I'll plan to focus my comments today on our longer term positioning.
We are increasingly constructive and our outlook for global energy demand recovery.
Vaccinations are progressing he world economies, a reopening and global inventory levels have drawn down meaningfully.
On a supply side, a combination of opec's discipline recent increases in Permian activity levels, and our ongoing dialog with producers reinforces our confidence in the Permian to resume growth in the back half of 2021, and importantly building momentum into 2022 and beyond as global supply and <unk>.
A manned balance improves.
We expect the Permian to exit 2021 at four 4% to $4 5 million barrels a day, which is an increase of 200, a 300000 barrels a day from year end 2020 to year end 2021 now.
Notwithstanding our constructive bias, we chose to maintain our 2021 adjusted EBITDA guidance a $2. One 5 billion at this time due to the combination of the timing matters that al will cover and the fact that our constructive view of the fundamentals is weighted towards the end of the year.
For P. A a we believe 2021 represents a meaningful cash flow injection point.
As illustrated on slide four we've increased our free cash flow estimate by $100 million and now expect to generate plus or minus 400 million after distributions and excluding asset sales were.
We remain confident in our ability to achieve our 2021 asset sales target of.
$750 million, having continued to progress formal sales processes with a strong levels of interest and engagement in.
Including targeted asset sales are projected free cash flow after distribution growth to 1.15 billion.
Beyond 2021, maximizing free cash flow will continue to be our focus we expect to generate sizable levels a free cash flow after distributions over a multiyear period.
And any further asset sale proceeds would be additive.
We plan to continue allocating free cash flow after distributions in a balanced manner with a near term focus on debt reduction and a larger percentage shifting over time to equity holders through a combination of share repurchases and our distribution increases. We believe this balanced approach a strengthening our balance sheet, while also increasing.
<unk> cash return to our equity holders offer a meaningful value for our current and prospective investors.
Our long term cash flow visibility is bolstered by the substantial completion of our multi year system build out resulting in a significantly lower capex profile going forward, which is illustrated on slide five.
We continue to exercise discipline limiting our investment capital to must do no regrets opportunities and relative to a prior estimates we have further reduced our 2021 investment and maintenance capital expectations by $65 million, a roughly 10% a high level overview on the status update for our two key <unk>.
Remaining projects Wink to Webster and the Diamond expansion cap line reversal are located within the appendix of today's presentation.
That I will turn the call over to al.
Thanks, Willie as shown on slide six our first quarter fee based adjusted EBITDA, a $559 million exceeded expectations and was in line with fourth quarter 2020.
First quarter results benefited from lower power costs, including gains on power hedges and a stronger results in a natural gas storage business as well as some lower operating expenses that are timing related and we expect to incur later in the year.
These benefits more than offset the revenue impact of a storm related downtime across our Texas and mid Con pipeline systems as well as lower realized revenue at certain non hub crude terminals and Canadian NGL facilities.
Before I get into the performance relative to our guidance and to a level set everyone. Our first quarter supply and logistics was expected to be weaker than normal because NGL margins for the quarter were locked in during the second half of 2020 and did not reflect the rising prices during the first quarter looking for.
Forward, our NGL margins for the balance of the year are a little lower than the current market.
But are in line with historical margins.
Focusing on the first quarter adjusted EBITDA of a negative $13 million was below our guidance for the quarter. The primary drivers from the underperformance, where a combination of the negative impact of winter storm, Yuri and less favorable crude oil differentials in both the U S and Canada.
The impacts of winter start on Murray extends into the second quarter as inventory builds on the Gulf coast compressed crude differentials in the U S. Additionally.
Additionally, despite proration levels in Canada being in line with our expectations. We continue to see differentials that are less favorable than we originally anticipated.
As Willie noted earlier, we generated strong free cash flow after distributions, which totaled $511 million for the first quarter.
Free cash flow fluctuates based on changes in and the timing of short term working capital requirements. While the first quarter benefited from these items, even after adjusting for them, we were able to increase our forecast for the year by a $100 million.
Our capitalization and liquidity metrics are provided on slide seven as of March 31, our long term debt to adjusted EBITDA ratio was four <unk> times, which is above our target range of three to three five times and re a reinforces our focus on further debt reduction.
Additionally, we exited the quarter with $2 $8 billion a committed liquidity.
As outlined on slide eight we increased our fee based 2021, adjusted EBITDA guidance by a net $25 million and decreased our ethanol segment guidance by a similar amount, resulting in our overall 2021 adjusted EBITDA guidance remaining unchanged.
Plus or minus 215 billion.
This slide summarizes some of the drivers of the changes for each segment.
I would note that the change in inter segment NGL fees was approximately $40 million for the full year, which reduces our facilities segment adjusted EBITDA with a corresponding increase to SNL.
Before returning to the call a Willy slide nine summarizes the equity repurchase program that we initiated in November although we did not make equity repurchases in the first quarter.
Our capital allocation plans remain consistent with allocating up to 25% of our 2021 free cash flow after distributions to equity repurchases.
The ultimate total allocation pace and timing, we will continue to be balanced as described on slide nine.
With that I will turn the call back over to Willie.
Thank you al.
We've turned a meaningful corner with respect to free cash flow generation.
And we expect to enhance unitholder value by generating significant levels of free cash flow over a multi year period, and we will continue to allocate free cash flow to the benefit of a unit holders.
We are increasingly constructive on a long term outlook of North American energy, including our business as global demand continues to recover.
Meanwhile, our focus continues to be maximizing our free cash flow through optimizing and rationalizing our systems.
Working with customers partners and peers to align interests and streamline a rationale rationalize excess capacity.
Wearing a cost of operations advair.
Advancing our sustainability program and above all delivering safe reliable and responsible operations.
Recap of our 2021 goals are outlined on slide 10, followed by a summary of key takeaways from today's call provided on slide 11.
We appreciate your investment in and support appliance and we look forward to providing you with additional updates on our continued progress with that I will turn the call over to Roy to lead us into Q&A. Thanks, Louis as we enter the Q&A session. Please limit yourself to one question and one follow up question on return to the queue. If you're a additional follow ups. This will allow us to address the top questions from as many participants.
As a practical in our available time this afternoon.
Additionally, our Investor relations team plan to be available throughout the week to address additional questions. Joseph we're now ready to open the call for questions.
Thank you presenters once again further participants you May press star one on your telephone keypad.
And then we have our first question from junior.
Your line is open.
Hi, good afternoon, everyone.
Maybe to start off I was wondering if you can sort of reconcile.
<unk> for me a little bit here.
Overall, you had a strong quarter.
Certainly better than than you had guided from a fee based perspective.
Our commentary on the call today definitely more constructive than it was last time, you talked about building momentum it.
It sounds like you're a production forecast for the Permian back half weighted but it's certainly better than so kind of on the math.
You kind of beat expectations by $60 million gets you a fee base guidance is only up about 25.
Yeah.
He's got an election of conservatism I'm thinking you had mentioned the word election before.
Or is there a degradation in the base business.
Is something happening in the back half a year I was wondering if you can just sort of.
Spanned on on that for us.
You can.
Thanks, Shneur I'll start off on that I'll, let Jeremy and Harry kind a fill in the blanks. When you think if your question is around the full year. Our adjusted first quarter was a focused on just a first quarter.
It's a ran the full year I mean at the end of the day, you beat expectations, but you maintained guide, which seems to imply even on the fee based basis seems to imply that you are expecting a worse back half of the year, but you.
Talk about momentum.
And positive commentary. So I was just trying to figure out if you can square that if that's conservatism or if that or if there's something that we need to be thinking about yes.
Yes, Shneur, let me start and then others, who can jump in here.
Made a comment in my prepared comments, if you think about the benefits of the and we got based on a storm.
It's really $25 million across a whole, it's 25 million from the year.
And that's related to some of the shifting in the impacts of the storm shifting into SNL and I think that'll be a good starting point, maybe for Jeremy to comment a bit more.
That's an engineer.
It's a bit of an acceleration we saw some benefit in the first quarter that $50 million that you mentioned is driven by the transportation segment seeing additional are lower operating costs somewhat offset by a lower volumes and our facilities segment benefiting from.
Some opportunistic around our NGL facilities part of that involves some operating expenses close to $5 million to $10 million that was deferred to later in the year, just because of timing and interruptions.
In Q1, so that.
As part of that net 50 going down to 25. The other component a is driven by ethanol there were some impacts of.
They were pushed into the second quarter and even further based on market spreads and timing so you'd see some some of that erosion is just all a lumpiness associated with Europe. So if you say a a net impact of <unk> 25 versus 50. The other part is just wait and see on the rest of the opportunity we see completions, we see efficiencies.
But we really haven't seen the rigs accelerate faster and so we're looking to see for production growth backend weighted and we're also seeing al mentioned this as well is we're not seeing Canadian differentials widened to historical levels based on a level of proration part of Thats built into our plan and we're looking to see but as far as core.
<unk> assets and other assets are performing in line with expectations no degradation to that core business.
Okay.
That makes sense really do appreciate.
We can see aspect of it maybe.
Maybe it's a follow up question I was wondering if we can talk about the asset sale process.
If you can remind us in terms of the timing and EBITDA that you've baked into the guidance for this year.
And does this process block you out from doing any share repurchases.
Sure Hi, this is Jeremy Goebel again.
As Alan Willy both stated.
We are very confident in our ability to execute the processes. All began in the first quarter of this year, we don't want to speculate on timing more impact.
Transactions just for a second confidentiality.
But I feel very strongly on our ability to execute with regard to our targets.
Richard wanted to comment on the blackout periods. So I don't think the.
Asset sales.
The timing of that will have any impact on repurchases.
We've predicted are included that as a part of our guidance. So.
No impact on the ability to.
Effect repurchases.
Perfect. Thank you very much really appreciate the color on the clarification today.
Thanks Shneur.
We have our next question from Christine Cho from Barclays. Your line is open.
Thank you.
Sure.
Yes, Jeremy you usually provide.
Sort of like expectation for what exit rate for the year is on Permian volume.
So if we could kind a get that and.
Maybe sort of what that means for 2022 for you guys.
And in that context, how should we think about earnings growth tied to the volume to the headwind that we're going to be one year closer to some contract expirations.
At what point do you guys think about blend and extend the volumes on your system for a longer.
Jeremy Christine.
Good questions. So I will start and if I get them right I heard there is a exit rate what does that mean from momentum into 'twenty. Two and then what does that mean for our ability to contract longer term on a pipes.
The first question.
I would say that we're seeing a positive bias on drilling and rig completion efficiency manifesting themselves in a shorter cycle times on higher EUR and Thats driven by a spacing. We're seeing a february was a bit of a speed bump.
<unk>, Texas production, New Mexico production were down just because of timing on March and April came back stronger what we're seeing is an acceleration of some completions into this commodity environment.
Arent there they're pacing our original projections. So we're seeing some acceleration of production, but nothing that materially changes our outlook. So if we entered the year at $4 2 million barrels a day. Our view is four four to $4 5 million barrels a day exit.
Rigs really need to step in and for acceleration, but this goes to your 'twenty two expectations, we're increasingly optimistic about north American production, but it ultimately comes down to supply and demand, we're not going to see that material a rig ramp until you see OPEC production come out.
From behind pipe and you see demand fill that so I think there is a wait and see approach. There. That's why we're cautiously optimistic but we need to see demand response, and we need to see the OPEC barrels hit the market before youll really see a expectation. So it's really too early to call 2022, because you need to see that backfill of additional rigs.
<unk>.
To enter a material production growth I know I didn't directly answer your question, but that's how we're thinking about at this time.
With regard to blend and extends we're constantly in dialogue with our customers right now with 50% to 66, Midland MGH differentials that doesn't bode well for a re contracting at a level that we think set so what we're doing is we're staying close to our customers. We continue to add dedications of the lease.
And we're now well over $2 5 million acres with term debt continues to extend our customers a very happy with us and when those customers come back to re contract part of the big problem with a long haul pipes right now as people securing supply.
<unk> purchased over 900000 barrels a day on a very strong position when it comes to either a filling the price ourselves a rig contract. So volume is not going to be a concern in filling our price we want to do it at the right time. So I think we have levers that most don't so we'll be patient, but we're in constant dialogue, there and we'll constantly look for opportunities to rationalize across the space.
We're a.
While you say, we don't have time 2025 is a long time from now before we have any material reductions on a commitment. So we do have time to let some of this evolve because the industry understands the overcapacity and they're constantly looking for options to rationalize and we will be right in a center of those discussions.
And sales team.
Sorry go ahead no go ahead please.
I was just going to add this is Willie the key point on this just a momentum that built with our expectations and the end of 2021.
It happens at the end of 2021, but clearly if you don't build a momentum theres a longer lag time before you see the benefits and that's what where.
We're optimistic about it and we see the recovery kind of driving a.
Quicker growth trajectory into this year, if everything continues to weigh a expected too.
Okay and then.
Just because you did sort of on the comments on pipeline alright rationalization.
As we think about that.
<unk> got a conversion to cash maybe make the most sense.
Essentially you have sufficient takeaway on the NGL side.
From what I understand it doesn't sound like it's that simple to convert a liquids to gas it sounds like it requires a meaningful capex to change out pump stations and I've also heard that the diameter or needs to be at least 30 inches is that right or are there other things that these pipes could transport that require less on game just try.
You get a sense of what the options are here.
Well Jeremy Christopher on work in this geron once you start off.
Christine Thanks, Ken on the rationalization piece.
Get a natural home for takeaway as you look for forecasting in the markets.
It's a question of valuation and capital and scope. So those those get reviewed from time to time and then it's a question of how do you deal with existing contracts and existing structures on pipe.
So I think it's one of many options.
<unk>.
I mean, we're looking at anything at all options across the system and so are our peers and so I'd say just being patient. We don't have details for you on now some of the comments you made around gas are true just because a compressor.
And congrats a whole nature of the gas and fuel consumption, increasing with a smaller diameter pipes that does makes sense. So all of that gets looked at but I just need you to be patient as we as the industry works through the best options, but we're all working on it Christy.
Christian do you have any do you want to add yes. This is Chris Chandler I guess I would just confirm kind of the points you made in your initial question natural gas price are typically larger.
And they of course require a compression instead of pumps like you'd have a liquids pipe. So.
It can be done.
It's certainly a specific to the asset in question, but it's been done a number of times sometimes.
Liquid to gas on back to liquid in the history of our industry. So.
There are certainly opportunities to do it out there, but in general you have to replace the pumps with compressors and you do take a net efficiency or a capacity impact by having a relatively smaller price than you might.
Install if you were building it from scratch.
And Christine this is Willie one on one of the other benefits I think thats important to us.
It seems as if it's getting harder and harder to build assets now one of the things that we've got is a lot of operating leverage in our system, which gives us the capability to be able to evaluate some of these things perhaps more than others.
And the challenge really is if you think about capital efficiency across the industry, while it may not be perfect and if you were designing it from from scratch you'd go with on.
New lineup of a certain size in many cases, if when you factor all these other things in.
It does make a lot a sense and that's what that's what the industry is really needs to start working through.
So really helpful and maybe if I could just tack on from a follow on on all your major long haul pipes out of the Permian over a third.
A 30 inches a remark.
This is Chris channel they vary in size from 20 up to 36 inches.
Great.
Permian.
Thanks Christine.
We have our next question from Jeremy Tonet from Jpmorgan. Your line is open.
Hi, good afternoon.
Hi, Jeremy.
I just wanted to kind of dive in a little bit more on your producer conversations and what's giving you I guess the sense of confidence a cost into 2022.
It seems like the privates are a bit more active in the publics and just wondering what that means for plains. If you agree with that and you kind a see different.
Activity trends, there and what that means for you guys.
Jeremy or Jeremy Jeremy.
Jeremy Thanks again for the question.
It is consistent so the public company operators are largely holding a line and maximizing free cash flow and waiting for supply and demand.
Once.
They are investors are demanding a free cash flow going back to equity holders and paying down leverage.
The large private producers with little to no leverage.
They just see the returns and they are investing in that.
We're investing heavily in it so there is I.
I wouldn't generally say a private versus public I would say a very select group a very large privates that are very well capitalized that's the group that's hitting the accelerator and so.
They'll have some impact, but that's not all of that is driving this I think $65 a oil with a slight backwardation versus steep backwardation allows producers to hedge.
Thats more free cash flow for them to allocate so I think market structure aggregate flat price.
But there is cautious optimism on that side and there is a few select operators that are stepping out in front of the generalizations made with all of the privates first of all the public side I'd say that there's a gray area and there is a a select fewer that are really hitting the accelerator.
Got it that's a helpful. Thank you for that and.
I just wanted to pivot towards the energy transition, obviously, a very topical on getting more topical and I'm wondering if you had on your thoughts on on that subject. These days and specifically thinking about carbon capture and wondering if you see the 45 Q.
That's a written right now it was kind of a sufficient to move forward with projects. If you have existing assets that can be redeployed in that direction, just any thoughts in general would be helpful.
Jeremy This is willie on on Seo to sequestration I would tell you in transport, we have not been as active.
As far as looking at that.
Others can make a comment on it the point I would make on energy transition.
As you know our company doesn't produce a resource and we don't manufacture a product.
We have a commercial agreements to move products from point, a to b in and find solutions and so while it may have not been advancing some of the day.
And some of the advancing discussions on on specific sequestration projects, we do stay very into with a.
Our upstream and downstream.
Ours is as well as our peers, we see a lot of activity and really it's a role to figure out how can we generate.
Solutions to moving things around at this point in time again on back on <unk>, We Havent Theres nothing that we have really moved forward on but we stay there's really no news I can share with you other than that we stay tuned on on different things, we can do on energy transition.
Got it I'll leave it there thank you.
Thank you.
We have our next question from Tristan Richardson from true secure.
Securities Your line is open.
Hi, good afternoon guys.
Hi, Thanks.
Clarification question with respect to the <unk>.
Are bound a potential repurchases.
Should we think a that is inclusive.
Of asset sales to the extent they materialize throughout the year is that purely just a the.
The free cash flow after distributions guidance.
Al why don't you take that.
No.
On.
I would think of the up to 25% being the maximum but what we've articulated specifically around asset sales are that we would have to.
Take into account.
And consider the EBITDA that we're selling as well.
So as you are selling an asset part of those proceeds need to go to reduce debt just to keep leverage flat. So you got to think of it after that again, we provided to the up to 25% to give a mathematical.
A maximum but practically with asset sales it would be less than that.
And then a couple with a mid point you to the other points on on our slide nine just theres a.
Other considerations that will factored in.
We view this as a tool that will be part of our capital allocation going forward.
But there'll be a number of considerations that will come into play.
That's helpful.
I appreciate the earlier comments on on the cadence of a year.
Curious.
Is there any delta around the timing on.
<unk> asset sales.
Factoring in just a follow up on a previous question sort of.
Has the timing change within a year and in terms of general assumptions for asset sales.
<unk> two sort of debt.
Fourth quarter weighted outlook.
Interest in its Jeremy I'd say, when we don't want to speak to timing of the asset sales as we talked about earlier, but we have assumptions in there and they haven't materially changed since the beginning of the year.
Something does change we will update once we make the announcement on the divestiture.
Thank you guys very much.
Thanks Tristan.
We have our next question from Keith Stanley from Wolfe Research. Your line is open.
Thanks. Good evening, just two quick follow ups first sorry, if I missed this did you comment on the amount of asset sales completed now year to date.
Keith This is Jeremy Goebel, we've completed $20 million a asset sales today.
That's consistent with what we had.
I guess, we did that in January of this year. So that's.
A total amount of completed to date.
<unk> in progress.
Okay great.
And then the other ones I just want to understand so the lower NGL intersegment fees item.
I assume that's just you're you're lowering rates on some of the facilities that says that a debt the ethanol business uses.
And I just want to clarify I think you said facilities EBITDA misheard 40 million by this and it helps us on al by 40 for the year.
Keith that's correct. This is Jeremy.
Effectively think about it is we just charge our.
Marketing a affiliate market rates and we looked at that we make assumptions from beginning of the year impacted by a market structure and competitive rates around the area and so we made that adjustment and so it's a net neutral it's just an allocation from the facilities definitely.
Great. Thank you.
We have our next question from Gabe Moreen from Mizuho. Your line is open.
I guess my question's a.
Hey, good afternoon, everyone. Most of my questions have been asked or answered, but maybe I was just kind a talk about how how low you think you can sort of whittle down you're on.
Ongoing maintenance Capex I'm, just a capex.
Capex outside of.
What are you kind of finding those savings so far on how we might be able to pick those numbers on an annual basis.
Sure Gabe I'll, let Chris Chandler address them I gave as Chris Chandler I'll start with maintenance capital.
I said previously that we think a long term run rate for maintenance capital is less than or equal to $200 billion. We still believe that to be the case, we did update our guidance for 2000 $21 million to $180 million, a $15 million reduction theres, a number of factors driving that including.
Asset sales that have been completed and ones that are a forecasted later in the year.
We're also completing a number a multiyear improvement programs related to integrity and reliability that we won't have to spend on going forward.
Regulatory requirements continue to evolve as do best practices around inspection methodology tools and analysis. So it's a number of factors. It's by all means not a a lot.
Lack of investment or a lack of commitment maintenance or integrity.
But when the best practices are found internally or within the industry, we certainly look to apply those.
As to your question on investment capital.
We've lowered our guidance there by $50 million from 425 million a $375 million.
Likewise, there is a number of factors involved we're always looking to optimize our maintenance capital spend so some of thats a cost improvements a scope reductions timing optimization.
We will talk with our customers and if we can delay a.
A part of the scope of a particular project without a.
A financial impact or with with.
Supported a customer we will do that we have a.
Also a pushed back the startup construction for the by Hail you a project.
As a piece of the diamond expansion at the very end the 40 miles that goes from our Memphis refinery to the cash.
A cap line facility outside by helium, Mississippi, we've done that to take some time to evaluate alternatives in response to our stakeholder engagement activities that we have.
Been doing for almost two years now.
We're still planning on a startup by year end, but if the alternatives cause that to change, we'll certainly provide an update when.
Appropriate.
Hey, Gabe.
One thing I want you to takeaway from what Chris talked about is back to the maximizing free cash flow.
Goal that we all do I mean, it's part of our dialogue every day as we think about investment.
Investment Capex maintenance Capex operating costs on.
How do we maximize free cash flow right and so it is a much broader discussion and it's really taking hold.
And the business and that's why we think we will continue to have success in that area.
Thanks, Chris Thanks, Rob maybe I could just ask a quick follow up on I guess by early on extension.
If youre a timeline slips there for whatever reason because thats a liquid alternatives to the cap on contracts still kick in as expected or are those tied together somehow.
So this is Chris.
Well I'll answer that on the cap line reversal the mainline that originates a protocone ends at St. James that project is moving ahead as scheduled as an independent project and its independent of anything on the Diamond expansion on the Diamond extension. So things are unchanged, there and that's still on schedule for a startup.
By year end.
Thanks, Chris.
We have our next question from Michael a PD from Goldman Sachs. Your line is open Yeah, Hey, guys. Thanks for taking my question real quick just on a.
A follow up on Diamond cap line can you remind us when when do you expect top line to be fully in service so both legs.
And do you expect it to be at full run rate EBITDA in that first year or will it take a couple a years to kind of a ramp in that.
Jeremy Thanks for the question as Chris mentioned there is a.
We're evaluating some alternatives associated with the diamond piece, but to reiterate with Chris Davis.
Be at full run rate on committed capacity for.
For a cap line from north to South there is a uncommitted space and we look to continue to fill that in a.
Just on current commitments that will get a full run rate in the first quarter, a 22 from the north to South East and we will look to add additional commitments over time on the diamond piece, we're evaluating alternatives and we'll update you guys as soon as possible.
Got it and then on Diamond.
It's gotten a messy obviously at the city Council on with the litigation underway as well both state and federal just curious.
Is there an opportunity to use your partners pipeline there's.
A second pipeline that kind of runs not too far from by hail yet.
Do you have that opportunity.
Utilize that as a work around or is that a full pipe right now.
Michael This is Willie I would tell you we are evaluating all options and leave it at that.
Got it okay. Thanks, guys much appreciate it.
Thank you.
We have on our next question from Jean Ann Salisbury from Bernstein.
Your line is open.
The committed tariff that was posted for a wink to Webster recently.
<unk> 45 per barrel, which I think has caused some investor confusion and for being on this been confusing for me it's on.
Is there a right way to think about it.
Just an interim rate for large customers and the true committed long term rate hasnt been disclosed yet.
Jean Ann This is Jeremy you're absolutely correct. This is just an interim service with limited.
Capacity is limited origination capacity and it's effectively matching the arc from Midland.
Houston during a period prior to the fourth quarter when the.
Mpc's kick in so that has no debt has no reflection on the long term committed debt and limited adjusted.
Alternatives and eventually when the pipeline is up and running that long term ore freight will be put debt.
That's correct.
Okay. Thank you.
And then as a follow up on any update on the range land expansion. It seems like with Keystone getting access to that might be garnering more interest.
This is Jeremy we are in constant dialogue with our customers we are.
We have interest in that expansion, but at this point, we're shipping and our capacities for going South from Canada to the U S and multiple destinations.
Yes.