Q4 2020 Energy Transfer LP Earnings Call
[music].
Greetings and welcome to the energy transfer of fourth quarter earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded I will now turn the conference over to your host Tom Long you may begin.
Thank you operator, and good afternoon, everyone and welcome to the energy transfer of fourth quarter 2020 earnings call and thank you for joining us today.
I'm also joined today by 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.
<unk> of the Securities Exchange Act of $19 30 for 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 annual report or form 10-K for the year ended December 31, 2020, which we.
Expect to be filed in the next several days I'll also refer to adjusted EBITDA distributable cash flow or 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.
I'll start with our recent announcement.
We were excited to announce that we have entered into a definitive merger agreement to acquire enable midstream partners and a credit accretive all equity transaction valued at $7 2 billion.
The transaction is expected to be immediately accretive to free cash flow post distributions have a positive impact on our credit metrics.
And add significant fee based cash flows from fixed fee contracts.
Under the terms of the merger agreement enable unit holders will receive <unk> 80, 595, ETE common units for each enable unit and exchange ratio representing an at the market transaction based on the 10 day the web of BT.
And enable common units on February 12, 2021.
In addition, <unk>.
Each outstanding enables series a preferred unit will be exchanged for 0.0265% series G preferred units of energy transfer.
These assets are of great fit to our system and will be very complementary.
We expect this consolidation to provide increased scale in the mid continent, arkla tax regions and improve connectivity for our natural gas and NGL transportation businesses.
Through this acquisition, we will be adding substantial gathering and processing assets in the Anadarko basin, which gives us the opportunity to enhance our ability to provide an integrated end to end midstream solution utilizing our downstream fractionation and export platform on the Gulf Coast.
And the addition of enables crude gathering assets in the Bakken will help ensure wellhead to market connectivity via our Bakken pipeline system.
Enables transportation and storage assets are also expected to enhance our access to core markets with consistent sources of demand and bolster our portfolio with the addition of long term firm contracts anchored by large investment grade customers pro forma for the acquisition we continue to.
Expect to generate approximately 95% fee based cash flows.
In addition, we expect the combined company to generate more than $100 million.
Of annual run rate cost and efficiency synergies excluding.
Excluding potential financial and commercial synergies.
The combination of energy transfers and enables complementary assets will allow the combined company to leverage its tensive infrastructure to pursue additional commercial opportunities and achieve cost.
The cost savings, while enhancing our ability to serve customers.
The transaction has been approved by the board of directors of energy transfer and enable and enables two largest unit holders or GE Energy Corp, and Centerpoint Energy, Inc. Have entered into support agreements that require them to provide their consent to the transaction of bone SEC <unk>.
<unk> of the form S. Four registration statement for this transaction.
As these two unit holders own approximately 79% of the outstanding common units of enable no additional unitholder votes will be necessary upon receipt of these consents.
The transaction is expected to close in mid 2021 subject to HSR and other customary closing conditions. We view this acquisition as a strategic opportunity to expand our scale and midstream connectivity, while remaining consistent with our goals of improving our financial position.
<unk> through deleveraging.
Now I just want to briefly touch upon the unprecedented winter weather conditions. We are currently seeing across the country.
Just like the majority of our peers, we are experiencing impacts to our operations related to the extremely cold temperatures, but.
But we believe our operations team is second to none and their efforts over the last few days have been remarkable they're in constant communication with our commercial teams and are trying to do what is best for our customers, particularly those serving human needs customers and electric generation facilities.
The situation is changing constantly and our team is addressing these challenges on an hour by hour basis.
As best as possible.
Next turning to a few of our fourth quarter and full year 2020 highlights.
For the full year 2020, we generated adjusted EBITDA of $10 five 3 billion.
Which came in just above the top end of our guidance range.
<unk> attributable to the partners of ETP as adjusted was $5 $74 billion, which resulted in excess cash flow after distributions of approximately $3 $2 7 billion.
On an incurred basis, we had excess DCF of approximately $215 million after distributions of $2 $4 7 billion.
And growth capital of approximately $3 5 billion.
As we discussed on previous calls during 2020, we implemented cost reduction measures throughout our corporate offices and field operations.
For full year 2020, we achieved G&A and opex savings of over $500 million.
We expect about $300 million to $350 million of this to be reoccurring in 2021.
Operationally, we moved a record number of Ngls through our pipelines for full year 2020, primarily driven by our Mariner East and Texas NGL pipeline systems.
And our fractionation volumes also reached a new high during 2020.
Due to additional ramp up of volumes on Frac, seven which went into service in February of 2020.
During the fourth quarter of 2020, we completed construction of our 50000 barrel per day LPG expansion at Marcus Hook terminal.
Also during the fourth quarter, we were excited to complete the majority of our LPG expansions at our Nederland export terminal and in January of 2021, we announced that we loaded our first very large ethane carrier with 911000 barrels under our joy.
<unk> venture with satellite.
Briefly taking a look at guidance for 2021.
Our adjusted EBITDA is expected to be 10 $6 billion to $11 billion.
Compared to 2020, we expect to see strong growth from our NGL segment as increased export activities drive higher demand across our NGL system, and we expect a positive contribution from NGL and gas prices.
This growth will be partially offset by some headwinds related to crude spreads as well as a decrease from certain contract explorations.
This guidance is for the existing energy transfer of business, excluding any contribution from enable we expect to provide pro forma financial information in the S. For when it is filed in the next few weeks.
And for growth capital, we now expect 2021 growth capital expenditures to be approximately 145 billion.
This number includes approximately $250 million of 2020 plan capital that has been deferred into 2021.
When accounting for this.
Our updated 2021 capital the guidance represents a further reduction of approximately $100 million.
To what had been previously communicated.
We continue to focus on disciplined in regards to all spending and all committed.
Two aligning capital outlay with customer needs.
Our 2021 growth capital expenditures are primarily made up of several projects within our NGL and refined products crude and midstream segments, including Mariner East additional modifications to our LPG facilities at Nederland, and our Cushing to Nederland project.
In addition to expanding our presence in the northeast and on the Gulf Coast. This spend will improve our opportunities around our existing assets further strengthening our footprint in key basins. We continue to expect to spend approximately $500 million to $700 million per year in 2022.
In 2023.
For 2021, we continue to expect to generate a significant amount of excess cash flow. This will be directly used to pay down debt balances and maturities as we continue to focus on accelerating debt reduction and achieving our leverage target of four to four five times on a rating agency basis one.
We have reached our leverage target, we will look to return additional capital to unitholders in the form of unit buybacks <unk> distribution increases with the mixed dependent upon our analysis of market conditions at the time.
I'll now walk through recent developments on our major growth projects and we will start with the dapple.
As you May recall of the District Court ruled last March that the Army Corps needed to prepare an environmental impact statement for the Dakota access pipeline and then ruled in August the the easement that Dakota access received from the Army Corps and Lake Hawaii, the vacated in the pipeline shutdown.
The Army Corps of appealed both of these decisions and in January of the DC Court of Appeals of firm the decision requiring the Army corps to prepare in the eyes, but overturned the decision to shut down the pipeline separately. The district Court is considering a motion filed by the tribes for an injunction for the purpose of shutting down the pipeline.
John.
Briefing was completed on this motion in early January but the district Court has not ruled on this motion.
Following the D. C Court of Appeals decision that I, just referred to the district Court ordered a status conference to discuss the injunction motion and the Army Corps position related to the vacated easement in light of the D. C Court of Appeals decision.
On February nine the Army Corps requested that the status conference be postponed until April nine and the district Court approved the motion.
In the midst of these legal proceedings. The Army Corps initiated the EIS process in September of last year, and we expect that the EIS will be completed.
By the end of this year.
The pipeline remains in service and like all of our assets will continue to operate safely and efficiently we.
We do not see a scenario where the pipeline will be shut in we are still in America with the rule of law. The Army Corps gave us guidance early on in the permit process about the best locations to construct the pipeline to have the least impact on the environment.
The Apple has been one of the most scrutinized politicized, yet safest pipelines ever built in our country. It has been safely flowing for almost four years and is critical to this country for jobs for tax revenue and for energy security and independence.
Next the Ted Collins link will significantly increase the utilization of existing assets by Repurposing, Our Eagle bond pipeline that was previously bringing barrels out of the Permian, while providing market connectivity between our nederland and Houston terminals. It will ultimately allow us to trans.
Board up to 275000 barrels of crude oil from West, Texas of needle in to our Houston terminal and is expected to be in service in the fourth quarter of 2021.
Our Cushing to Nederland project will provide the ability to move crude barrels from our white cliffs pipeline and Cushing storage assets through our existing Permian Express one pipeline system and third party pipelines to our Nederland terminal on the Gulf Coast.
Upon completion in the second quarter of 2021, we will be able to transport between 65000 and 120000.
Barrels per day of crude oil from the DJ Basin, and Cushing area to Nederland.
Now, let's turn to our Mariner East system fourth quarter 2020, NGL volumes through the Mariner East pipeline system increased more than 30% over the fourth quarter of 2019 utilization of our Mariner pipelines in our Marcus Hook terminal remain strong in the fourth quarter across all products.
The system continues to demonstrate flexible optionality for shippers, including the ability to handle ethane spot cargos as well as provide multiple local market connections for ethane propane and butane as I mentioned earlier on the call in December 2020, we commissioned 180 miles of Amy <unk> from Dell.
Pennsylvania to Cornwall, Pennsylvania, and also placed our 50000 barrels per day LPG expansion at the Marcus Hook terminal into service.
And we now expect the next significant phase of the Mariner East project to be in service in the second quarter of 2021.
The completion of the next phase of Mariner East will also give us the ability to initiate service on Pennsylvania access.
Which will bring refined products from the Midwest supply regions through our Allegheny access pipeline system into Pennsylvania and to markets in the northeast.
This project will require minimal capital, which is already included in our budget and we expect through time that it will add significant revenue and synergies with our existing refined products pipelines and terminal assets. It is also expected to be in service in the second quarter of 2021.
The final phase of the Mariner East pipeline is expected to be completed in the third quarter of 2021.
We also anticipate transporting natural gasoline through Mariner east beginning early in the second quarter of 2021.
The mandatory 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 highest price markets for the product.
As I mentioned earlier during the fourth quarter, we completed expansions of our LPG facilities, along with the construction of a new 20 inch pipeline that directly links our fractionation and storage assets of Mont Belvieu, Texas to our naval and export terminals on the U S Gulf Coast.
The completion of these projects takes our LPG export capacity from the Gulf Coast to approximately 500000 barrels per day for which we have significant demand.
And finally construction of our 180000 barrels per day orbit ethane export joint venture with satellite petrochemical was completed at the end of 2020, we.
We loaded our first very large ethane carrier with 911000 barrels under this joint venture.
In 2021.
The Siri average the world's largest VL EC departed from Orbitz newly constructed export facility at our Nederland terminal is the largest single shipment of ethane today.
We expect the next shift to arrive in Nederland for loading in March.
With the completion of our LPG in orbit expansions, we now have for separate NGL pipelines for ethane propane butane and natural gasoline that connect our Mont belvieu facilities to dedicated chilling storage and marine loading facilities at our Nederland terminal support enormous.
International demand for NGL exports.
In addition, the completion of these expansion projects at our Nederland terminal as well as our expansion at our Marcus Hook terminal brings our total NGL export capacity to just over 1 million barrels per day.
Next just an update on our environmental activities last week, we announced that we have created an alternative energy group to focus on pursuing alternative energy projects and reducing our environmental footprint in a manner that makes economic sense, Tom Mason will be heading up this group and in this role will be.
Coordinating various initiatives within the partnership focused on renewable energy projects, such as solar and wind farms, either as a power of purchaser or in partnership with third party developers and we'll also look to develop renewable diesel and renewable natural gas opportunities.
These potential projects could involve the utilization of existing pipelines through our extensive pipeline system, which consists of more than 90000 miles of pipelines crossing 38 states.
Today, nearly 20% of the electrical energy, we purchased off the grid and generate from solar panels originates from renewables in November we announced that we had entered into our first ever dedicated solar contract that will deliver 28 megawatts of low cost.
Clean power to energy transfer under a 15 year power purchase agreement.
Also we are in advanced discussions to support a significantly larger solar project with a long term power purchase agreement.
As we think about emission reductions our patented dual drive compression technology offers the industry a compression solution that helps to reduce greenhouse gas emissions in 2020 of this technology allowed us to reduce scope, one and two emissions by more than 630000 tons.
We have also implemented carbon capture for <unk>.
<unk> at several of our existing treating and processing facilities that are already allowing us to sequester more than 85000 metric tons of <unk> on an annual basis.
And we are also actively pursuing numerous other carbon capture and sequestration projects related to our gathering and processing facilities that we believe will generate attractive returns through structures that would provide third parties with the benefit of federal tax credits and provide us with annual.
Cash flows with very low capital requirements.
Just touching briefly on our EHS metrics for 2020, our total recordable incident rate of TR IRR.
Was a record low of <unk> 87, compared to <unk> 90 for in 2019, and we worked over 17 million hours.
We are extremely pleased with our team's ability reduce this metric which speaks to their efforts and strong focus on safety and environmental compliance as well as the reliability of our assets.
Now, let's take a little closer look at our fourth quarter results consolidated adjusted EBITDA was $2 $5 9 billion.
Compared to $2 77 billion.
For the fourth quarter of 2019. This was primarily the result of volume growth on the Mariner East system, the acquisition of new assets and lower operating expenses across all of our core operating segments, which were offset by a decline in volumes in the crude and midstream segments as well as reduce optimization.
<unk> in the crude and NGL businesses.
DCF attributable to the partners as adjusted was $136 billion for the fourth quarter compared to $1 five $1 billion for the fourth quarter of 2019. This is primarily due to the decrease in adjusted EBITDA.
And on January 28, we announced a quarterly cash distribution of <unk> 15 in the quarter cents per common unit or <unk> 61 on an annualized basis. This distribution will be paid on February the 19th to unitholders of record as of the close of business on February the eighth.
Now turning to our results by segment, we'll start with NGL and refined products adjusted EBITDA was $703 million compared to $743 million for the same period last year.
This decrease was primarily due to lower optimization gains from the sale of NGL components at Mont Belvieu as well as lower margins from butane and gasoline blending which were partially offset by higher fee based margins from our Mariner east system in Nederland terminal.
NGL transportation volumes on our wholly owned and joint venture pipelines increased to $1 4 million barrels per day compared to one 3 million barrels per day for the same period last year. This increase was primarily due to increased volumes on our Mariner east pipeline system as well as increased throughput on our tech.
Is NGL pipeline system as the result of higher export volumes feeding into our Nederland terminal from the initiation of service on our propane export pipeline in the fourth quarter of 2020.
On our fractionator average fractionated volumes increased to 825000 barrels per day compared to 734000 barrels per day for the fourth quarter of 2019.
For our crude oil segment, adjusted EBITDA was $517 million compared to $676 million for the same period last year. This was primarily due to lower volumes on the Bakken and Texas crude pipelines as a result of lower production and reduced demand due to COVID-19 lower rates.
On our Texas crude pipelines as well as a decrease in our crude oil acquisition and marketing business, primarily related to less favorable pricing conditions for.
For midstream adjusted EBITDA was $390 million compared to $397 million for the fourth quarter of 2019. This was primarily due to volume declines and lower NGL pricing, which were partially offset by reduced expenses GAAP.
Other gas volumes were $12 6 million M M Btu per day compared to 14 million <unk> per day for the same period last year lower volumes in South, Texas and in the northeast were partially offset by volume growth in the Permian and Ark La Tex as well as the addition of assay.
Yes.
Acquired in 2019 in the mid continent, and Panhandle region.
In our Interstate segment, adjusted EBITDA was $448 million compared to $434 million for the fourth quarter of 2019.
This was primarily the result of reduced operating expenses SG&A expenses and increased margin from the transwestern Panhandle and Rover systems due to increased demand and firm transportation. These were partially offset by a scheduled contract rates step down in January 2020.
At our Lake Charles LNG facility as well as contract explorations on Tiger.
In our intrastate segment, adjusted EBITDA was $233 million compared to $222 million in.
In the fourth quarter of last year, primarily due to higher physical storage margin from withdrawals and higher realized gains from our hedging activities as well as reduced operating expenses for.
For 2021, we expect to have less exposure to spreads as we have locked in additional volumes under long term contracts with third parties.
Let's look at Capex for the full year December 31, 2020 energy transfer of spent $3 $5 billion on organic growth projects, primarily in the NGL and refined products and midstream segments. This excludes sun in USA <unk> Capex.
And we currently expect our 2021 growth capital expenditures to be approximately one four of $5 billion and growth capital of 2022, and 2023 to be between 500 and $700 million per year.
Looking briefly at our liquidity position as of December 31, 2020, total available liquidity under our revolving credit facilities was approximately $2 79 billion.
And our leverage ratio was 431 times per the credit facility.
For 2021, we have debt maturities of $1 4 billion, which will be more than covered with our retained cash flow.
In conclusion, we believe there is increasing value to have a strong existing asset base and we will continue to strategically enhance our footprint and improve our industry leading franchise.
Looking ahead, we are extremely excited about the acquisition of enable which will be credit accretive and provide meaningful incremental cash flows post distributions and.
In addition, these complementary assets will enhance our midstream infrastructure and provide increased connectivity throughout the mid continent and Gulf coast.
We're also very excited about our NGL projects that we brought online in the fourth quarter and in the first month of 2021.
And believe we are well positioned to help meet increasing demand for NGL exports. We are focused on exercising capital discipline as we work to create more financial flexibility generate additional excess cash flow and lessen our cost of capital.
And we remain committed to our investment grade rating and accelerating our deleveraging by immediately using excess cash flow.
To pay down debt.
We're also taking new steps to expand our efforts to develop alternative energy projects when they make economic sense and to further our commitment to reducing our environmental impact energy transfer is best in class assets and extensive geographical footprint positions the partnership to respond to.
<unk> market conditions and for continued long term success operator, please open the lineup for our first question.
At this time, we will be conducting a question and answer session. If you would like to ask the question. Please press star one on your telephone keypad. The confirmation tone will indicate your line and in the question. Keith You May Press star two if you'd like to remove your question from the queue for participants using speaker equipment it may be necessary.
The pickup your handset before pressing the star Keith.
One moment, please while wheat.
Poll for questions.
Okay.
And our first question is from Jeremy Tonet with J P. Morgan. Please proceed with your question.
Hi, good afternoon.
Good day.
Yes, I hope that everyone is well with the weather and everything happening.
<unk> capsules.
Just wanted to get kind of of global portfolio question out there with regards to the higher commodity prices with the team.
Potentially induce greater producer activity and just wondering how youre producer conversations might've been evolving recently on that.
With higher commodity prices, there and then just wondering as well.
Weather.
If that if you see any kind of lingering impact in the quarter. Just if you could walk through how you think that could be an offset there.
You bet.
Tom.
Certainly the last for five days as hopefully opened up to the.
The reality of the necessity of necessity of natural gas for.
For electric generation for our country, and especially here in Texas, and Oklahoma and the.
Surrounding states.
Yes commodity prices had continued.
<unk> for the last two or three months crude oils continue to increase we've got.
Higher demand for lot of the vaccine for everything over the country, but what this really does what's happened over the last four five days.
For example, if you ask the Oklahoma.
Would you guys wish I had more gas.
Because I can't run the.
They can't generate enough electricity to similar to Texas to I'll provide the necessary electricity to run homes.
And for the LDC gas to them.
Financial so tough.
Asian, but.
We already had seen the corner kind of turning to some of our producers. Some of them have said things publicly some of them haven't set of publicly how theyre going to increase kind of other theyre spending in light of crude oil increases.
<unk> no doubt what's transpired over the last few days, we're going to see an increase in gas prices.
We've been at kind of historical levels for the last number of years.
Above the five year average and storage for example, and we don't know where its going to end up when the dust settles. After all of this but it will be hard to believe it's not going to be at as lower levels of its been in a long time so.
Heaven forbid if another coal front hits in a week or two because of.
The storage is going to be running at very low levels for the value of of oil and gas is going to do nothing but increase we believe we do believe just kind of help producers to go out and bring their DUC, John and start bringing in more rigs and likely of kind of been doing over the last for five months. So as I started out saying this has really opened the eyes.
Of the country of the necessity of.
Oil and gas expansion of natural gas in this instance to.
Provide.
Fuel for our.
Electric generation facilities throughout the country really.
Importantly, highlight the value of hydrocarbons for you said.
Maybe shifting gears a little bit.
In the press release this morning.
I think you had mentioned the $100 million of annual run rate cost efficiency synergies and you talked about connecting all of the Anadarko footprint to the Gulf Coast, where Gulf Coast footprint. There I was just wondering if you could expand a lot more on the map.
Synergies either on the market it looks like it lines up nicely, but just hoping for some more color would be helpful. Thanks.
Yes, Joe.
Yes go ahead, Michael go ahead.
You kind of talk about the $100 of synergies, but if you're talking about just the commercial synergies.
Ross, we havent really even began to evaluate and fully appreciate what we're going to recognize from the this acquisition. It's an absolutely incredible acquisition at a very.
Unique Pam win.
I just said.
The necessity for natural gas is going to do nothing but grow not only in this country, but around the world and these assets are.
The most significant assets in the state of Oklahoma and throughout the Ark La Tex.
Fit very well with rsh everybody knows are theirs.
Large pipeline that brings rich gas down into the Fort worth basin net deliveries into our project <unk>.
Processing plants, and then feeds into our downstream pipelines, there's a lot of opportunities over in Western Oklahoma, and Texas Panhandle, where we can create significant efficiency between these assets.
Large and trust day, Interstate pipelines that feed across the state and into Bennington, the connect into our Interstate pipelines and we have significant synergy synergies from Carthage throughout Louisiana.
And we have some new opportunities with <unk> and new deliveries to the to.
For the north so as.
As I mentioned, we really haven't totally quantified pharma commercial standpoint, what.
What all is going to happen with the desk.
And all of the benefits that we're going to see but in.
And Theres a lot from commercial I'm, sorry from competitive standpoint, we won't really talk about but we certainly will also have the ability to move natural gas liquids from the tailgate of lot of these enabled plants into our.
NGL system, the fee down to Mont Belvieu to keep our tracks for for for many years to come.
Exciting exciting news for us.
Great. Thanks for that and wishing the best to all of the you and your families.
Good day.
And our next question is from Shneur <unk> with UBS. Please proceed with your question.
Hi, good afternoon, everyone glad to see you all one of them well.
Maybe just to clarify the your response to Jeremy's question before I jump into like too. So the $100 million in synergies is cost related and Mackie youre seeing incremental commercial revenue type of opportunities that you have actually pulled on pay for yet is that correct answer.
That's correct.
Okay perfect awesome.
Just starting off with with guidance here.
I was wondering if.
Im not sure if it's an accurate of 12 question here, but if you can talk around the talk about the sensitivities around achieving potentially of the high end of your guidance.
<unk>.
Is that really just driven based on commodity prices and spreads.
Or is there some flex in your guidance volumetric the or elsewhere.
That would allow you to achieve the high end of your guidance.
Well, Tom I can start.
The commercial perspective kind of kind of alluded to earlier, we did see volumes kind of.
Struggle, especially in the Eagle Ford and few other areas as we enter.
The went through the fourth quarter of 2020 Harry.
It started the kind of see the light at the end of the tunnel and we start to see rigs start moving and throughout last year and as we've entered into 2021.
There's been some public statements made.
Producers have announced theyre going to increase the capital budget not not a lot, but some and then we've had conversations with the bunch of producers that are now anticipating spending more than what <unk> been made public.
Of course, we can't share that but anyway, there's a lot of optimism because of what's happening to the.
The markets and the demand growing in the.
And the value of the oil and gas increasing debt we are very confident.
Pad drilling is kind of pick up in.
In addition of that we are.
Our excited about.
Our NGL projects, we have had a lot of that in our budget. However, we are going to be able to squeeze out even more volume out of both of our Marcus hook facility out of Nederland. So we're very optimistic on being able to really capitalize.
And.
Maximize our ability to export around the world out of those significant terminals. So we really see some upside there.
And then we've also of course seeing.
Some upside over the.
Over the last four or five day, if we've seen some some when.
When you the.
The one thing that.
Yes.
Our revised recognizing I've already said and we all know on this call I of imported fossil fuels are for this country and this world but.
What's really important to us to be able to get the fossil fuels to the market and if there's one thing in your transfer does it better than anybody, especially in Texas and really throughout the country is to move molecules from.
From the source to where they go and so we've been able to benefit over the last for five days of being one of the major providers of transportation across the state from both not only west, Texas, but also from the Carthage area, where they're at.
Can be large volumes come in and out of those areas and we're able to move those down to what we've really focused on and that's getting the gas to the human needs of customers. So a lot of the sales both on purchases that we're making and the others are making all of our system.
And the sales that we're making out of our storage facilities. We have one of the most significant storage facility.
Facilities in the state just north of Houston, and we've been maximizing our withdrawals and capitalizing on very strong commodity prices.
Because we already had all of that gas.
On the ground ready to come out in this type of situation and it's really paid off even though our state as well as much of a nation of struggling but a lot of people don't have electricity or gas a lot of them to do and it's because of the our ability to bring a lot of gas out of out of our storage facilities and other areas on our pipeline system and of live.
For them to all of these power plants that are generating the electricity.
Got it thank.
For the thorough answer there.
And maybe.
Follow up question with respect to the enabled transaction.
I recognize that most of the rating agencies today.
Basically opined kind of unchanged.
To where it stands.
You noted in your prepared remark and in the slide decks of its supposed to be leverage accretive.
Just wondering on the margin if you can comment about what was the feedback from the agencies.
Does the larger sized energy transfer improve your standing with the agencies because of the dilution of the potential for Apple outcome.
Help you at all the.
The fact that youre going to of a higher regulated percentage of earnings just kind of curious on how the transaction was perceived even though we can see specifically of change announced today, but.
Does it move the change at the field at all I'm just wondering if you can speculate about this.
Yes, we did have very good very good conversations with all three of them I think you touched upon the fact that all three have put out put.
Put out little US reports on this and I think it's fair to say that it was slightly slightly positive I think the analogy you used moving the kind of moving the the change down the field of little bit clearly all of the stuff that Mackie just covered of how excited we are about the additional.
<unk>, we're looking at.
We were very conservative in how we really looked at this we think debt as we get in and bring more of the commercial teams over the fence operation teams et cetera, and move further into this that we're going to be able to get back with the agencies of.
Possibly even improved improved type numbers, but right now we feel like the $100 million was was right down the middle of the right down the middle of the fairway and will likewise be looking for more but the agencies. It was I think very good discussions with all three.
Perfect. Thank you very much and definitely stay safe and stay warm the weather.
Thank you.
Yes.
Our next question from Christine Cho of Barclays. Please proceed with your question.
Thank you good evening.
Maybe if I could start off with the M&A.
The al.
Would you say that the deal has more commercial synergies on the gas side or the NGL side from a financial of perspective, and you noted fractionation and export.
In the press release, there is an opportunity but could there also be NGL takeaway.
And would there be like what would be the timing with any of the would be immediate or do you have to wait for a third party contracts roll off.
This is mackie again, I'll start with that Tom.
Well there is certainly some confidentiality issues with statements we can make around contracts of course, all of that kind of stuff but.
I'll start with gas the other significant gas opportunities as we've already talked about just with how the pipeline feed into our pipelines are.
Both upstream and downstream, where we can actually.
Utilized plants up in the fourth base and more efficiently in the pipelines more efficient fleet. So a lot of upside around the the natural gas side and the gas gathering side as far as the NGL side.
The more of the opportunities that we see or down the road, a little bit as contracts roll off but as they do.
We will be able to connect the dots so to speak to where we can move those barrels down into are significant.
Lone Star system, where we have a 30 inch.
And the runs out of the Fort Worth Basin area, all the way down the Mont Belvieu, So we'll be able to bring significant volumes not only from for.
The enabled trials, but also from other cryo says so.
We really see the NGL side more of a big benefit several years down the road and then extending for many years after that whereas the natural gas the gas gathering of processing.
And the.
The natural gas side is more immediate benefits and synergies that we see okay. That's great.
And then actually if I can move on to GAAP Paul.
Does that status conference hearing need to happen in order for the district Court can make a decision I wasn't sure. If the two are independent of each other or not and how does it work at the Army Corps is Danny to tell the quite what their action is going to be who necessarily decides it within the army Corps of hit the key for us there.
Now also or is there some sort of committee committee.
Any insight into that process with the helpful.
Yeah. This is Tom Mason.
The general counsel.
With respect to your first question, it's unclear whether the two are are dependent on each other the.
The judge could rule on the injunction motion without having the status conference I think key.
The <unk>.
<unk> wants to wait until that conference or after.
For for various reasons and so.
It's just a little bit hard to predict but I would say that there is more likely we would wait until after debt status conference.
So in the period after that so in EMEA.
He may not rule.
For a long time, we still now.
On the second question.
It's clear as to what who's making the decisions that the army corps of thick.
They've been very professional throughout the last five years of our dealings with them.
And the.
If the left alone from the political interference I think we'll continue to make good decisions as they per.
Recede.
Okay. Thank you.
Our next question is from Michael Blum with Wells Fargo. Please proceed with your question.
Good evening, everyone hope everyone's doing well.
Maybe just to stay.
On Dakota access and the Army Corps.
Sure.
Do you do you know of the Army Corps is under the New administration is going to incorporate climate change analysis into the.
And if so is that factored into your timeline for that you provided for when you think.
<unk> completed.
This is Tom Mason again, we really don't know obviously the by the administration has put out of the deck.
<unk> orders to talk about.
Agencies, the evaluating climate change in the number of.
The decision, making I don't know if they will.
This will affect the <unk>.
The EIS process at all we just.
It's too early to tell on that.
Okay, and then I just had the quick question on the enable transaction.
Are you contemplating, possibly rationalizing any processing capacity.
In the mid continent, it seems like Theres, a lot of excess capacity, there and then sort of related to that perhaps.
With this transaction do you see anything as non core that you might look to monetize some assets.
Michael This is Tom I'll run with this and Mackie, if you want to add something.
As we went through this process. We saw these assets that actually is very complimentary. So I can say that we have net.
Nothing identified the.
As far as divestitures, whether it be for.
Or even identified as non core as we sit here right now.
Great. Thank you.
Okay.
And our next question from Jean Ann Salisbury with Bernstein. Please proceed with your question.
Okay glad that you guys all of power.
One on the App enables deal as the Bakken crude gathering system already moving down dapple or what does the new volumes for doubtful.
Yes.
Okay.
I don't know the.
100% share all of that moving of I think the vast majority of it is.
But I'm not sure of a 100% of items.
Okay.
That makes sense and then just wanted to dig a little bit more about some of the major assumptions in the 2021 Guy. So I guess, most importantly are there any numbers that you could give around what youre expecting for U S crude production growth of Permian production growth year on year.
Kind of level of debt versus the other people got it.
Okay.
Sorry, the question is.
What's our projections for Permian crude growth.
Yes, or you ask Eric.
Debt.
Plenty plenty of the plenty of 'twenty one debt.
Yes.
Yeah.
We're pretty conservative when you look at kind of across the board on that.
Right now for example, the Permian crude is around for $4 1 million ish, maybe a little more than that.
We don't expect it to get more than about four four.
<unk> barrels a day by the end of the year.
But there is a lot of good things happening.
For example, if you look at.
Just a year ago, if you look at the floating crude around the world there was about 90 million barrels.
In July of last year, there was 230 million barrels of now are back down to about 90 million barrels. So we do as we keep saying on the earlier on this call. We're very optimistic about the turnaround in the market growth. So we do think that pricing will increase production.
As far as the total U S growth.
I don't really of.
An estimate on that.
Other than probably a similar type growth where it might be.
Two of 3% type number.
Okay that makes sense and then just a couple of other assumptions in the 'twenty 'twenty One guide it's double expansion in there.
Yes that.
That was including.
Excellent and then lastly.
Capital expansion.
Yes, Okay, Great and then last one is have you received all of the Bakken crude MVC invoice payments Jeremy.
Earlier, this year or did some of those go into 'twenty and 'twenty one guidance.
None of those are relative rollover, yes.
We're good on all of those so.
Thank you Dennis.
Yes.
And our next question is from Michael The Peters with Goldman Sachs. Please proceed with your question.
Hey, guys.
Actually a couple of questions first of all on crude spreads are obviously de minimus right now and a lot of different places, but just curious of the other businesses, especially given what's happened the gas over the last for five days.
Where do you see.
Potential dramatic changes relative to what you realized in 2020 in terms of optimization revenue whether up or down.
Well. This is mackie again as I mentioned earlier because of the nature of our assets and how we operate them and where they're located especially our our storage facilities.
We feel very fortunate.
To be able to.
Have gas and storage of the time when it's needed in a big way in the deal to come out at whatever the market prices are at that time and unfortunately.
From that standpoint prices were really strong there are kind of at historical levels.
Especially as you get up into Oklahoma, and we've heard process over to a $100 of Mcf up there but anyway.
In Texas alone we are.
Ask that youre doing exceptionally well the tough time, we hate what's going on around the country in the state, but we're doing everything we possibly can to pull gas out of storage and deliberate to power plants into the LDC and also the find gas.
All of our Carthage and bring as much as we can and off Tiger and other pipelines to for.
Feed or our need here in the state because we are a real short gas because so much gasses is shut in for the producers, especially out in west, Texas. So we.
We from a financial standpoint.
This is we're doing.
Pretty well because of the nature of our assets, where they sit and how we're able to perform in this type of situation.
Got it and then well have talked in the.
And we'll put out of the release last week about kind of the.
The increased attention on kind of alternative energy of renewable energy related.
Do you understand pretty quickly what your competitive advantage for or how you would utilize the existing assets for things like renewable diesel or renewable natural gas.
What is your competitive advantage to do more traditional renewables like wind or solar.
What are you, bringing the COBOL necessarily that other potential developers of that.
Can't bring themselves.
Yeah.
So on the on the first part of your question I guess the point Youre, making is with our inter and intrastate systems, we are able to move Brian.
The green.
<unk> because of the okay, because we of LDC is they're asking for today, our interstate but net.
Not a lot of.
The wind.
We're struggling with win quite honestly, it's hard for us to figure out how to make that work and we're not going to do anything that doesn't make good economic sense for our unit holders solar is different if we can go out and acquire solar in areas, where there is.
A lot of Sunshine like out in West, Texas and also on the other parts of Texas, We will certainly do that because when we were doing it were a large consumer of electricity throughout the country, but especially in Texas and when you can build in our solar priced.
Very inexpensive supply of electricity. It just makes sense. So that's really our fit.
I don't know if we'll ever get involved as far as investing in the solar project because of the returns are so.
<unk>.
Then there is so much of less than what we can achieve with other opportunities we have but we certainly will support solar projects that will provide us with 10 15 years of what we believe to be very inexpensive power.
Got it thank you guys much appreciated.
Our next question is from Keith Stanley with Wolfe Research. Please proceed with your question.
Hi, Thanks first I just wanted to confirm there's no lockup period or anything on the units Centerpoint energy will receive in the transaction.
That is correct Keith.
Okay, great and the 2021 guidance. So you referenced the lower crude spreads and contract expirations as a driver for the year.
Do you expect that to continue to be of driver in 2022 and beyond or are we most of the way there now on Permian crude margins kind of resetting to the market conditions.
Yeah I think.
We're the <unk>.
Fred's of kind of fallen to now its about as low as they can go.
As we've mentioned on prior calls and conversations we're doing a lot.
Figure out of way way too.
Make as much of the value stream as we can all the way from the Wellheads out in the Mexico and West, Texas, All the way through the refineries up and in the mid continent by utilizing our our Permian Express.
Assets in our.
The mid valley asset so we are a believer.
Believing that we're kind of at the bottom as far as the spreads go but we also are contained of work with others.
The evaluate things that we could possibly do together and we're looking at converting some of our.
Our assets of our crude assets to other uses that would be more profitable.
More efficient for our for our company.
But yes, we've kind of seen it.
Get them out of bad as it can get and youre down to not much spread moving across the state, but we're doing everything we can to take advantage of that in fact, we've kind of got a new team.
That's heading that up it's running of our crude group and are very pleased on just the early results. Just this year, where we've increased our cross hall.
Fairly significantly from where we kind of ended up in the fourth quarter of next year. So we are.
There's a lot of there's a lot of.
<unk> companies out there battling for of the crude that is available out in the Permian basin, where probably a $1 million maybe in a half of barrels less out there the where we thought we'd be a year and a half ago and theres more capacity, we will of course significantly more than it was a year and a half ago. So we're we're all scrambling for less barrels, but there is no company that cannot.
The can take the barrels so many different places like we can so we feel like we've got to get advantage in and we're going to take advantage of that.
Okay. Thanks for that color, if I could sneak in one other quick one and I.
I appreciate the commentary on the company are doing pretty well through this unfortunate event in Texas.
On the electricity side.
Just a curious question do you typically buy power in Texas said spot market rates or are you.
More on fixed rate type contracts for electricity needs.
It's a variety in fact, Fortunately, we have quite of bit of our current megawatts of hedged which has been extremely fortunate.
Today during the last for five days and then we have a variety of different ways. We buy we do buy a lot on the day to day basis and the we do have some.
Some.
The packages bought for term different different terms, so it's kind of a myriad of.
Of the different ways, we buy it.
Thank you.
And our next question is from Pearce Hammond with Simmons Energy. Please proceed with your question.
Yes, good afternoon, and thanks for taking my question.
Investor sentiment, specifically E&P investors.
It's kind of moved away from the Scoop stack play in Oklahoma and towards the Permian over the past few years and so as it pertains to the enable the acquisition the acquisition what gets you comfortable with the Scoop stack assets and continued producer activity on those assets over the longer term or essentially what do you think investors NAV.
Fully understand or appreciate about the enable assets. Thank you.
Tom Let me take that.
Yeah, Yeah, Okay. Okay yeah.
I think the.
The bottom of along the way we look at it as the reserves are there. So if we see something like what happened.
And then making the whole country's hit certainly that will slowdown.
A lot quicker than say, the Permian basin, but as we see commodity prices recover and especially the levels that we have now where we see natural gas prices not going just hire of the rest of this year because of what's happened in the <unk> and the kind of the reality of the demand for natural gas, but theres going to be growing demand for natural gas around the world.
It's the cleanest best way to fuel enormous amounts of.
Of electricity and it's just going to be something that we are very optimistic and are big believers is going to be.
A big growth area for the world, including the U S of course, and and the reserves are there I mean, the reserves are in the scoop in the stack that are in the Arkoma basin there over the.
While the Panhandle and as long as commodity prices stay up.
At reasonable levels, we think that's an area where rigs will move back ending.
And grow production for for many years to come it doesn't take a lot of rigs Im sure enable has said this.
We'll say it doesn't take a lot of rigs on their system.
Provide volume growth for for their system. So if we get back any kind of type of reale of.
<unk> of where we were a year and a half ago, we're going to see tremendous growth through those asset so.
We're very excited about.
One in the in the in the future.
Because of the need for natural gas and the.
And the oil.
Our opinion for many years to come.
Yes.
Well, thank you Mac the appreciate it.
You bet.
Okay.
Greater.
The last of our questions.
Yeah.
Alright.
It looks like maybe we lost the operator I'll go ahead for those that are still on and we are still connected. Thank all of you for your support we thank you for joining us today and we look forward to talking to you about lot of the exciting step that we have happening and of course the.
We will continue to file our S. Four just as soon as possible and have more information to be able to share with you. Thanks to everyone stay safe stay warm.
Yes.
Okay.