Q3 2021 EnLink Midstream LLC Earnings Call
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After today's presentation, there will be an opportunity to ask questions to ask a question. Crestar then one on your Touchtone phone to withdraw your question. Please press start then too. Please note. This event is being recorded.
I would now turn the conference over to Brian Burghardt Director of an Investor Relations. Please go ahead.
Thank you and good morning, everyone welcome to in the third quarter of 2021 earnings call participating on the call today Ah Barry Davies, Chairman and Chief Executive Officer been Lamb, Executive Vice President and Chief operating Officer, and Pablo Mercado Executive Vice President and Chief Financial Officer.
We issued our earnings release and presentation. After the market's closed yesterday and those materials are on our website.
A replay of today's call will also be made available on our website at www Dot <unk> Dot com.
Today's discussion will include forward looking statements, including expectations and predictions within the meaning of the federal Securities laws.
Before looking statements speak only as of the date of this call and we undertake no obligation to update or revise actual results may differ materially from our projections and a discussion of factors that could cause actual results to differ can be found in our press release presentation and SEC filings.
This call also includes discussion pertaining to certain non-GAAP financial measures definitions of these measures as well as reconciliations a comparable GAAP measures are available in our press release in the appendix of our presentation. We encourage you to review the cautionary statements and other disclosures made in our press release, and our SEC filings, including.
Those under the heading risk factors.
We will start today's call what they set a brief prepared remarks by Barry been and Pablo and then leave the remainder of the call open for questions and answers.
With that I would now like to turn the call over to Bury Davis.
Thank you, Brian and good morning, everyone. Thank you for joining us today to discuss our third quarter of 2021 results.
On the call today, we will discuss our strong financial results, the improving operating environment and in links active role in the energy transition that is transforming our industry and positioning companies like in link for a sustainable future.
As I sit here today I'm inspired by the people that Enlink and what we have achieved over the past 18 months or so since the pandemic changed the world.
<unk> team knows what it takes to show up fire on all cylinders and execute with excellence and I believe it's our focus that is empowered in late to navigate this season to where we are today.
We are strongly positioned to achieve our vision to become the future of midstream by leading and innovation and creating sustainable value.
We entered 2021 with a focus on improving our financial flexibility and.
In addition to that focus to significantly improved commodity price environment has allowed us to accelerate those plans and make meaningful progress on our company's execution plan.
With this backdrop I will now discuss four key focus areas that are helping us achieve our vision.
The first is a relentless focus on operational excellence.
By implementing technology process improvements and innovations we have transformed the way, we operate and created a lower and sustainable Croft structure.
We have an intense companywide focus on improvement and innovation every single employee has been empowered to look at how they do things and think how can this be better we call. This the enlink way and while there are more examples than we have time for on this call. A few recent ones include utilizing.
Utilizing technology to Debottleneck, our purity product pipelines to accommodate incremental volumes.
Leveraging real time data and expertise from across functional team to optimize plant recoveries and.
And implementing robotic process automation to save hours and hours of spreadsheet manipulation.
Giving us valuable time to think and make improvements.
These are just a few examples of projects that are driving current results higher and creating real long term value, while reducing inefficiencies and transforming our business.
The second is taking full advantage of in links large scale positions in key basis, which strategically provide us with scale and access to strong customers and demand markets.
And the Permian, we are well aligned with solid operators and we're growing with them through capital efficient higher return projects like project War-horse and now project Phantom.
In Louisiana, we have over 4000 miles of pipeline in the ground connecting to that diversified and growing demand markets.
Dispositions us well to unlock additional growth through attractive downstream projects. We are working on which are similar to our venture global project last year.
In addition, our unique position along the Mississippi River corridor gives us the capability to utilize existing pipelines for C. O two transportation and one of the highest emitting areas in the United States, while meeting existing commercial arrangements continuing the services we provide today.
And lastly are substantial positions in Oklahoma, and North, Texas, which are generating significant cash flow are well positioned to benefit from increased activity given the strength in natural gas and NGL prices.
The third area is are active role in the energy transition.
<unk> is committed to seeking out innovative projects that create value for our unitholders, while reducing the impact of carbon emissions.
Earlier this year, we set a meaningful path net zero by 2050 and yesterday, we announced a 15 year agreement to sell 100000 metric tons per year of C. O two emitted from our Bridgeport plant.
To be purified for use in food beverage and similar applications.
This agreement advances us down R D carbonization path, while making a modest profit.
Our carbon solution group continues to build our vision for providing customers a complete capture transportation and sequestration offering and we continue to make solid progress on opportunities with potential customers.
Our unique ability to utilize existing pipeline in the ground to transport C. O two to potential sequestration locations nearby allow us to offer a cost efficient transportation solution for all parties involved and of equal importance significantly reduce the environmental impact when compared to new pipeline construction and <unk>.
Wire mentally sensitive areas.
We remained very excited about the prospects for this new business opportunity and will continue to provide updates as the team executes on our vision.
And lastly, the financial discipline that has enabled us to have best in class free cash flow yield while growing the business.
Entering this year, our initial guidance implied flat adjusted EBITDA year over year at the midpoint of the range, excluding the impact of the expiring MVC.
We then increased guidance by approximately 7% at the midpoint in June and now we expect to end of year in the upper end of the new range of one O two to 1.6 billion delivering growth over 2020.
We also enter this year forecasting leverage to be four three times at the midpoint of our guidance. While today, we are within arm's reach of our near term leverage goal of under four times, which will enable us to take a more balanced approach to our use of free cash flow.
Moving to our third quarter results, we exceeded our internal forecast, excluding the modest impact of Hurricane Ida and achieved adjusted EBITDA of $256 million in the third quarter of 2021.
The robust EBITDA, coupled with our capital light approach allowed us to continue to generate free cash flow after distributions of $81 million for the quarter.
Importantly, there is solid results were not only driven by continued focus on efficiencies and cost containment, but also by throughput volume momentum across our operating systems.
Producers have only recently begun to take advantage of the more supportive commodity price environment, and we view the recent commodity strength as a game changer for operations in 2022 and beyond.
The clear takeaway for our investors should be that there is a modest uplift and activity for the remainder of 2021, and we anticipate meaningful upside potential in 2022 and beyond.
In summary, our business showed solid results during the third quarter and our outlook continues to improve with that I'll turn it over to bend to discuss our operational update.
Thanks, Barry and good morning, everyone.
I'll start with the Permian segment, which continues to see robust activity and generated $69.1 million and segment profit.
Segment profit in the quarter included approximately $9 million of operating expenses related to project War-horse and unrealized derivative gain of approximately $10 million.
Excluding workhorse Opex and unrealized derivative activity segment profit in the third quarter of 2021 grew an impressive 9% sequentially and 47% over the prior year quarter.
The third quarter of 2021 also marked the fifth consecutive quarter of positive segment cash flow with $43.3 million being generated.
Average natural gas gathering volumes were 8% higher compared to the second quarter of 2021 and increased by approximately 20% compared to the third quarter of 2020.
Average natural gas processing volumes for the third quarter, where 11% higher compared to the second quarter of 2021 and increased by approximately 14% over the prior year quarter.
Project War-horse came online as expected during the quarter and the follow on 15 million cubic feet per day plant expansion project remains on pace to be completed during the fourth quarter.
Bringing total plant capacity to 95 million cubic feet per day.
Last night, we announced our second plant relocation with project Phantom, which will move are underutilized Thunderbird plant from Oklahoma to the Midland Basin there.
The relocation will add 200 million cubic feet per day of processing capacity at about half the cost of a new built plant and is expected to be online in the fourth quarter of 2022.
Shifting to the Delaware, we continue to see activity picking up as expected and plan to start the Tiger plant in early 2022.
Turning now to Louisiana, where the second and third quarters are seasonally lower segment profit for the third quarter of 2021 came in at $63.7 million.
Segment profit included unrealized derivative losses of approximately $9 million and an estimated negative impact from hurricane Ida of approximately $4 million.
Excluding the impact of unrealized derivative activity and Hurricane Ida segment profit in the third quarter of 2021 was approximately flat relative to the second quarter of 2021.
In addition, Louisiana continues to generate very strong cash flow with $63.3 million reported in the third quarter of 2021.
And we continue to forecast strong cash flow for the remainder of the year.
I'd like to take a moment to thank everyone involved in our Louisiana operations for their dedicated efforts in responding to hurricane Ida. Thanks.
Thankfully all of our employees and their families were safe and we incurred no significant damage to our assets.
Moving to Oklahoma, where we saw momentum pick up during the quarter as customers increased drilling activity segment profit for the third quarter of 2021 came in at $87.1 million.
This compares to $85 $6 million reported in the second quarter of 2021.
Oklahoma also continued to show significant segment cash flow of $76.8 million in the quarter.
The Devon Dow JV continues to progress as planned with its to rig program for 2021. The first volumes began to flow during the third quarter, but will be more significant in the fourth quarter end in 2022.
Consistent with our last call, we continue to see our customers, particularly private operators be more active as they look to take advantage of the improved commodity price backdrop.
There's a time lag between this drilling activity and the time that the well start flow through our systems, we anticipate that approximately half of all the wells that will come online in Oklahoma. This year will come on during the fourth quarter, giving us great momentum going into 2022.
With this improved outlook for Oklahoma activity, we now expect 2022 volumes to be approximately flat to 2021 volumes.
Wrapping up in North, Texas segment profit for the quarter was $60 million, which was slightly above the 57 $9 million reported for the second quarter of 2021.
Gathering and processing volumes for the third quarter of 2021, where approximately flat from the prior quarter.
With the improved commodity price backdrop, we expect to see our customers continue to focus on re stimulation and recompletion activities and we also expect to see a modest level of new drilling in 2022.
This activity will help to moderate the decline right on our system and this mature basin.
To elaborate on various comments, we announced last night, the advancement of our carbon emission reductions goals with the Bridgeport C O two project.
We recently entered into a 15 year agreement to capture C. O two from our Bridgeport facility and sell it on a firm basis to continental carbonic products the.
The captured C O two will be terrified for use in food beverage in similar applications.
We will capture and sell approximately 100000 metric tons of C. O two per year, taking a significant step on our way to our 2030 target to receive a 30% reduction in total C O two equivalent emissions intensity.
This project is expected to be online in early 2024.
With that how pass it over to Pablo to discuss our financial results.
Thank you panic good morning, everyone.
I'll start with the third quarter highlights.
As Barry mentioned and linked delivered a solid third quarter, which exceeded our internal forecast, excluding the approximately $4 million impact of Hurricane Ida.
And like achieve $256 million of adjusted EBITDA and $81 million a free cash flow after distributions with all four of our asset segments. Once again delivering positive cash contributions.
Excluding the impact of the MVC that rolled off at the end of last year.
Adjusted EBITDA increased almost 4% from the third quarter of 2020.
Also although there's always volatility in quarterly cash flows due to the timing of capital expenditures.
<unk> continues to deliver solid free cash flow after distributions with approximately $340 million reported over the last 12 months.
Given the positive industry backdrop, and the seasonal strength of our Louisiana business in the winter months.
We continued to be on pace to end 2021 in the upper end of the adjusted EBITDA guidance range that we increased in June to one point O $2 billion to $1.6 billion.
Now with respect to cost last quarter, we discuss some inflationary pressures that we continue to manage with the work our team is doing on the efficiency front.
Despite being in the modest growth in inflationary environment are operating in general and administrative expenses in the first nine months of 2021, where approximately flat from the same period in 2020 after adjusting for project War horse and the noise from winter storm here.
Additionally to the extent, we continued to see sustained inflationary pressures the overwhelming majority of our GMP contracts includes annual market based inflation adjusters, providing an additional buffer.
On the capital expenditures front, our team continues to do a great job with our capital light high returns approach.
Ben mentioned, our announcement of project Phantom now our second plant relocation from Oklahoma to the Midland basin to accommodate rapidly growing volumes from our producers.
The total project is expected to cost $80 million with approximately $50 million of that to be classified as operating expenses for cap purposes.
The project is a great use of our existing asset base and represents cost savings of approximately 50% over an illustrative newbuild processing plant.
With the start of project Phantom the expansion of project War horse and the positive momentum and greater visibility and producer activity. We now expect our 2021 capex to come in at around $225 million.
This modest increase in Capex spending is focused on projects with very high returns and quick paybacks that will allow us to grow the business next year, while keeping us generating very significant free cash flow for 2021.
On the balance sheet side are teams actions over the past 18 months or so have put us in a strong financial position.
During the quarter, we paid down an additional $100 million of our term loan and we are well positioned to repay the remaining $150 million by year and given our strong cash generation and our 175 billion dollar on drawn revolver.
Additionally, during the quarter, we expanded our facility by another $50 million to $350 million and improve the pricing while extending the maturity to September of 2024.
Our debt to adjusted EBITDA ratio under our credit facility was just below 4.1 times at quarter end and that puts us very close to our near term leverage goal of under four times.
With the continued progress on our balance sheet as we have discussed we intend to employ a more balanced capital allocation approach that allows us to continue to delever the balance sheet, but makes us in more return of capital to unit holders.
This may include modest common unit distribution increases as well as common unit buybacks.
To that end, we repurchased 12 $5 million in common units during the third quarter.
Now as we get closer to exiting 2021, we continue to feel very good about finishing the year strong and our outlook for 2022 and beyond continues to improve.
The current commodity price momentum is a game changer for drilling and completion activity in our portfolio and we stand to benefit from both higher volumes and improved realized pricing.
Our Permian segment has seen tremendous growth this year, driven primarily by the activity in the Midland Basin.
We expect that to continue and now we also see that Delaware ramping nicely next year.
In addition, natural gas and combo plays are benefiting from robust natural gas and NGL prices and we now expect Oklahoma to deliver volumes in 2022.
Importantly, this is all within the context of continued producer capital discipline, which we believe will result in a longer commodity price bull market.
We're excited about the future and look forward to providing specific 2022 guidance early next year as we finalize our plans with that I'll turn it back to Barry.
Thank you Pablo in summary, our team continues to deliver solid results and our outlook continues to improve.
We're very well positioned to benefit in 2022 and beyond from a more supportive industry environment, while we work to create sustainable value for our unitholders.
And we continue the momentum of building upon our vision to become the future of midstream by leading and innovation and creating sustainable value with that you may know open the call for questions.
We will now begin the question and answer session to ask a question press star than one on a touchtone phone. If you are using a speakerphone. Please speak up your handset before pressing the keys to withdraw your question. Please press Star then too.
And the first question comes from Brian Reynolds with UBS. Please go ahead.
Hi, Good morning, everyone, maybe to start off on the Tv's and of 2022 growth in the Permian It looks like combining the process and expansions projects War-horse and Phantom in the Midlands and the potential for the Delaware Tiger plants be on idol of 2022 markets a significant amount of processing capacity in areas, where the Permian is tight.
Could you perhaps talk about some of the growth you have seen on the Permian footprint and whether the existing.
Capacity supports organic growth from existing customers or whether online clips to attract new businesses and volumes on towards system, where.
Processing capacity as tight in the region. Thanks.
Yes, good morning, Brian This is Ben.
I will talk about each side.
The basin.
On the Midland Basin side, we have a very diverse.
Group of customers.
And we've seen a lot of commercial success this year and 2021.
Set this up for 2022.
And so the relocation of the Phantom plant to the Midland Basin is really to serve that serve that growth is growth from the customers that we had coming into the year and also some.
Some commercial success that we have already executed on in in 2021.
And leaves us a little bit of room for additional growth beyond beyond 2022.
On the Delaware Basin side, it's more about the rising tide.
In the whole basin. We also have a diverse book of business there, though as we've acknowledged before <unk> is one of our major customers and <unk> plans or Exxon Mobil's plans.
Involve a significant amount of it.
<unk> increased production on the acreage is dedicated to us and.
And that along with some other business is what's driving the restart of the Tiber plan and I expect that to be.
Effectively in January that the.
<unk> start run all year.
Great I appreciate that color and as a follow up if we could just talk about capital location for a minute.
Leveraged starts to tick below four times and then link remains free cash flow positive, they're way, we should be thinking about buybacks or dividends or or appropriate action as we as we think about return of comparable options in 2022.
Yeah, Hey, Brian is Pablo.
On the capital allocation side, our posture or thinking hasn't really changed from what we discussed last quarter.
Hearts with the strong free cash flow that we're generating as we pointed out $340 million over the last 12 months and that gives us a lot of optionality.
So we're very close to that part of leverage ratio below four times.
Gives us an opportunity to pivot two or more balanced capital allocation approach and that's really the key to it it's balanced.
We will see a bit of an increase in returns to the equity holders.
Seen us be pretty light touch on the.
Buyback side, but.
But we do plan to employ that program and we also think it is time to look at the distribution. So what are we doing that with the fourth year in the near term.
You mentioned preferreds.
That is certainly partners toolkit, we would like to reduce those overtime and we view that as.
A productive way to reduce overall leverage on the balance sheet.
That said, there must liquid and say buying common units in an open market repurchase program and some of them not as much within our control as some of the other tools.
Okay I'll make sense. That's all for me you have a great day.
Thank you Brian.
The next question comes from Michael Qsymia Cusumano with heightened energy. Please go ahead.
Good morning, everyone. Thanks for taking my questions.
I wanted to start with the realized helps losses in three key.
In Louisiana.
I understand the way typically holds but can you provide any color on how we should think about those hedge realization <unk> and beyond.
Yeah, Hey, Michael it's been let me try to unpack that a little bit specifically in Louisiana, you have a couple of things going on.
The biggest item is we produce all of the purity products all year long, but some of them, we sell seasonally particularly butane because there's a winter market that stronger than the summer market.
And so there's a portion of our butane that we store.
Through the summer for sale in the winter and we headed.
And often times, we roll those hedges on a monthly basis. So you may realize the negative side of the hedge on a monthly basis, but you don't get to realize the gain on the product the physical product until you sell it.
And so that's why we a big reason why we have a stronger seasonal fourth quarter and first quarter. Then we have a second and third quarter in that business that is particular year. It's exacerbated for two reasons number one because the market price of the products has risen so quickly.
That are normal hedging activity, just gets Utah larger absolute numbers than it would have done say in prior quarters.
And the second thing is it was exacerbated by the hurricane.
Because during the Hurricane we had some downtime and.
And during that downtime, we put product into storage Y great product into storage that we will fractionate and sell in the fourth quarter and then we'll realise the physical side the physical game that offsets that realized hedging loss. So it does it does generate quite a bit of.
Of derivatives noise in the third quarter results.
My expectation is that you will see a significant positive offset in the fourth quarter and into the first quarter of next year that represents the the physical game that offsets that unrealized pardon me that realized derivative loss.
Got it yes, that's true.
[noise] helpful. And then if I could follow ups looking at the Capex increased to 225.
Seeing any cost cream in like current projects that you had or I guess I should say previous projects that you've had in the backlog or is the increase mostly attributable to like Phantom and maybe some timing pulling forward some projects.
Yeah. The overall, increasing capex is overwhelmingly driven by producer activity. So the increase is the first several million dollars.
Of the Phantom plant.
In addition to that more well connection, Oklahoma more well connected and compression projects and the Permian now on the question of inflation.
There are some reality is out there like steel prices that we're all exposed to.
But at this point that is still a relatively minor driver in the overall picture of our capital spending.
And we have a very proactive supply chain team here that has done a lot of great work to help insulate us from some of those price pressures relative to relative to our peers.
Understood. Okay, well, that's all I had thank you for the details.
Thanks Martin.
The next question comes from Christopher Jeffrey with Mizuho Securities. Please go ahead.
Hi, How're you Doin' I was just curious on.
Deal with Continental I was wondering if they have previous experience with similar deals in place or would this be the first of its time for them as well.
Yeah I know this is.
Very much in line with what Continental does if you if you want to go in and take a look at.
At their organization, they're a part of Madison Drygas, which is.
A national provider of a very wide range of industrial gases C. O. Two is only one small part of it and then more broadly they're part of a global can comp conglomerate name Nicholas Sanzo group based in Japan and of this this is our first.
<unk> with C O two.
Capture in sales, but certainly not certainly not theirs.
Got it and then following up on that 225, and 22 Capex should we expect similar allocation by basin to what we saw or something maybe a little more in Oklahoma.
Yes, so I spend most famous pop over by the way has been was saying most of the increase has to do with producer activities and so vast strongest in the Permian basin.
And we also have an uptick in Oklahoma, where we're connecting more wells.
And then the starkness of Phantom plant will obviously be in the Permian basin as well.
Got it thank you well.
The next question comes from TJ Schulze with RBC capital markets. Please go ahead.
Hey, good morning.
Just stand on Oklahoma, there, what's the customer mix for you all for private operators versus public.
For current Reg activity or volumes on your system and do you think.
That the difference of activity levels for the private versus public stays pretty consistent given.
Yes, we're current gas and NGL prices are thanks.
A T. J this has been in.
In Oklahoma in recent days, we've seen anywhere from seven to as many as 11 or 12 rigs operating on the system.
Of those as many as five have been public operators I think today, we are at seven or eight rigs and only two of them are public operators.
Which is the Devon Dow JV activity.
I do expect to continue to see more activity from the privates van from the Publix and I think that's because the private operators have a little bit more flexibility than the public operators due to ramp up activity because they have a.
Have a different investor base that may have different priorities than what the public operators or hearing from their own investor base and so I think that just goes to the point of the benefit of having such a diverse group of customers in Oklahoma.
Whether it's public activity or private activity that predominates in a given environment, we have exposure to everyone who operates in the basin.
And that we're being rewarded for that today.
Got it makes sense.
And then just a question on the potential for downstream projects in in Louisiana.
Mentioned that could be similar to venture global type of transaction and just looking for any more color on.
On the types of projects you are looking at here are projects more natural gas or NGL focused on their their assets you are looking to repurpose.
Alright, and just anything that fire larger amounts of capital that you're looking at thanks.
T J. Thank you this very.
Let me say that this is consistent with what we've always said about just the great asset base that we have there with over 4000 miles of pipe basically.
Traversing through the demand center of Louisiana.
So by the nature of that pipeline I mean, we are focused on the downstream delivery type projects across all products and.
And so the venture global project last year as we cited in the prepared remarks is a good example of the types of things that we have and we have more projects like that that are for expanded gas service.
And and also for NGL service conversion of pipe is always an option for us because we've got the multiple pipelines in most quarters later and so again lots of Optionality as we look at the Ccu's business the NGL business in the natural gas business.
Good progress I noted in the prepared remarks that we've made good progress on those projects.
I look forward to being able to communicate to you when they're completed when they are they're going to be relatively capital light because we're we're building off of existing infrastructure and they are going to be higher return projects.
So.
Good good area for us lots of opportunity.
Great. Thanks Barrett.
Again, if you would like to ask a question Cross Star then one to join the queue. The.
The next question comes from a Colton being with Tudor Pickering hole. Please go ahead.
Good morning, maybe just back in my carbon utilization project, one I guess, we'll enlink be funding the capture build out in any transportation infrastructure and if so any preliminary expectations on magnitude and timing.
Yes. This is Barrett, let me, let me start by saying we continue to be really encouraged by the work that we're doing in this issue of space.
You know I mean this is the amount of time that we've been focused on this is measured in months right now because it's relatively new for all of us but.
But we've made great progress ill.
I'll start with kind of the bigger picture were encouraged by what we're seeing from a legislative standpoint.
I think we're seeing.
Everyone recognized carbon capture will be an important part of meeting the global D Carbonization objectives.
See unlike many other things in Washington, we're seeing good bipartisan support so that's helpful and I think that's evidenced by looking at the current <unk>.
Build it is being discussed which really is three things that we think are very helpful to the <unk> business.
First of all the increase of the 45 few credits.
Basically a 70% increase for both the sequestration and you are capture and and.
Removal of carbon the second thing or does it extends the eligible construction from 2026 to 2032.
It gives us more time to develop these projects and then lastly, and maybe most importantly is the directly aspect of it that is included in the bill and so.
Good things happening in that direction.
Our focus right now has been on providing a total solution to the market and what I mean by that is we have in place basically a transportation infrastructure.
But we want to be able to provide to any customer the capture and sequestration aspects of it and and so we're very focused on doing that.
We could do that independently, but we think a better approach would be to do it with someone who has that expertise and skill set today and.
And so we're focused on working with partners on the upstream capture in the downstream sequestration and then what we would bring to the table is the transportation fees, but as I said, we could do all of it but we don't think that's the best approach.
Get it maybe just say clarify on the 15 year term is that structured as a dedication air does in Lancaster deliver minimum volumes over the duration of the contract.
Hey, Colton. This has been so I think barriers talking there about our broad vision for CCU S in in Louisiana.
What you are talking about it at Bridgeport is a project, where we already do the work to capture the C O two today.
And that just goes to show that is a skill set that we already have within enlink. It's just that today. The <unk> is vince into the atmosphere, we're going to start sending it to the atmosphere and instead deliver it in a pipeline to our partner Continental carbonic products, they will purify it and convert it to liquid C O two.
And dry ice and they will do that there at the Bridgeport plant onsite for that term of 15 years did you have a specific question about the term.
Yes, effectively and you're just thinking about long term risk is there is it structured as a dedication where any C. O. Two that's produced and it goes to take ironic or do you all have to deliver minimum volumes over the entirety of the 15 years.
Yes, there is no minimum volume commitment and they are constructing their plant to handle 100000 metric tons per year today, we produced significantly in excess of that.
Perfect.
And maybe just.
Final one for me here.
Mentioned that strategy expecting in Delaware next year I think we just passed the five year anniversary of the Delaware Basin Jv's can you just update us on how you view the platform strategically and whether consolidation can be an option down the road.
[noise], Yeah, colds and first of all let me let me say this a partnership has worked it is working well.
You might recall that five years ago, we would have a moment in time, where we needed a financial partner just didn't make sense for us to do all of that on our own shortly thereafter by the way.
And we might have had.
A different.
Decision, but <unk> has been a great partner for us.
We continue to think about what we do with that long term, but.
At this point I would say, there's nothing we foresee in the near future that would be different than continuing with a 50 50 partnership within GP in that area.
Okay I appreciate your time.
Thank you.
The next question comes from VA Chatty with J P. Morgan. Please go ahead.
Hi, Good morning is.
My first question is on the exposure to <unk> keep oil contracts.
Can you break down how the exposure is and defend basins and.
So we had seen some of the <unk> moving towards keeping the Williams opened and Han hits.
Maybe just your thoughts on how you on.
How you see about commodity exposure in 2022 and.
For the rest of the year.
[noise] Hello, Vinay, it's been I'll I'll take the first half of your question and then Pablo are probably one of address the second half of your question and.
In terms of art.
Paul exposure I'll I'll start by reminding everyone that we are.
About 90% fee based in our overall contract mix, where we have.
Noel exposure is in the Permian basin and in particular in the Midland Basin.
Even there it's not it's not the majority of our contracts.
So it's a relatively small part of the overall business mix.
But in environments like these it does give us a tailwind as commodity prices rise, which is a good lead into the second half of your questions you have in the Hague follow up.
Yeah. So look the way our hedging program is the sign is.
Built to give us additional cash flow stability in the near term so we layer on.
Hedges unexpected equity volumes in the near term so that we're pretty well heads.
One quarter out and then it's steps down to about 25% for quarterstaff, so with that the US is in the rising commodity price environment, you've got good price stability at the front in the near term.
And then you've got commodity price exposure.
You can.
<unk>, hi realized prices and two hedge into higher prices as you move.
Around that time line.
In terms of.
The overall approach.
Goal here is to provide.
That cashflow stability for.
For the business and to be able to.
Sort of hedge against the forecast or guidance or a budget that we all believe it.
Got it thanks, maybe.
Maybe just falling playing up on the project's project Whitehall's on project sanctum.
So given you are shifting a processing facility that I am assuming that growth Cross-fade. That's definitely go up in the Colombian but if you would share unhealthy.
Unique.
Margins would be on the new plants.
Yes, if I if I understood. Your question correctly, certainly you are right that the relocation of the Phantom plant.
Allow us for the Permian segment that keep growing.
And so the segment profit will go up in the Permian at the plant fills up in terms of the unit margins.
Don't expect it to be very different from the unit margins that we're seeing today.
Because the plant is being relocated to serve the same book of business that we have in place today.
Wrong with as I mentioned earlier some of the commercial success, we had in in 2021.
Got it that's a semi thanks guys.
Thanks to Matt.
This concludes our question and answer session on us in the conference back over to Barry Davies for any closing remarks.
Thank you Tom for facilitating a call. This morning, and thank you everyone for being on the call today and for your support is always we.
We appreciate your continued interest and investment in in like and we hope you have a great day. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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