Q4 2021 Energy Transfer LP Earnings Call
Greetings and welcome to the energy transfer fourth quarter earnings results Conference 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 this conference. Please press star zero on your telephone keypad. Please.
Please note that this conference is also being recorded.
I will now turn the conference over to our host.
Tom Long co Chief Executive Officer for energy transfer. Thank you you may begin.
Thank you operator, good afternoon, everyone and welcome to the energy transfer fourth quarter 2021 earnings call and thank you for joining US today I'm also joined today by Mackie Mccrea and other members of our senior management team who are here to help answer your questions. After our prepared remarks.
Well you saw the 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 SEC.
Section 20, <unk> of the Securities Exchange Act of 1930 for the.
These statements are based on our current blades as well as certain assumptions and information currently available to US and are discussed in more detail in our annual report on Form 10-K for the year ended December 31, 2021, which we expect to be filed this Friday February the 18th I'll also referred.
Adjusted EBITDA and distributable cash flow or DCF, both of which are non-GAAP financial measures you will find a reconciliation of non-GAAP measures on our website.
I'd like to start today by looking at some of our fourth quarter and full year 2021 highlights.
For the full year 2021, we generated adjusted EBITDA of $13 billion, which was a significant increase over 2020 and in line with our expectations.
DCF attributable to the partners of energy transfer as adjusted was $8 2 billion, which resulted in excess cash flow after distributions of approximately $6 $4 billion.
On an incurred basis, we had excess DCF of approximately $5 billion after distributions of $1 $8 billion and growth capital of approximately $1 4 billion.
January 25th we announced a quarterly cash distribution of <unk> 17, and a half cents per common unit or 70 stance on an annualized basis, which represents a 15% increase over the previous quarter and represents the first step in our plan to return additional value to get owners operationally.
We moved record volumes through our NGL pipelines, and NGL and refined products terminals.
For the full year 2021, primarily driven by growth in volumes through our Nederland terminal and on our Mariner East pipeline system and.
In addition, NGL fractionation volumes reached a new record during the fourth quarter, largely driven by growth in volumes, beating our Mont Belvieu fractionator.
At our Nederland terminal, we completed expansions in early 2021 that broader companywide total NGL export capacity to more than $1 1 million barrels per day, which we believe is the largest in the world.
On December 2nd 2021, we completed our acquisition of enable midstream partners, which provides increased scale in the mid continent, and Ark, La Tex regions and improve connectivity for our natural gas crude oil and NGL transportation customers. The combination of energy transfers and enables <unk>.
Mary assets will allow us to continue to provide flexible reliable and competitive services for our customers as we pursue additional commercial opportunities utilizing our improved connectivity and expanded footprint.
We continue to expect the combined company to generate more than $100 million of.
Of annual run rate cost saving synergies of which we expect to achieve $75 million in 2022.
In addition, we are in the process of identifying and evaluating a number of commercial and operational synergies that are expected to enhance the operational capabilities of our systems by capitalizing on improved efficiencies and increasing utilization and profitability of our combined assets.
Before moving to a growth project update.
I want to briefly touch on the recent winter weather conditions seen across many of our assets.
This out of winter weather was less severe and significantly less disruptive than winter storm Yuri last year and commodity prices remained much more stable throughout as a result, as we always do we have procedures in place to provide layers of protection and risk mitigation, including engineering controls.
And when a realisation processes and pre planning and pre positioning our resources to assure we are able to respond when needed.
Our extensive experience with operating pipelines processing plants and storage facilities combined with a significant amount of preparation allows us to operate reliably throughout extreme weather conditions and this is due to the consistent.
Ordinary efforts of our employees.
I'll now walk you through recent developments on our growth projects, starting with Mariner East pipeline system construction of the final phase of the Mariner East pipeline is complete and commissioning is in progress, which will bring our total NGL capacity on the Mariner East pipeline system to 350000 to 307.
5000 barrels per day, including ethane.
Energy transfer Mariner East pipeline system now includes multiple pipeline across the state of Pennsylvania, connecting the prolific Marcellus and Utica shales to markets throughout the state and the broader region, including energy Transfer's Marcus Hook terminal on the East coast.
For full year 2021, NGL volumes through the Mariner East pipeline system and Marcus Hook terminal.
Nearly 10% over 2020 with our expanded network, we will see volumes continue to grow.
And our Pennsylvania access project, which allows refined products to flow from the Midwest supplier reagents into Pennsylvania, New York and other markets in the northeast started flowing refined product in January .
At our expanded Nederland terminal NGL volumes continue to increase during the fourth quarter, including export volumes under our orbit ethane export joint venture, which have remained strong.
For the full year 2021, we loaded nearly 26 million barrels of ethane out of the facility for 2022, we expect to load a minimum of 40 million barrels of ethane.
Projected to increase to up to 60 million barrels for 2023.
We also expect our LPG export volumes at Nederland to continue to grow in 2022.
And in total our percentage of worldwide NGL exports has doubled over the last two years, capturing nearly 20% of the world market, which was more than any other company or country exported during the fourth quarter of 2021.
At Mont Belvieu recently brought online a 3 million barrel high rate storage, well, which increases our total wells to 24, and our NGL storage capabilities at Mont Belvieu to 53 million barrels.
Turning to our Cushing South pipeline.
In early June we commenced service on the 65000 barrels per day crude oil pipeline, providing transportation service from our Cushing terminal to our Nederland terminal, which also provides access for powder River and DJ basin barrels to our Nederland terminal B in an upstream connection with our white cliffs pipeline.
This pipe is already being fully utilized and as we mentioned on our last call. We're moving forward with phase two which will nearly double the pipeline's capacity to 120000 barrels per day.
Phase two is expected to be in service by the end of the first quarter of 2022 and is underpinned by third party commitments as a reminder, minimal capital spend was required for this space.
Next construction on the Ted Collins link is progressing and is now expected to be completed late in the first quarter of 2022.
Ted Collins will increase market connectivity for our Houston terminal. It will also give us the ability to fully load and export W. T I barrels as well as low gravity Bakken barrels out of the Houston market demonstrating energy transfer has unique capability to provide a neat bakken barrel to markets along the Gulf.
[noise] coast.
Our Permian Bridge project, which connects our gathering and processing assets in the Delaware basin with our G&P assets in the Midland Basin was placed into service in October and continues to be significantly utilized. This project allows us to move approximately 115000 Mcf per day of rich gas.
Out of the Midland basin and to utilize available processing capacity more efficiently, while also providing access to additional takeaway options.
In addition, and expansion is underway, which you bring the pipeline's total capacity to over 200000 Mcf per day in the first quarter of 2022.
And due to significantly increased producer demand, we now plan to build a new 200 Mcf per day cryogenic processing plant in the Delaware Basin.
The Gray Wolf plant is supported by new commitments and growth from existing customer contracts and is expected to be in service by the end of 2022 .
In addition to provide incremental revenue to our midstream segment once in service the volumes from the tailgate of the plant will utilize our gas and NGL pipelines for takeaway, providing three revenue streams.
Now in order to address the growing need for additional natural gas takeaway from the Permian Basin. We are diligently evaluating a takeaway projects that would utilize the existing energy transfer assets, along with new build pipeline, providing producers with firm capacity to the premier markets of Haiti Carthage Gillis.
And Henry ups.
This pipeline project would include the construction of a new approximately 260 mile pipeline from the Midland Basin to our existing 36 inch pipeline southwest, but fort worth paralleling existing right away.
From there it would interconnect with our existing assets with available capacity for delivery through our vast pipeline network to markets at Carthage as well as to Katie Beaumont and the Houston ship channel and other markets, along the Gulf coast, including deliveries to the Gillis and Henry hubs.
We view this project as an ideal solution for natural gas growth out of the Permian basin that we can complete much more quickly than our competitors options at significantly less cost about following an existing right of way along the majority of the route.
In addition, it is aligned with our strategy of identifying and Repurposing underutilized assets in order to maximize the value of our uniquely positioned existing asset base.
Customer discussions are underway and as we pursue this project.
The proposed route and our ability to utilize the existing assets. We believe we could complete construction of the project in two years or less once we have reached F. I D.
Turning to the Gulf run pipeline, which will be a 42 inch intrastate natural gas pipeline with 165 Bcf per day of capacity Gulf Rod is backed by a 20 year commitment from Golden pass LNG, and we will provide natural gas transportation between the Haynesville shale and the Gulf.
Coast connecting some of the most prolific natural gas producing regions in the U S with the LNG export market pipeline.
Pipeline construction is underway and is expected to be completed by the end of 2022.
Lastly in July of 2021, we announced the signing of a memorandum of understanding with the Republic of Panama to study the feasibility of jointly developing a proposed tranche Panama gateway pipeline.
We anticipate working closely with Panama to successfully bring this project to fruition.
Animals geographic location and favorable investment climate make this an attractive project. We continue to believe this project will create the most liquid and attractive LPG supply hub in the world and are excited about the opportunity it presents.
Now for an update on our alternative energy activities in January of 2022, we announced that we expanded our alternative energy group through the hiring of a vice president of alternative energy.
This role is responsible for developing alternative energy and carbon capture projects for energy transfer along with various ESG initiatives, including the development of carbon capture offset programs that are accretive to our operations.
In addition to the two solar projects, we announced in 2021. We are also continuing to explore several opportunities for solar wind and forestry carbon credit projects on our existing acreage in the Appalachian region.
We remain in discussions with other large renewable energy developers on.
On the carbon capture front, we continue to pursue our carbon capture projects at Marcus Hook that would involve capturing seal to from the flue gas and delivering it to the customers for use in the food and beverage industries.
This project looks financially attractive based upon preliminary cost estimates and design feasibility studies.
We are also pursuing several carbon projects related to our assets, including projects involving the capture of <unk> two from processing and treating plants for use in enhanced oil recovery or sequestration.
We continue to believe that our franchise will allow us to participate in a variety of projects involve the carbon capture or other innovative uses as we continue to reduce our carbon footprint.
Lastly, we published our annual corporate responsibility report to our websites in December .
Now, let's take a closer look at our fourth quarter results.
Solid data to adjusted EBITDA was $2 $8 billion compared to $2 $6 billion for the fourth quarter of 2020 DCF attributable to the partners as adjusted was $1 $6 billion for the fourth quarter compared to $1 4 billion for the fourth quarter of 2020.
For the fourth quarter, we saw higher transportation volumes across all of our segments, including record volumes in the NGL and refined product segment as well as a $60 million adjusted EBITDA contribution from the acquisition of enable for the month of December .
On January 25th we announced a quarterly cash distribution of <unk> 17 in the half cents per common unit for 70 cents on annualized basis. This distribution will be paid on February 18th to unit holders of record as of the close of business on February eight.
This distribution represents a 15% increase over the previous quarter and represents the first step in our plan to return additional value to unitholders, while maintaining our leverage ratio target of four to four five times debt to EBITDA.
Future increases to the distribution level will be evaluated quarterly with the ultimate goal of returning distributions to the previous level of 13, and a half cents per quarter or $1 22 on an annualized basis, while balancing our leverage target growth opportunities and unit buybacks.
Turning to our results by segment, starting with NGL and refined products adjusted EBITDA was $739 million compared to $703 million for the same period last year.
This was primarily due to higher transportation and terminal services margins related to increased throughput at our Nederland terminal in the fourth quarter of 2021.
As well as increased fractionation and refinery services margin.
NGL transportation volumes on our wholly owned and joint venture pipelines increased to a record $1 9 million barrels per day compared to one 4 million barrels per day for the same period last year.
This increase was primarily due to increased export volumes feeding into our Nederland terminal from the initiation of service on our propane and ethane export projects higher volumes from the Permian and Eagle Ford regions as well as increased volumes on our Mariner East pipeline system.
And our fractionator. It's also reached another record for the quarter.
With average fractionated volumes of 895000 barrels per day compared to 825000 barrels per day for the fourth quarter of 2020.
For our crude oil segment, adjusted EBITDA was $533 million compared to $517 million for the same period last year.
This was primarily due to higher crude oil transportation volumes out of the Permian basin improved volumes through our Nederland terminal and improved performance on our Bakken and Bayou Bridge pipelines as a result of recovering volumes in the fourth quarter of 2021.
And the addition of the enable assets.
For midstream adjusted EBITDA was $547 million compared to $390 million for the fourth quarter of 2020.
This was primarily due to a $147 million increase related to favorable NGL and natural gas prices. In addition, our midstream segment also benefited from growth in the Permian South Texas <unk>.
And northeast and the acquisition of the naval assets in December 2021.
Gather gas volumes were $14 8 million in the MBT years per day compared to $12 6 million M. N V to use per day for the same period last year due to higher volumes in the Permian, South, Texas and northeast weak regions as well as addition of the naval assets in December of 2021.
In basin volumes continued to be strong and Midland endless volumes remain at or near record highs. As a result, we are expanding our Permian bridge project and constructing our new Graywolf processing plant in the Delaware Basin.
In our Interstate segment, adjusted EBITDA was $397 million compared to $448 million in the fourth quarter of 2020.
Well volumes are beginning to improve we did experienced contract expirations at the end of 2020 on Tiger and FEP and due to very mild temperatures throughout the Midwest, we experienced lower demand on our Panhandle and trunkline systems during the fourth quarter.
However, these decreases were partially offset by increases on Rover and Tiger due to more favorable market conditions and to significant volume growth out of the haynesville.
These results also include the enable assets in December of 2021.
We have seen steady growth recently in the intrastate segment with the fourth quarter up more than 10% over the third quarter of 2021, even without the impact of the night.
For our intrastate segment, adjusted EBITDA was $274 million compared to $233 million in the fourth quarter of last year. This was primarily due to increased firm transportation volumes from the Permian and South Texas. The recognition of certain revenues related to winter storm, Yuri and an increase in retained fuel.
Revenues due to higher natural gas prices as well as the addition of the naval assets in December 2021.
Now turning to our 2022 adjusted EBITDA guidance with expectations for continued strong performance from our existing business as well as the addition of the enable assets. We expect our full year 2022, adjusted EBITDA to be 11 $8 billion to $12 2 billion.
And moving to our 2022 growth capital expenditures, we expect growth capital expenditures, including expenditures related to the recently acquired enabled assets to be between $1 6 billion and $1 $9 billion balanced primarily across the midstream NGL and refined products and Interstate segments.
This number includes approximately $200 million of 2021 planned capital that has been deferred into 2022 as well as growth capital related to the recently acquired enable assets in particular Gulf run pipeline.
In addition, this includes newly approved projects in the Permian Basin that support ROE natural gas production through new gathering and processing capacity.
Proved efficiencies and reduced emissions.
These projects include construction of a new processing.
Plant optimization of the <unk> pipeline and modernization and debottlenecking of the existing system.
The majority of these new projects are expected to provide strong returns and be completed at a six multiple on average.
Now looking briefly at our liquidity position as of December 31, 2021, total available liquidity under our revolving credit facility was slightly over $2 billion and our leverage ratio was three point <unk> seven for the credit facility.
During the fourth quarter, we utilized cash from operations to reduce our outstanding debt by approximately $400 million and for full year 2021, we reduced our long term debt by approximately $6 $3 billion.
We expect to generate a significant amount of cash flow in 2022, which will be strategically allocated in a manner that best positions us to continue to improve our leverage invest in the growth of the partnership and return value to our unit holders as we approach our leverage target range, we have taken our first steps towards returning.
Additional capital to our equity holders through distribution growth, which we will continue to evaluate on a quarterly basis. In addition, we have increased our growth capital spend as I mentioned earlier on the call with this capital focused on strong returning projects that will be in service in less than 12 months and we expect to continue to pay.
Down debt throughout the year with excess cash flow from operations.
During the fourth quarter, we continue to see volumes recover across many of our systems, including another record quarter for volumes in our NGL and refined product segment. Looking ahead. We are excited about the opportunities in front of US we will continue to explore and implement commercial synergies around the recently acquired enable asset.
And we continue to see growth across our NGL business segment, driven by increasing demand both domestically and internationally.
We have entered 2022 with a much stronger balance sheet in 2021, and we will continue to place emphasis on financial flexibility and paying down debt in 2022, while continuing to position ourselves to return value to our unit holders given the volume growth expected out of the Permian basin, we have some attractive new.
<unk> underway that will address new demand enhance the efficiency and flexibility of our existing asset base.
And generate attractive returns above our target threshold.
We also continue to make progress on the alternative energy.
Which can further enhance and effectively grow our energy franchise.
Operator, please open the lineup for our first question.
Thank you.
Ladies and gentlemen at this time, we will conduct a question and answer session.
Please limit yourselves to one question and one follow up question for each time that you place yourself in the question queue.
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One moment, please while we poll for questions.
Thank you.
And our first question comes from Michael Lapidus with Goldman Sachs. Please state your question.
Hey, guys. Thank you for taking my question and congrats on a good end of year and good quarter actually I had two one is in the potential development.
Takeaway solution financial gas coming out of the Permian can you talk a little bit about what the early feedback from shippers is been meaning what's the level of interest and shippers to sign a 10 or 15 year contract or are they more willing to do and want to do shorter term deals.
The first question and then the second question is can you just talk a little bit about the Permian Express system in where you might have a re contracts contracts that roll off over the next couple of years.
You bet Michael this is mackie.
We are so excited about this project, we haven't really spoken a lot about it we have some.
More capacity than anybody else now across the states, we've been accommodating volume growth was last year or two.
We've heard a lot of our competitors talking about a project needed. It was how close they were to get enough.
Project online and it really became important over the last number of weeks that we kick in in a big way so.
To answer your question the customers that we talk to are very excited if you compare our project to anybody else you know most of them have gone either from the area down to Agua Dulce or now they're talking about going to the Katy and the luxury of what our project will provide will be just kind of a smorgasbord of.
Markets, we've said.
In the statements by Tom earlier, but bottom line is you will take the Permian basin.
All of the fuels and deliver them to the best markets along the Gulf Coast to Katie the ship channel to some of the LNG markets to Henry hub to Gill with some of the better markets in Louisiana.
These producers can stop our shippers can stop in Carthage. So we're extremely excited about this we continue to do what we've been doing for a long time and that's look at all of our assets.
And not only how we repurpose them, possibly to make more revenue, but also how we use more efficiently and utilize them.
A better way in and this project will allow that it's probably a 200 mile less pipeline that our competitors. It will tie into 36 and 42 inch pipelines downstream, where we have significant amount of capacity. They will needless to say, we're very excited and the customers. We've spoken to are as well in regards to Permian Express.
Those spreads as everybody knows it.
<unk> the last couple of years.
As the industry does commonly we go through these cycles, both building and truly the crude side of our business is overbuilt.
We always say, though we feel very fortunate that we have assets that reach out and all the way to the wellhead and we don't stop at Houston now are dealing with all the way to Bayou bridge or are putting barrels on the water and even deliver who are mid valley system up in the in the mid continent. So we cannot be more than any of our competitors.
Our teams at the results have shown this quarter and have done a fantastic job of keeping our May express schools and growing our volumes at all after the pandemic, we grow significantly fourth quarter over fourth quarter that we just showed in our results and so yes contracts have rolled off over the last two or three years.
We're not looking at locking in long term.
Contracts right now where the spreads are.
We will see the production start to increase over the next two to three years.
And we'll certainly capitalize on the spreads as they move out but meantime was to offer this string of services from the wellhead all the way to low loan ships or two refineries.
We're pretty excited about our crude growth business through these assets.
Thank you.
And our next question comes from Chase Mulvehill with Bank of America.
Please go ahead and state your question.
Well.
Good afternoon everybody.
Follow up question here.
If we think about the potential capacity.
The pipelines coming out of the Permian.
The natural gas coming out of the <unk>.
The Permian how much capacity do you think you'll be able to kind of pull out of there and get to the Gulf coast.
As you look at this.
Conversions off of this.
Permian gas takeaway projects.
Oh.
The way, we're going to look at that is of course listen to our customers and we will design a system that can meet those demands, but what we anticipate as kind of a minimum of combined capacity that we have today on <unk>, that's available today and in the future and with this new pipeline project will have a target between one five and two bcf of new takeaway.
Pasty.
A couple of years after we reach F I D.
Okay, alright that makes sense.
You said once you reach a idea that.
Kind of two years to put it in service and it seems like its early stages, maybe conversations with customers. So maybe we're a few months away from from <unk>.
And if we kind of look forward two months.
$90 crude is going to incentivize a lot more activity in the Permian, it's only going to pull this bottleneck forward not push it to the right. So it's probably going to happen even faster than people think.
So we reach that point of constraints for natural gas takeaway capacity earlier in the Permian.
2023, so maybe walk us through your Permian business and help us understand the puts and takes.
Where you can make more money and where it might hurt you if you're if you hit some bottlenecks for Nat gas takeaway in the Permian.
Okay, Yes.
We've spoken about a few of these projects we are in the middle of a project right now where we're spending not a great deal of capital and we're increasing the capacity of the Oasis Bob between 40 and 45000 a day, we're looking at another expansion, where we can increase it by about another 20000 so.
We should kick that off pretty soon but not a lot of capital just adding compression and we will be able to move out 60000 more today. So to your question about it could move forward more quickly. We agree we think if you look at some of the forward curve you're out over a dollar dollar's 'twenty I think latter part of 'twenty, two and 'twenty three and we are.
Well positioned to capitalize on that.
We have capacity on <unk>, we have more capacity coming available in the next couple of years from contracts that are rolling off at much lower rates than where we think the market will be so we positioned ourselves very well. So we're we're kind of capitalizing on three different ways one of what we have today.
Radios, where we are.
<unk> benefited from that we are adding capacity, where it makes sense as I just alluded to in the 60000 that would be adding here.
Next six or seven months and then once we hopefully get the D. Here.
Quarters, do we will add additional takeaway, but there is going to be some tough time, regardless of the.
Decisions light for whoever turns over the next pipe and there. We do believe there is going to be a blow out spreads.
Sitting in a very.
Good spot there because where our assets are in the available capacity, we have to move Permian basin volumes to the Gulf Coast.
Thank you.
Next question comes from Jeremy Tonet with Jpmorgan. Please state your question.
Hi, good afternoon.
Hey, Jim.
Just wanted to start off with the Capex if I could I was just wondering if you could help.
US Bridge I guess, the 500 to 700 guide before to know in any numbers you could put around how much was enable versus new projects just trying to better understand the drivers there.
Okay, Yeah, Jeremy this is Tom.
One of them that start first with the split of how the numbers are coming out between the various segments and I. Appreciate the fact that you know Gulf run is now included in this but the largest piece of this is really earmarked towards the.
Towards the midstream you heard us talk about like the new processing plant. So that's probably about 35, 36% of the number then moving next you're going to move into the Interstate with the Gulf run that I've, just mentioned, you're probably running about 20, 23% or so.
On that piece of it and then when you keep moving on down through the through the mix, the NGL and refined products or 2021% with.
With crude.
Entrust state and other kind of bringing up the bring up the last of it but that's the way you really kind of see it now kind of looking at NASS remember that we did roll over a couple of hundred million from projects in 2021, so probably need to start start with that.
As far as the rest of the pieces of it.
That's so that's really how it's probably best to try to try to break it out I don't really have a bridge necessarily between the between the $700 million.
To the.
To these numbers, but I would say the biggest chunk of that is coming in with the Gulf run.
Got it.
Helpful. There and just wanted to turn to enable for a minute. If I could just wondering now that you have them in the fold for a little bit here wondering how things are going versus expectations and really just wanted to see you talked about converting assets like for this potential new permanent gas pipe project do you see I guess more potential conversion.
<unk> now that you have kind of a larger set of assets to work with here.
Yes, Jeremy we do we are we're very excited as we've said before we had really dug into the commercial synergies. We knew they were there we saw some kind of.
Easy ones, but as we've dug in we found more there's a number of ways, where we can run plants more efficiently there's pipelines that we're looking at.
Can't convert them.
To a different product, particularly NGL and a couple of instances.
And we're also looking at combining assets pipeline assets to move Volte.
Volumes out of the Haynesville and into some of the markets to get gas through our assets to the Gulf coast. So.
Still a little bit early to talk much about those certainly by our next earnings call, we'll be knee deep in the announcements and taken advantage of some of those synergies, but we're very excited with kind of the very preliminary.
Discussions and analysis that we've been going through.
We do at teams working on that day.
Thank you.
Our next question comes from Michael Bluhm with Wells Fargo. Please go ahead with your question.
Thanks, Good afternoon, everyone just.
Just wanted to follow up on some of the Permian gas discussion.
Just to confirm the Oasis pipeline optimization project that you referenced is that the 60000 expansion at that mill.
You were talking about or if there is not the limit as to what the oasis can be expanded.
But hey, Mackie, Yeah, gosh limit we seem like we've gone through this exercise all known for years and we keep adding capacity as we study more we find ways to add more so the more recent one was the one I mentioned too that we're already moving forward on the 40000, plus 40 45000.
Mcf a expansion of compression and then we're about to approve another smaller one but 2000 20000. So combined it's about 60 or 65000 of additional capacity that we will have added by the end of the year first part of two.
<unk> 2023.
So that's separate from this other projects that we're talking about out of the Midland Basin, a much bigger diameter project to move gas to the existing assets that we own over closer to east Texas.
Okay, Great and then.
On this new project I think you mentioned you'd have to convert some existing.
Pipelines would you what service would you be taking those out of and the.
The second part of that question is for the new larger pipeline what length of contract where you need to sort of get this thing time I D.
Thanks.
I'll start at the end of that you know our goals. When these types of projects are typically 10 years. So that's what we'll be negotiating a lot depends on the rate.
And what exactly the customers looking for so we will be.
Negotiable on that but to clarify no. This one unlike all the others converting crude oil to gas or gas Ngls for Ngls to diesel.
This is just utilizing capacity that is underutilized today. So for example would be we would be time. This project into a 36 inch pipe.
<unk>, which is southwest of the Metroplex, DFW metroplex and that would tie into our massive intrastate 36, 42 inch pipeline systems that deliver enormous amounts of gas, although Carthage and all the way down into the Gulf Coast.
Katy ship channel markets as well as the Beaumont markets. So we're not converting any of capacity. This project is fully utilized the capacity its already built sitting there idle underutilized.
Perfect. Thanks for the clarification.
You bet.
Our next question comes from Jean Ann Salisbury with Bernstein. Please state your question.
And the Haynesville is growing rapidly and several new projects have been proposed.
Can you kind of comment on if you think people will run out of capacity before Gulf run comes on.
Are you close to moving forward on the expansion project.
Yeah, I'll I'll step back a little bit better.
Vicki and her and her folks have been working hard on finding a solution for the growth out of the Haynesville. So we've done that in a number of ways by bringing gas from tiger into Carthage and moved into our H P. L. In DTC.
Network down into the Gulf Coast. So we've done some significant.
The contracts there we're negotiating some very significant ones that provide.
Actually some flexibility where some of these producers looking to go east parity Bill on Tiger and also come back into Texas at the same time, there's about one one bcf of golf runs already sold so we've got about 500, plus 50 that we're looking to sell we're aggressively tying that into our.
<unk> for those producers that would like to reach the markets at the end of the Gulf run and in that dialogue as you can imagine we're in the volume growth in the Haynesville tremendous volume growth, we'll need to increase Gulf from a no doubt.
And we'll be looking at doing that in the near future.
And to that as we move more gas east on both our new C. P line Tiger, one we will be kind of.
Upgrading our ability to move gas through trunk line down into the Henry hub market into some of the LNG markets along the Gulf Coast. So haynesville huge growth for for this country for natural gas growth and huge.
Things that we can capitalize along with the assets, we have especially now that.
Enable assets that run through that same area.
Great. That's super helpful. And then as a follow up you used to have significant exposure to the <unk> differential, but then I think you affirmed it all up I'm not sure for how long how much exposure would you have to the differential in 'twenty three 'twenty four.
And it looks like it might widen again I know you kind of mentioned you could you could optimize oasis, so perhaps that could be part of it but on the underlying oasis just wanted to see if you still add a bed capacity.
Yes, we have we didn't have a strategy a while back.
We were very fortunate to be able to benefit from the spreads when they blew out but during that time, we knew they'd come back in so we did go in and carve out some of that capacity is our shippers requested and put some of those contracts in place long term 17 year contracts, but we still have several hundred thousand in excess of several hundred.
A day of capacity across the state and over the next year or two we'll have more capacity coming available like probably at least double that amount. So four to 500000 in the next year or two we will have to benefit from these water water spreads and <unk> benefit from those shippers that are willing to take capacity under a 10 year deal.
On a new project they may start out on wafers.
Part of that time in the early years.
Moving over to the bigger projects. So it just gives us kind of a significant advantage over all the competition and be able to accommodate the needs over the next year or two and then gives us time to build a much bigger diameter pipeline to meet the needs that we all see come in by 'twenty four 'twenty five.
Thank you.
Our next question comes from Timm Schneider with Citi. Please state your question.
Yes, good afternoon, and actually let me follow up on the contracting question on the new from the potential new.
Gulf Coast gas pipeline any appetite here then maybe do this even if you don't get the 10 year commitments right off the bat because you are going to.
Assuming this is the most cost efficient project they're.
Theyre going to be making a lot of money potentially on <unk>.
Spreads how do you think about that.
I'm, sorry, I missed the first part of that question.
I'm sorry, Tim.
Yes I was.
Just asking what the appetite was for you guys to potentially go ahead with this project. Even if you don't have 10 year contracts from shippers given the fact that it's probably the most cost efficient and you'd be making a lot of money on spreads as anyways.
Yeah as we've said one thing we are going to do even.
In light of how needed. This is we're going to be very prudent on our capital and so we're going to make decisions that make sense, both short term and long term.
But we do believe because of the advantages that I talked through in <unk>.
All are aware of that we have a significant advantage to kind of get this moving very quickly and so we do believe that whether it's a seven year <unk>.
Contracts at higher rates are 10 year terms at a little bit lower rates, we believe we will achieve those.
Really at this point don't see any like major players stepping up 600000, a day, we do think this will be made.
A lot of different shippers and producers, but once again I think as we get worn out and we have the number of customers.
Everybody's going to see a clear advantage that this project offers is significantly better than any of the competing pipeline projects that are out.
Got it.
Up on the Capex side.
And Tom I think you've kind of talked about this in the prepared remarks.
The increase in Capex that is primarily going to be very short not very short cycle, but shorter cycle capex, but a lot of that is actually going to show up in 2022 EBITDA is that the right way to think about that.
Yes.
Is the way to think about it that sets the real beauty of lot of this capex. It is very short nature and I'm not I'm not saying it won't be till kind of later 2022. So 2023 is probably when youll see the full impact but.
You stated it properly when you when you said that these are shorter build type good returning projects.
Alright. Thank you and then maybe the last one here what are the book I mean, the book ends eliminated 12 to the EBITDA what are some of the moving pieces around that.
Yeah, I'm not sure if I understand your question on lately, if you can talk I.
I mean some of it is.
<unk> process, if commodity prices stay.
Hi.
It will be on the higher end, but they go higher from where they're at today, we see commodity prices drop off the tender.
Move a little bit off of the high end. So that's one of the drivers.
And then <unk>.
Reds.
Watching to see what happens with spreads and we think that as we've seen in the gas.
We're down the team's not that long ago now, we start to see them spread out and as I mentioned, a little bit earlier as you get deeper into this year, there's no spread out significantly.
So we've made certain assumptions on those spreads however, we've been very conservative.
Along those lines so.
I guess.
Summarize all of that with <unk>.
The process certainly will have an impact but also.
We do believe that the drilling is returning in a big way.
The rigs have even move back into Oklahoma will talk a little bit earlier today that the rigs.
Pandemic in the first part of 2020 are now back I think equal maybe a little bit more rigs in Oklahoma.
Where they've moved back into the big way, so theres assumptions that of the industry is going to.
Continue to grow as the pandemic leaves the world as demand grows for all these products. So we're very bullish on drilling to continue to win and so that plays a role into the into our projections as well.
And then the one thing that I would add is the commodity piece of this is as far as exposure, we're using about 75% to 10% and we're using zero to two 5% almost spreads so 90% fee based and when you add those others together they add up to about 10%. So that's how you can calibrate that commodity.
And spread component.
Thank you.
Our next question comes from Spiro <unk> with Credit Suisse. Please state your question.
Thanks afternoon guys.
First one is just on the distribution I'm curious how you guys are thinking about the timeframe or maybe the pace on getting back to that prior distribution of $1 2020, sorry, $1 22, a year sounds like leverage maybe one of the governing factors there to some degree.
And then the other factor you mentioned of course is the pace of buybacks. So just curious how you're weighing all of that and just kind of help us think about the pace of getting back to that prior level.
Yeah, we are.
We really are focusing them on the points that you just walked through there. So if you really look at this returning to the at least the Buck 22 that we talked that we had previously.
Back before we had reduced the distributions that is that is say moved up to a top priority, but we clearly have these great projects. We're talking about likewise these capital projects and then you blend in the debt Paydown Likewise.
Unit buybacks I would probably put us behind behind those three.
Got it that's helpful. Thanks, Tom and then Mackie just put all your comments together just around the Haynesville clearly more gas coming there this new natural gas pipeline out of the Permian you try and move that Nat gas you know it sounds like as far east as you, possibly can all seems to be getting to a point, where maybe Henry hub very clearly.
Can be well supply for a long time, so I'm sort of curious what does that do for prospects on something like Lake Charles LNG I saw that you guys had requested an extension there for construction recently, so I don't want to tie them together too much but just curious where that sits commercially got I think moving more gas towards hub is a good thing long term.
Yes, it's a great question because for example, one of the larger shippers that possibly could take a fairly significant amount of gas compared to the others. On this project wants to get to the Henry hub and would love to be a provider of gas to our L. LNG project in electrical.
So.
That does kind of go hand in hand, with some of the shippers and producers we're talking to but.
LNG, we've been through cycles and of excitement and a motion over the last four or five years.
Get there and I would tell you it's really picked up steam you read it anywhere you see what's going on around the world in China on top of their leader there. Their mandate is to go out and find gas and we're seeing that with Chinese customers as well as other customers around the world. There is a big push right now.
All of a sudden natural gases is green everybody realizes how important it is I'll look for the next five years of next 30 years and so it's really picked up steam.
Build to announce some some agreements that we are close to getting signed over the next few years, there certainly still ways from F. I D.
But we are.
Really excited about where that project, one and more importantly, the nod of where we may end up at the end of the day what percentage we made under that biggest excitement we have with what you just alluded to and that all the gas that will feed into the system into the Henry hub area through our multitude of pipelines to the Gulf run through trunk line, both directions, bringing gas across.
C P across Tiger.
Unlike all the other projects along the Gulf Coast, Nobody can bring gas from Marcellus Utica through Panhandle, I mean Rover Panhandle trunk and directly into this project are now Arkoma and the Oklahoma Basin, all the way down or even out in the Permian So yes it.
It's turned into a really good project for the markets around the world and it is part of our diverse supply portfolio and connectivity upstream. So we do believe that the Henry hub area, it's going to become a much bigger trading up and already is in our LNG project with us.
Does magnify that significantly.
Thank you.
Our next question comes from Keith Stanley with Wolfe Research. Please state your question.
Hi, Thank you.
First just.
One how many units of the company repurchase in Q4, the company itself if any.
I think it was about four 4 million.
4 million okay great.
Second one Tom you talked about debt reduction still being a priority for this year.
Can you give a sense of I guess, how youre looking at maturities and using free cash flow. Obviously, I mean, you did over $6 billion of debt repayment last year. So as you see maturities. This year or are you looking to use free cash flow to repay them generally or.
Are you open to refinancing some of the debt as it matures.
Let's start off with we are clearly going to keep working towards the four to four and a half. So as these maturities come up throughout the year I would say that we will be paying down some of those maturities with free cash flow, but we will probably refi some of those some of those maturities as they come up.
Throughout the year.
Thank you.
Next question comes from Colton Bean with Tudor Pickering Holt. Please go ahead with your question.
Afternoon.
You mentioned seeing more drilling activity in Oklahoma now that you have to enable operations in house can you just update us on your mid Con NGL strategy, and what sort of timeline, we should be thinking about to fully integrate those volumes in E T value chain.
You bet and as I mentioned, we have teams working on this daily trying to figure out a way.
Best utilized all of our pipelines.
Our processing plant for example, there are some plants in the Panhandle.
Since two.
So initially are for a short period time shut those down more.
Please standby thank you.
Yeah.
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Sure.
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Thanks for your patience in waiting to reconnect the speaker line. Thank you.
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Please go ahead Sir.
Okay can you all hear me.
Yes, Sir go ahead.
Okay. So did you hear any of my answer.
I'll just start over and we're not sure what happened to just disconnected.
But anyway I'll do a shorter version.
We do have teams working on this around the clock, we've already identified some opportunities to better utilize more efficiently some of our plants and some of our pipelines looking longer term. We are looking at converting our pipeline to potentially crude service and then of course, a lot of our folks is gonna be utilize the existing.
Pipelines in ore.
Repurposing is it other matters to get NGL barrels down into our Texas NGL franchise, ultimately for deliveries to Mont Belvieu and and of course, along the Gulf coast into the export market. So we've got kind of a short term vision of immediate things that we'll do to benefit the assets.
In Oklahoma and in a longer term vision of bringing as many of the NGL barrels into our barrels into our system.
Great and maybe just to clarify that last point on bringing Oklahoma barrels down.
Is that thought process over the next couple of years or is that more of a back half of the decade, when those barrels might be available to you.
Without disclosing a whole lot I guess from a competitive standpoint.
Two three years or so we do expect.
The demand.
The demand to grow in our ability.
Traction standpoint to start moving more barrels from the tailgate of those plants and other plants in Oklahoma, Even third party plants into R. R.
Our NGL franchise.
For deliveries down to the Gulf Coast.
Perfect and then maybe Tom switching back to the Council priorities, you mentioned buybacks slowing a bit lower in the stack versus some of the alternatives can you remind us how you all evaluate the return potential on buybacks versus new growth projects.
Yes.
Based upon what you.
But if you look at from a DCF DCF per unit standpoint, which is how we really look at that probably not as much from them from a distribution yield.
And as we look at where the unit price is and where that breakeven is versus the other the other opportunities for the some of the capital projects, we've talked about today, but we do look at it from a DCF and DCF per unit standpoint.
A DCF yield let's call it that.
Thank you.
And our.
Thank you and that concludes today's.
Today's conference call.
We participate I appreciate your participation all parties may now disconnect have a good day. Thank you.
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