Q4 2021 DCP Midstream LP Earnings Call

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Speaker 1: Good morning, ladies and gentlemen. Thank you for standing by and welcome to the DCP Midstream Fourth Quarter 2021 Earnings Conference call. At this time, all participants are on the listen-only mode. After this biggest presentation, there will be a question and answer session. So as a question during the session, you will need to press the star, then the one key on your touch-tone telephone.

Good morning, ladies and gentlemen, thank you for standing by and welcome to the DCP Midstream fourth quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press. The Star then the one key on your Touchtone telephone.

Please be advised today's conference maybe recorded.

Speaker 1: Please be advised today's conference may be recorded. If you would call operations anytime, please press star then zero.

Operator any time, please press Star then zero.

Speaker 1: I would now like to turn the conference over to our speaker host, Mike Stolman. Please go ahead, sir.

Now I'd like to turn the conference over to our Speaker Huh, Mike Feldman. Please go ahead Sir.

Speaker 2: Thank you. Good morning and welcome to the DCP Midstream fourth quarter 2021 earnings call. Today's call is being webcast and I encourage those listening on the phone to view the supporting slides which are available on our website at dcpmidstream.com.

Thank you good morning, and welcome to the DCP Midstream fourth quarter 2021 earnings call today's call is being webcast and I encourage those listening on the phone to view the supporting slides, which are available on.

Our web site at DCP midstream Dot com.

Speaker 2: Before we begin, I'd like to point out that our discussion today includes forward-looking statements. Actual results may differ due to certain risk factors that affect our business. Please review the second slide in the deck that describes our use of forward-looking statements. And for a complete listing of the risk factors, please refer to the partnership's latest SEZ file.

Before we begin I'd like to point out that our discussion today includes forward looking statements actual results may differ due to certain risk factors that affect our business. Please review the second slide in the depth of describes our use of forward looking statements and for a complete lifting of the risk factors. Please refer to the partnership's latest SEC filings.

Speaker 2: We will also use various non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measure in the schedule in the appendix section of the slides. Vouter van Kempen, CEO , and Sean O'Brien, CFO , will be our speakers today. And after their remarks, we will take your questions. With that, I'll turn the call over to Vouter. Thank you, Mike, and good morning, everyone. We appreciate you joining us.

We will also use various non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measure in the schedules in the appendix section of the slides the other bank, Kevin CEO and Sean O'brien CFO will be our speakers today and after their remarks, we will take your questions with that I'll turn the call over to Valerie. Thank you, Mike and good morning, everyone.

Appreciate you joining us.

Speaker 3: Before we cover our Q4 results and our outlook for 2022, I'd like to spend some time reviewing our 2021 performance.

Before we cover our Q4 results and our outlook for 2022 I'd like to spend some time reviewing our 2021 performance.

Speaker 3: And during the year, we said 2021 would be successful if we could accomplish three things.

Entering the year, we said 2021 would be successful if we could accomplish three things.

Speaker 3: First, control what we can control by maintaining our cost savings and strict approach to capital dish.

First control, what we can control by maintaining our cost savings and strict approach to capital discipline.

Speaker 3: Second, reduce our absolute debt and further strengthen our balance sheet.

Reduce our absolute debt and further strengthen our balance sheet and finally accelerated progress on sustainability and emissions reductions.

Speaker 3: Finally, accelerate our progress on sustainability and emissions.

Speaker 3: While we found ourselves battling through a continued global pandemic and the impact of Winter Storm Yuri, I'm once again extremely proud of our team before.

While we found ourselves battling through a continued global pandemic and the impact of winter storm Yuri.

Once again extremely proud of our team performance.

Speaker 3: For the year, the business exceeded all of our financial targets, generating record results for the partners.

40 year business exceeded all of our financial targets generating record results for the partnership.

Speaker 3: We produced approximately $1.3 billion of adjusted EBITDA and approximately $870 million of DCF, $59 million over the high end of our guidance.

We produced approximately $1 $3 billion of adjusted EBITDA, and approximately $870 million of DCF $59 million over the high end of our guidance.

Speaker 3: We also generate a record $500 million of excess free cash flow, which has more than doubled year over year. And we accomplished all of this while maintaining approximately 100% over 2020 Woo.

We also generated a record $500 million of excess free cash flow, which has more than doubled year over year and.

And we accomplished all of this while maintaining approximately 100% of our 2020 cost savings.

Speaker 3: These results highlight the strength of our fully integrated business model, which includes a diversified GNP franchise that positions us to benefit from strong commodity environments and supplies volumes to our downstream logistics network.

These results highlight the strength of our fully integrated business model, which includes diversified GNP franchise positions us to benefit from strong commodity environments supplies volumes to our downstream logistics network.

Speaker 3: During the year, we do critical actions to accelerate our progress towards successfully executing a long-term sustainability strategy.

During the year, we took critical actions to accelerate our progress towards successfully executing long term sustainability strategy.

Speaker 3: We were recognized with the GPA Environmental Excellence Award for the sixth time. We established a board like

We will recognize with the GPA Environmental Excellence award for the sixth time.

We established a board level sustainability Committee.

Speaker 3: We added an executive leadership position to lead our sustainability and energy transition effort.

We added an executive leadership position to lead our sustainability and energy transition efforts.

Speaker 3: and we released our second annual sustainability report which substantially increased our transparency at large.

And we released our second annual sustainability report, which substantially increased our transparency at large.

Speaker 3: We had great activity, but more importantly, we delivered great results.

We had great activity.

More importantly, we delivered great results from 2018 to 2020, we saw a 16% reduction in our total greenhouse gas emissions and a 23% reduction in methane emissions and we fully expect to see those trends continue but we report a 2021 admissions numbers later this year and as we.

Speaker 3: From 2018 to 2020, we saw a 16% reduction in our total greenhouse gas emissions and a 23% reduction in methane.

Speaker 3: And we fully expect to see those trends continue when we report our 2021 emissions numbers later this year and as we make continued progress towards accomplishing our 30x30 target.

Continued progress towards accomplishing our 30 by 30 targets.

Speaker 3: We were also able to make significant progress in strengthening our balance.

We were also able to make significant progress in strengthening our balance sheet. We entered the year with a goal, finishing 2021 at four times leverage and I'm extremely pleased to report that we exited the year with leverage of three eight times <unk>.

Speaker 3: We entered the year with a goal of finishing 2021 at 4.0 times leverage. I'm extremely pleased to report that we exited the year with leverage at 3.8 times.

<unk> trajectory has us on an accelerated pace to reach our three five times target and allows us to advance our strategy towards returning additional capital to our unitholders this year.

Speaker 3: This trajectory has us on an accelerated base to reach our 3.5 times target and allows us to advance our strategy towards returning additional capital to our unit haulers this year.

Speaker 3: We plan to execute the strategy by increasing our distribution in 2022 and pursuing additional capital allocation options, which I will discuss later on the call. But first, I'll turn it over to Sean to walk through our Q4 results and 2022 guide.

We plan to execute the strategy by increasing our distribution in 2022 and pursuing additional capital allocation options, which I will discuss later on the call, but first I'll turn it over to Shaun to walk through our Q4 results and 2022 guidance. Thanks, Matt and good morning on slide four I'll walk you through our fourth quarter.

Speaker 2: Thanks, Valder, and good morning. On slide four, I'll walk you through our fourth quarter performance and the drivers that impacted our results. For the quarter, we generated 330 million of adjusted EBITDA, 219 million of distributable cash flow, and 122 million of excess free cash flow.

Performance and the drivers that impacted our results for the quarter, we generated $330 million of adjusted EBITDA $219 billion of distributable cash flow was $122 million of excess free cash flow.

Speaker 2: Fourth quarter earnings came in lower than expectations, primarily due to timing and marketing results. However, the earnings power of the business remains intact, and we're seeing improving trends so far this year.

Fourth quarter earnings came in lower than expectations, primarily due to timing and marketing results. However, the earnings power of the business remains intact, and we are seeing improving trends so far this year.

Going back to the fourth quarter, we realized higher costs and sustaining capital as we proactively manage the Q1 impact of winter storm jewelry and shifted spend into the second half of the year.

Speaker 2: Going back to the fourth quarter, we realized higher costs and sustaining capital as we proactively managed the Q1 impact of Winter Storm Yuri and shifted spend into the second half of the year. Our L&M business was impacted by the timing of tax payments on Sandhills and Southern.

Our <unk> business was impacted by the timing of tax payments on sand Hills, and southern Hills, and the very warm start to the winter dampened our marketing results as limited volatility impacted our trading business and we saw fewer opportunities to optimize our gas and NGL storage assets.

Speaker 2: And the very warm start to the winter dampened our marketing results as limited volatility impacted our trading business and we saw fewer opportunities to optimize our gas and NGL storage assets.

While NGL and crude prices were up approximately 10% from the third quarter, we did realize a lower natural gas price versus Nymex due to widening basis differentials during the quarter, our Permian and DJ Basin G&P regions continued to perform well with Permian volumes up 5% versus the third quarter.

Speaker 2: While NGL and crude prices roped approximately 10% from the third quarter, we did realize a lower natural gas price versus NIMEX due to widening base distribution.

Speaker 2: During the quarter, our Permian and DJ Basin GNP regions continue to perform well, with Permian volumes up 5% versus the third quarter.

Speaker 2: And while our DJ volumes were impacted by the timing of new wells coming online, the asset performed extremely well, delivering higher margins quarter over quarter.

And while our DJ volumes were impacted by the timing of new wells coming online the asset performing extremely well delivering higher margins quarter over quarter.

Speaker 2: I'm extremely pleased with our full year results as we exceeded all of our financial targets. And with the month of January behind us.

Extremely pleased with our full year results as we exceeded all of our financial targets and with the month of January behind US we are seeing some positive trends.

Speaker 2: costs and sustaining capital returning to normalized levels, and strong commodity pricing has provided an uplift to the base business.

Cost and sustaining capital returning to normalized levels and strong commodity pricing has provided an uplift to the base business, creating opportunities to optimize our portfolio like our gas storage asset.

Speaker 2: creating opportunities to optimize our portfolio, like our gas storage asset. Now let's move to slide five and our.

Now, let's move to slide five and our guidance for 2022.

Speaker 2: For the year, we are set up to deliver increased earnings and continue to generate excess free cash.

For the year, we are set up to deliver increased earnings and continue to generate excess free cash flow. Our 2022 adjusted EBITDA range is $1 three five to $1 5 billion.

Speaker 2: Our 2022 adjusted EVDOT range is $1.35 to $1.5 billion, and our DCF range is $900 billion to $1.01 billion.

And our DCF range is $900 billion to $1 $1 billion driven by increased producer activity, we expect sustaining capital to increase to $100 million to $140 million and a growth capital range of $100 million to $150 million.

Speaker 2: Driven by increased producer activity, we expect sustaining capital to increase to $100 to $140 million and a growth capital range of $100 to $150 million.

Speaker 2: For the year, we will see increased costs associated with absorbing the impacts of inflation, increased reliability spend to improve runtime and profitability of our assets, and additional spend to ensure we stay in front of regulatory changes. These increased costs are all

For the year, we will see increased costs associated with absorbing the impacts of inflation increased reliability spend to improve runtime and profitability of our assets and additional spend to ensure we stay in front of regulatory changes.

These increased costs are all very manageable and we are committed to maintaining approximately 50% of our post COVID-19 savings over two years after they were realized.

Speaker 2: And we are committed to maintaining approximately 50% of our post-COVID savings over two years after they were realized.

Speaker 2: Even with this uptick, our costs are some of the lowest we've seen in the past decade, and these inputs lead to an excess-free cash flow target of $425 to $585 million.

Even with this uptick or costs or some of the lowest we've seen in the past decade, and these inputs lead to an excess free cash flow target of $425 million to $585 million.

Our guidance outlined today assumes a $1 56 per unit distribution, but as Wouter mentioned, we anticipate using a portion of our excess free cash flow to make a distribution increase later this year.

Speaker 2: Our guidance outlined today assumes a 1.56 per unit distribution, but as Valter mentioned, we anticipate using a portion of our excess free cash flow to make a distribution increase later this year.

Speaker 2: At the bottom of the slide, you can see the commodity price assumptions that drive the midpoint of our guidance ranges and our sensitivities to help you adjust expectations based on your commodity output.

At the bottom of the slide you can see the commodity price assumptions that drive the midpoint of our guidance ranges and our sensitivities to help you adjust expectations based on your commodity outlook. If the current forward curve holds up we will realize $140 million of uplift to our outlook and our adjusted EBITDA and DCF.

Speaker 2: If the current forward curve holds up, we will realize $140 million of uplift to our outlook, and our adjusted EBITDA and DCF would exceed our guidance ranges, demonstrating how well-positioned we are to benefit from improved pricing outcomes.

Would exceed our guidance ranges, demonstrating how well positioned we are to benefit from improved pricing outlooks.

Speaker 2: Moving on to slide six, I'd like to provide some additional details on our 2022 assumption.

Moving on to slide six I'd like to provide some additional details on our 2022 assumptions on the G&P side of the house, we expect overall volumes to increase 2% to 5% driven by growth in our DJ Basin and Permian assets. This growth is partially offset by expected declines in our south and mid con businesses.

Speaker 2: On the GNP side of the house, we expect overall volumes to increase 2% to 5%, driven by growth in our DJ basin and Permian assets.

Speaker 4: This growth is partially offset by expected declines in our south and mid-con business.

Speaker 4: Our favorable GNP outlook feeds the L&M business, and we're assuming 3% to 5% growth on our NGO pipeline.

Our favorable G&P outlook feeds the O&M business, and we're assuming 3% to 5% growth on our NGL pipelines.

Speaker 4: For the full year, we are forecasting DCP operating plans remain in ethane recovery while third-party customers operate and reject.

For the full year, we are forecasting DCP operating plans for maintenance ethane recovery, while third party customers operate in rejection.

Speaker 4: With expected increases to domestic and international ethane demand, we could see a benefit of around 20,000 barrels per day on Sandhills if pricing supports a third party switch into ethane recovery, which would be another significant tailwind for our outlook.

With expected increases to domestic and international I think demand, we could see a benefit of around 20000 barrels per day on sand Hills, if pricing supports a third party switch into ethane recovery, which would be another significant tailwind for our outlook.

Speaker 4: Our L&M business will benefit from FERC escalators on NGL pipeline tariffs during the second half of the year, which provides a natural hedge to inflation and will help us mitigate any margin pressure we may face as we work to secure incremental NGL supply.

Our <unk> business will benefit from FERC escalators on NGL pipeline tariffs during the second half of the year, which provides a natural hedge to inflation and will help us mitigate any margin pressure, we may face as we work to secure incremental NGL supply.

Speaker 4: Lastly, we are entering the year with an 82% fee in hedged earnings management.

Lastly, we are entering the year with an 82% fee and hedged earnings mix.

Speaker 4: and will continue to take advantage of strong markets to add additional hedges for the second half of the year and for 2020.

And we will continue to take advantage of strong markets to add additional hedges for the second half of the year and for 2023 now.

Speaker 4: Now I'll turn it back to Wouter to provide some additional details on our 2022 strategy and business outlooks. Thanks, Sean. On slide seven, I'll cover some key themes for 2022.

Now I'll turn it back to about or to provide some additional details on our 2022 strategy and business outlooks.

Hmm mm.

On slide seven I will cover some key themes for 2022.

Fundamentals are strong and we continue to see demand strengthening with U S shale, playing a critical role in supplying international markets.

Speaker 3: Fundamentals are strong and we continue to see demand strengthening with U.S. shale playing a critical role in supplying international markets.

Speaker 3: Producers remain committed to prioritizing capital discipline and shareholder returns, which supports the near-term commodity outlook.

Producers remain committed to prioritizing capital discipline and shareholder returns, which supports the near term commodity outlook.

Speaker 3: and there are signs from our customers that activity levels are ramping up, leading to moderate.

And there are signs from our customers and activity levels are ramping up leading to moderate growth. This.

Speaker 3: This constructive environment is driving an uptick in opportunities for D.C.

This constructive environment is driving an uptick in opportunities for DCP.

Speaker 3: Generally, the projects we have line-of-sight to are organic, bolt-on projects that will provide strong cash-on-cash returns in short payback periods.

Generally the projects, we have line of sight to our organic bolt on projects that will provide strong cash on cash returns and short payback periods.

Speaker 3: Along with advancing these growth opportunities, we plan to make some critical and strategic investments in our business that will strengthen DCP's position for the long term.

Along with advancing these growth opportunities, we plan to make some critical and strategic investments in our business.

Trenton Dcp's position for the long term.

And lastly, 2022 is an inflection point for DCP as we advance our capital allocation strategy.

Speaker 3: And lastly, 2022 is an inflection point for DCP as we advance our capital allocation strategy.

For the last two years, our strategy was to use every single dollar available to reduce our absolute debt and strengthen our financial position.

Speaker 3: For the last two years, our strategy was to use every single dollar available to reduce our absolute debt and strengthen our financial position.

Speaker 3: By the end of 2022, we expect to have reduced our debt by approximately $1 billion since 2020, all while growing our DCF and EBITDA.

By the end of 2022, we expect to have reduced our debt by approximately $1 billion since 2020, all while growing our DCF and our EBITDA.

Speaker 3: These accomplishments provide us a clear path to reach three and a half times leverage on an accelerated timeline and the ability to meaningfully increase our distribution, which leads me to our capital allocation strategy.

These accomplishments provide us a clear path to reach three five times leverage on an accelerated timeline and the ability to meaningfully increase our distribution, which leads me to our capital allocation strategy.

Speaker 3: We set a target to reach three and a half times leverage to ensure DCP's ability to manage through any commodity environment.

We set a target to reach three five times leverage to ensure dcp's ability to manage through any commodity environment at today's prices. We are looking at a high commodity cycle with Ngls crude and natural gas trading at some of the best levels that we've seen in years.

Speaker 3: At today's prices, we are looking at a high commodity cycle with NGLs, crude and natural gas trading at some of the best levels that we've seen in years.

Speaker 3: Historically, this industry has been considered a long-cycle business, but in recent years, the duration of these cycles has significantly shortened, and we've experienced some very quick transitions that can prove challenging for any balance sheet.

Historically this industry has been considered a long cycle business, but in recent years. The duration of these cycles has significantly shortened and we've experienced some very quick transitions. That's kept proved challenging for any balance sheet.

Speaker 3: When we build our long-term plans and do our scenario planning, we do not assume commodities stay at the current levels forever. Instead, we take a disciplined approach to our planning to ensure we're sustainable in any environment.

When we built our long term plans and do our scenario planning, we do not assume commodity stay at the current levels forever and stat, we take a disciplined approach to our planning to ensure were sustainable in any environment.

March 23, 2020 was a very difficult day as we have to take the necessary steps to manage through the last down cycle and reduce our distribution.

Speaker 3: March 23, 2020 was a very difficult day, as we had to take the necessary steps to manage through the last down cycle and reduce our distribution.

Speaker 3: 50% reduction to the distribution was very measured relative to what was happening in the market. However, it is a lever that we never want to pull again.

The 50% reduction to the distribution was very measured relative to what was happening in the market. However, it is a lever that we never want to pull again.

Speaker 3: So while you see us continue to de-lever to ensure we stay below 4.0 in a down commodity cycle, we believe that reaching 3.5x will provide financial flexibility to take a much more balanced stand.

So while you see us continue to Delever to ensure we stay below four point Owen or Doug commodity cycle, we believe that reaching $3 five FX will provide the financial flexibility to take a much more balanced approach.

Speaker 3: And given the significant progress made in Q4, reducing our leverage from 4.1 to 3.8, we are quickly approaching our leverage.

Given the significant progress made in Q4, reducing our leverage from four 1% to $3. Eight we are quickly approaching our leverage goal.

Speaker 3: Once reached, we have multiple options available to us to utilize the half a billion dollars of excess free cash flow we will generate this year and we will execute a sustainable plan to return additional capital to our units.

<unk> reached we have multiple options available to us to utilize the half a billion dollars of excess free cash flow, we will generate this year.

Executing a sustainable plan to return additional capital to our unitholders.

Speaker 3: In order to deliver immediate value, we believe a meaningful distribution race is an important first step. And we should be able to execute this race as soon as the middle of the year.

In order to deliver immediate value, we believe a meaningful distribution rates is an important first step and we should be able to execute this race as soon as the middle of this year.

Speaker 3: Following this race, our strong, access-free cash flow will afford us the optionality to consider additional capital allocation options, such as distribution increases, opportunistic repurchases, or execute low multiple and capital-efficient investments that fit our footprint and strengthen DCP's competitive position.

Following these rates are strong excess free cash flow will afford us the optionality to consider additional capital allocation options such as distribution increases opportunistic repurchases are execute low multiple and capital efficient investments that fit our footprint and strengthen dcp's competitive position.

On slide nine I'd like to highlight the strength of the DCP portfolio.

Speaker 3: On slide nine, I'd like to highlight the strengths of the DCP portfolio.

Speaker 3: Over the last decade, we were able to leverage our GNP footprint to transform the company from a pure play GNP business to a fully integrated midstream provider.

Over the last decade, we were able to leverage our G&P footprint to transform the company from a pure play G&P business to a fully integrated midstream provider.

Speaker 3: Our L&M earnings grew by almost 400% during this time, as we built Sandhills, Southern Hills, and we supported the development of Front Range, Texas Express, Gulf Coast Express, and the Cheyenne Connector, all underpinned by strong supply from our GNPN.

<unk> earnings grew by almost 400% during this time as we built sand Hills Southern Hills, and we supported the development of front range, Texas Express Gulf Coast Express and the Cheyenne connector or <unk>.

Underpinned by strong supply from our G&P assets.

Speaker 3: Looking to 2022 and beyond, we will continue to advance our value chain position, and securing and maintaining NGL supply will be critical to meeting this.

Looking to 2022 and beyond we will continue to advance our value chain position and securing and maintaining NGL supply will be critical to meeting this goal.

Speaker 3: For DCP, key areas of opportunity for supply growth will come from our DJ and our Permian Basin.

For DCP key areas of opportunity for supply growth will come from our DJ and our Permian basin positions.

Speaker 3: Starting with the DJ bass, we've seen incredible growth over the last.

Starting with the DJ Basin, we've seen incredible growth over the last decade gas.

Speaker 3: Gas volumes are up over 250 percent and NGL production is up well over 400.

<unk> volumes are up over 250%.

NGL production is up well over 400%.

Speaker 3: This growth has allowed us to drive downstream investments and provide much-needed takeaway optionality for our customers.

This growth has allowed us to drive downstream investments and provide much needed takeaway optionality for our customers.

Speaker 3: With the major infrastructure in place, we will have the ability to support DJ growth by making incremental investments to our gathering system over the next two years.

With a major infrastructure in place, we will have the ability to support DJ growth by making incremental investments to our gathering system over the next two years.

Speaker 3: Depending on producer permitting and local approval of development plans, we see the potential for a larger scale capacity expansion, and we are working with our key producers to ensure the alignment and timing of our plans.

Depending on producer permitting local approval development plans, we see the potential for a larger scale capacity expansion and we're working with our key producers to ensure the alignment.

Our plans.

Moving to the Permian Basin, we benefit from a large scale footprint provides exposure to both the Delaware and Midland basins, we've been executing a capital efficient strategy focused on building out our Delaware basin gathering infrastructure model utilizing excess third party processing capacity.

Speaker 3: We benefit from a large scale footprint that provides exposure to both the Delaware and Midland basin.

Speaker 3: We've been executing a capital efficient strategy focused on building out our Delaware Basin gathering infrastructure while utilizing excess third party processing capacity.

Speaker 3: In the near term, we will continue to execute this strategy to support our customers' drilling plans while maintaining flexible processing options.

In the near term, we will continue to execute the strategy to support our customers drilling plans, while maintaining flexible processing options.

Within our Midland Basin footprint, we see a lot of opportunity driven by private producers ramping up to our activity levels.

Speaker 3: within our Midland Basin footprint. We see a lot of opportunity driven by private producers ramping up their activity.

Speaker 3: And with this increased activity, we're well positioned to participate in Midland Basin growth by executing on some smaller scale projects to enhance our gathering system and fill open capacity.

And with this increased activity, we are well positioned to participate in Midland basin growth by executing on some smaller scale projects to enhance our gathering system and fill up with capacity.

As we develop these targeted GNP investments to aggregate supply this strategy will drive values through our downstream assets, providing steady fee based earnings.

Speaker 3: As we develop these targeted GNP investments to aggregate supply, this strategy will drive value through our downstream assets, providing steady fee-based.

Speaker 3: Moving to slide 10 to close us out. I'd like to reiterate how we will measure our success in 2020.

Moving to slide 10 to close it up I'd like to reiterate how we will measure our success in 2022.

Speaker 3: As a starting point, it's imperative for us to maintain our focus on operational excellence. Providing safe and reliable operations is critical to the success of DCP and our customers.

Starting point, it's imperative for us to maintain our focus on operational excellence, providing safe and reliable operations is critical to the success of DCP and our customers.

Speaker 3: Second, we will continue to strengthen our balance sheet and investment grade metrics while returning additional capital to units.

Second we will continue to strengthen our balance sheet to investment grade metrics, while returning additional capital to unitholders.

Third we set measurable sustainability targets to improve our emissions performance and increase our workforce diversity.

Speaker 3: Third, we've set measurable sustainability targets to improve our emissions performance and increase our workforce diversity.

Speaker 3: DCP has a record of not just meeting, but exceeding goals. And as we issue our third sustainability report later this year, I expect to announce our continued progress towards these targets.

DCP has a record of not just meeting, but exceeding goals and as we issue. Our third sustainability report later this year I expect to announce our continued progress towards these targets.

Speaker 3: Finally, improving fundamentals are creating some attractive growth.

Finally, improving fundamentals are creating some attractive growth opportunities, we will capitalize on these new projects.

Speaker 3: We will capitalize on these new prospects while maintaining our strategy of capital distribution.

Prospects, while maintaining our strategy of capital discipline.

Speaker 3: We're investing in our business, which includes our assets and our people to ultimately lead to improved profitability.

Investing in our business, which includes our assets and our people to ultimately lead to improved profitability.

Speaker 3: On our third quarter call, I noted that this is the best setup Sean and I've seen in the roughly 10 years we've been leading the company.

On our third quarter call I noted that.

This is the best setup Shouldnt I've seen a rough roughly 10 years, we've been leading the company and.

Speaker 3: And as we look at today's macro landscape, our improved balance sheet and our record access free cash flow, DCP is set up extremely well in 2022 and beyond.

And as we look at today's macro landscape, our improved balance sheet and a record excess free cash flow DCP is set up extremely well in 2022 and beyond.

Our team has built a strong track record of executing our strategy and meeting our commitments and we look forward to delivering exceptional results once again in 2022.

Speaker 3: Our team has built a strong track record of executing our strategy and meeting our commitments, and we look forward to delivering exceptional results once again in 2022. With that, we'll open it up to your questions.

We'll open it up to your questions.

Thank you so much.

Ladies and gentlemen to ask a question at this time you will need to press. The Star then the one key on your Touchtone telephone.

Speaker 1: Ladies and gentlemen, to ask a question at this time, you will need to press the star then the one key on your touchtone telephone. You may withdraw your question.

I mean with your question.

<unk>.

Our first question coming from the line of Ferro, Dennis with Credit Suisse. Your line is open.

Speaker 1: Our first question coming from the line of Piero Dunis with Credit Suisse, your line is open.

Thanks, Operator, hey, better John .

Speaker 2: Two things I want to start on, just based on your comments and the slides. So, one, Valerie, you mentioned the larger scale capacity increases to the system that could be coming. The other item was extending the value chain down towards the export dock. So, on expanding the system, can you talk a little bit more about how much of that is actually incorporated in the guidance already, if at all, and then just how you're thinking about the timing of when those assets or expansions could start cash flowing?

Two two things I want to start on.

Just based on your comments in the slides. So one Barry you mentioned the larger scale capacity increases to the system.

Could be coming the other item was extending the value chain down towards the export dock. So on expanding the system can you talk a little bit more about how much of that is actually incorporated in the guidance already if at all and then just how youre thinking about the timing of when those assets are expansions could start cash flowing and then on extending the value chain down to the dock.

Speaker 2: And then on extending the value chain down to the dock, you know, I know that's something you guys have talked about in the past, it's kind of a longer term strategy, but notice that put into the slides in and around the 2022 outlook context. So just curious if that's becoming kind of a more imminent strategy, we should expect you guys to execute on going forward.

I know Thats something you guys have talked about in the past as kind of a longer term strategy, but noticed that put into the slides in and around the 2022 outlook context. So just curious if that's becoming kind of a more imminent strategy. We should expect you guys to execute on going forward.

Speaker 3: Yes, Bureau, thanks. Let me take those. You know, starting with the larger scale capital

Yes, Spiro Thanks, Let me let me take those.

Starting with the larger scale capital.

Speaker 3: and processing. That's really what we're talking about, potential additions. What we're looking at is the DJ basin. So a little bit more insight around the DJ basin. As I mentioned, we've seen massive, tremendous growth over the last, you know, call it decade or so, both on the NGL side, on the processing side. We've built a number of different plants there. We are pretty full. And if you look at the DJ basin overall, we're the largest processor and we're also the ones that are the fullest from our system point of view. So what we're doing is working very closely with our producer customers who I think are looking through some of the regulatory changes that we've had here in the last couple of years, looking at a little bit more calmer waters, knowing how to work the regulatory construct that we have in place. And within that, they're seeing some really, really nice growth going forward. What it is not going to be, though, is kind of exponential type of growth. So what we see is some pretty good steady growth. Our kind of next, call it year or two, we think we will have to do a number of investments around our gathering system and making sure that we can move the gas that will come to us from our producers to our plants or potentially third party plants and make sure that we kind of deal with that growth. Then what we're looking at, you know, in no way, shape or form is this certain yet. It really depends on.

And processing, that's really what we're talking about potential additions.

We're looking at is the.

The DJ basin, so little bit more insight around the DJ basin as I mentioned, we've seen massive tremendous growth over the last call. It decade ourself, Boston the NGL side on the processing side rebuilt number of different plants there.

We're pretty full and so if you look at the DJ Basin overall are the largest processor and also demand stats are.

The fullest from our system point of view. So what we're doing is working very closely with our producer customers, who I think are looking through some of the regulatory changes that we have here in the last couple of years looking at a little bit more calm waters, knowing how to work the regulatory.

Construct that we have in place and within that we're seeing some really really nice growth going forward, but it is not going to be though is kind of exponential type of growth. So, but we see some pretty good steady growth. Our next call. It year or two we think we will have to do a number of <unk>.

<unk> ramped our gathering system and making sure that we can move to gas that will come to us from our producers to our plants are potentially third party plants and make sure that we kind of deal with that growth than what we're looking at.

This in no way shape or form as a certain yet it really depends on what the producers are going to get from a.

Speaker 3: what the producers are going to get from their big growth platform programs in 23, 24, 25, 26. There is a potential for us that we may have to build another plant. We already hold a permit, so that is great. So we can do that. So we are working together with the producers, looking at their plans and say, okay,

From their big growth platform programs in 'twenty three 'twenty four 'twenty five 'twenty six there is a potential for us that we may have to build another plant we already hold the permit so that is great. So we can do that.

So we are working together with the producers looking at their plans and say okay.

Speaker 3: What is needed in 22? What is needed in 23? Again, mostly around the infrastructure of the of the gathering footprint. And then if you go further out, there may be a potential to build another plant in the DJ basin, which I think would be an excellent thing if we can, if that comes to fruition. So.

But as needed in 'twenty two what is needed in 'twenty three again, mostly around the infrastructure of the gathering footprint and if you go further out there may be a potential to build another plant in the DJ Basin, which I think would be an excellent thing if we can.

Comes to fruition. So to the question of what is built hidden inherent 22, 2022 is really more focused around the smaller infrastructure type of capital.

Nothing is building for maybe in 234 years, where we have to built some processing capacity.

To your question around well.

I'll have to water well have to water has been a big part of our strategy. We believe that in the long run and wellhead to water players will be the main players in the winners in this industry we.

Speaker 3: Wellhead to water has been a big part of our strategy. We believe that in the long run, the wellhead to water players will be the main players and the winners in this industry. We've obviously worked ourselves from a strategy from a gathering and processing footprint only to now a company that has residue pipelines, NGL pipelines. We have spread a lot of fractionator interests. And so our L&M or logistics and marketing business now is 60% of our overall earnings profile. And yeah, we absolutely have a desire and believe there is an opportunity for us to go further downstream. How, if, and when that will take place, that is.

We've always we've worked ourselves from a strategy from a gathering and processing footprint only to now a company that has residue pipelines NGL pipelines.

Speaker 3: We have spread a lot of fractionator interests, and so our L&M or logistics and marketing business now is 60% of our overall earnings profile. And yeah, we absolutely have a desire and believe there is an opportunity for us to go further downstream. How, if, and when that will take place, that is to be seen. Hard for me to comment on at this very stage, but I think...

Spread along the fractionator interests, so our LNR more logistics and marketing business now is 60% of our overall earnings profile.

Yes, we absolutely have a desire and believe there is an opportunity for us to go further downstream.

If and when that will take place.

That's to be seen.

Hard for me to comment on that at this very stage, but I think but what we tried to kind of show you in that slide that you mentioned is how do we look at the future what do we believe strategically needs to happen.

Speaker 3: When we, what we try to kind of show you in that slide that you mentioned is how do we look at the future? What do we believe strategically needs to happen? And the well had to water strategy is one of them.

The well had to what our strategy is one of those.

Got it that's helpful color thanks for that router.

Speaker 2: Got it. That's helpful, Keller. Thanks for that, Bowder. Second question.

Second question.

Speaker 2: calendar earnings call go by without talking about everybody's favorite topic this season, which is Permian gas takeaway. And are you guys in the past were able to utilize the Guadalupe pipeline pretty well, take advantage of some wider spreads? I think since then.

Kaelin earnings call go by without talking about everybody's favorite topic. This season, which is Permian gas takeaway I know you guys in the past, we're able to utilize the Guadalupe pipeline pretty well take advantage of some wider spreads I think since then you have contracted a lot of that capacity out so I'm not sure what the tenor of those contracts looks like if that could be coming up for renewal.

Speaker 2: you've contracted a lot of that capacity out. So I'm not sure what the tenor of those contracts looks like, if they could be coming up for renewal, maybe around a good time, but seems like there's a potential for spreads to maybe break out again in 23 and 24. Curious how you see the impact to you, and then just more broadly, how do you think this gas takeaway issue gets resolved?

Maybe around a good time, but it seems like there is a potential for spreads to maybe break out again in 'twenty three 'twenty four curious how you see the impact to you and then just more broadly how do you think this gas takeaway issue gets resolved.

Speaker 4: Yeah, I can start with the spread comments, Bira. This is Sean and about making talk about the long term takeaway. So we we have taken we took advantage a few years ago and ran contracts out in two forms, obviously some some financial contracts. And then we we actually did some physical.

Yes, I can start with the spread comment Spiro. This is Sean it about make it talked about the long term takeaway. So we have taken we took advantage of a few years ago and ran contracts out in two forms obviously, some some financial contracts and then we actually did some physical contracts on Guadalupe typically went up.

Speaker 4: contracts on Guadalupe. They typically went out, on average, five years. We don't hedge the whole

On average five years, we don't hedge the whole.

Speaker 4: 100% of the capacity. So, as you think about our portfolio, it declines in terms of the hedge percentage over the years. We were close to 80, 90% last year. We're probably a little bit on the lower end of that, but similar this year. So, there's still some, you know, that's our strategy as a whole. We still leave ourselves some room to take advantage, as you mentioned, of the spread widening. And then that diminishes.

100% of the capacity so as you think about our portfolio.

It declines in terms of the hedge percentage over the years, we were close to 80%, 90% last year were probably a little bit on the lower end of that but similar this year. So there is still some that's our strategy as a whole we still leave ourselves some room to take advantage as you mentioned of the spread widening and then that diminishes.

Speaker 4: In terms of the amount hedged over time. So if you're thinking about 23, 24, you're going to get closer and closer to about 50% hedged based on

In terms of the amount hedged over time, so if youre thinking about 'twenty three 'twenty, four youre going to get closer and closer to about 50% hedged based on that.

Speaker 4: you know, some of those contracts rolling off. We still, just like we do in our normal business, we'll look at opportunities to hedge that when the spreads are wide.

Some of those contracts rolling off we still just like we do in our normal business, we will look at opportunities to hedge that win win win.

Reds are wide, but we definitely have I think it's a nice balanced approach we have enough.

Speaker 4: But we definitely have, I think it's a nice balanced approach. We have enough.

Speaker 4: fee-based type revenue stream and we leave ourselves, you know, anywhere between probably 30 to 20 percent of upside on Guadalupe

Fee based type revenue stream, and we leave ourselves anywhere between probably 30%.

20% of upside on Guadalupe and then maybe to add to that Spiro could you just go back to the first residue by new residue buys that came out of the Permian Gulf.

Speaker 3: Yeah, and then maybe to add to that, Spiro, if you just go back to the first residue pipe, new residue pipe that came out of the Permian was Gulf Coast Express. And between us and Kinder, we were the co-developers on that pipe. So I think we have a history of looking at the basin and saying, is there an opportunity to develop a pipe or to co-develop a pipe? It's very important to our business. We have a large GNP business. So being able to have our own takeaway on the residue side and the NGL side is something that we're always keenly interested in. You know, for a Permian residue takeaway pipe to happen, you need long-term commitments. And what that will mean is that some producers will have to step up with some type of long-term commitment.

Gulf Coast Express on between Us and Kinder, we Werent co developers on the pipe. So I think we have a history of looking at the basin and so you start an opportunity to develop a buying portico develop a five it's very important to our business. We have a large G&P business, so being able to have our own takeaway on the residue.

On the NGL side is something that is that we are always keenly interested in.

For Permian residue takeaway five to happen you need you need long term commitments.

That will mean is that some producers will have to step up with some type of long term commitments.

Speaker 3: The most significant growth that we're currently seeing in the Birmingham is from the privates.

The most significant growth that we're currently seeing in the Permian as from the privates.

Speaker 3: The privates historically do not have a tendency to sign up for five or ten year commitments that may change. And the question is, are the large publics, are they going to be willing to sign up? So I think that is one thing that...

<unk> historically do not have a tendency to sign up five or 10 year commitments that may change and the <unk>.

<unk> already are the large publics are they going to be willing to sign up so I think that was one thing.

Speaker 3: is to be seen and to be worked, but that is very important. And then lastly, I think what I would like to add to Sean, I'm like, yes, we have Guadalupe, we have GCX, that's existing steel. Existing steel is always better from a rate point of view than new steel. So I think over time, when we have some contract roll off, maybe that at either GCX at Guadalupe, we will have an opportunity to recontract that probably at significantly higher rates than what we currently have in place. So that's a pretty good outlook for us overall.

It's to be seen to be work, but that is very important and then lastly, I think what I would like to add to show them. Unlike yes, we have Guadalupe gcs, that's existing steel existing steel is always better from a rate point of view.

The new steel so I think over time, and we have some contract roll off they beat us at either Gtx at Guadalupe we will have an opportunity to re contract that's probably at significantly higher rates than what we currently have in place. So that's a pretty pretty good outlook for us overall.

Yes, great.

Speaker 2: Yep, agreed. Okay, go ahead. Helpful as always. Thanks for your time, guys. Thank you.

So I had outflows as always thanks for your time guys.

Yes.

Speaker 1: Our next question coming from the line of Michael Bloom with Wells Fargo, your line is open.

Our next question coming from the line of Michael Blum with Wells Fargo. Your line is open.

Thanks, Good morning, everyone.

Speaker 5: Thanks. Good morning, everyone. I apologize for maybe kind of a naive question to start here, but you show on the slide here the upside to your guidance based on the current forward curve. My question is simply, what's preventing you from hedging more of that and locking that in the current pricing environment?

I apologize for maybe kind of a naive question to start here, but.

You show on the slide here the upside to your guidance based on the carrier.

Sure.

My question is simply like whats, preventing you from from locking in hedging more of that in locking that in the current pricing environment.

And to your numbers for 2022.

Speaker 4: Yeah, Michael, I can start and give you a couple of things, you know, just the process itself. Yeah, there's always going to be a difference between when we come out with our guidance and when we approve our budgets. And I know that wasn't your question, but just to give you a little bit, you know, that stuff happens, you know, a good six weeks ago, we're locking in getting 22 approved. And obviously, guidance is going to be in line with what our formal budget is.

Yes, Michael I can start and give you a couple of things just the process itself. Yes. There is always going to be a difference between when we come out with our guidance and when we approve our budget and I know that wasn't your question, but just to give you a little bit that stuff happens goods.

Six weeks ago, we're locking in getting getting 22 approved and obviously guidance is going to be in line with what our formal budget as to your second question.

Speaker 4: To your second question, on the $140 million upside, we are out hedging some of that. I think I showed we're 82%

On the $140 million of upside we are out hedging some of that.

I think I showed for 82% fee or hedged. So we continue to take those opportunities to go out and add some hedges I'll remind you that the hedges in terms of another tailwind the hedges that we have on the books for 2022 or at better commodity prices and the hedges we have for 'twenty, one that it makes sense to everyone. So the answer.

Speaker 4: fear hedged, so we continue to take those opportunities to go out and add some hedges. I'll remind you that the hedges.

Speaker 4: In terms of another tailwind, the hedges that we have on the books for 2022 are at better commodity prices than the hedges we had for 2021. That should make sense to everyone. So the answer is yes.

Yes, we are taking advantage we are going out.

Speaker 4: we are taking advantage, we are going out and locking in some of that forward curve for sure, out the curve and adding to our hedge percentage. On the flip side, maybe the last thing I would say is that spot prices are higher than the forward curve. So as we sit here six weeks into the year, we're even benefiting even more than that forward because spot prices are, you typically have backward dated curves.

And locking in some of that forward curve for sure.

Out the curve and adding to our hedge percentage on the flip side.

Maybe the last thing I would say is that spot prices are higher than the forward curve. So as we sit here six weeks into the year, where even benefiting even more than that forward because spot prices are you typically have backward dated curve spot prices are stronger. So that's one reason, obviously youre still trying to take advantage in the shorter term although.

Speaker 4: spot prices are stronger. So that's one reason, obviously, you're still trying to take advantage in the shorter term.

Speaker 4: of an even stronger market than what the forward would show you, but we will take advantage of those curves. You will see us go out and layer on some additional.

Even stronger market than what the forward would show you, but we will take advantage of those curves you will see us go out.

Layer on some additional hedges.

Speaker 3: Yeah, and I think maybe the last one, even even to add to that, you never want to be in a position where you hatch 100% of your position, that would be great if we're in a perfectly completely steady business. But, you know, you take events like Yuri, you take a winter storm, like we had a week or two ago, or last weekend, in Texas, you know, there's all kinds of upsets that can happen. And you don't want to want to be at 100% hatched situation.

Yes, I think maybe the last one even even to add to that you never want to be in a position where you hedge 100% of your position that would be great. If we're in a.

Perfectly completely steady business.

You take events like Youri think of winter storm like we had a week or two ago, our last weekend in Texas, There's all kinds of upsets that can happen and you don't want to be at 100% hedged situation either.

Got it.

Speaker 5: Got it, that makes sense. Second question I just wanted to ask was on CapEx.

Makes sense.

The question I just wanted to ask was on Capex.

Speaker 5: Really on both, but particularly on sustaining CapEx, I went back and looked, I mean, the last time you were at $100 million or this level or higher was literally like 2018, it's been much lower the last few years, so I just wanted to understand what's going on there, and then just what is in the growth capital.

Really on both but particularly on sustaining capex.

I went back and looked I mean.

Last time, you were at 100 million or this level or higher was literally like 2018, it's but much lower the last few years. So I just wanted to understand what's going on there and then just what is the gross capital numbers there.

Yes, so on the sustaining side Michael.

Speaker 4: Yeah, so on the sustaining side, Michael, you know, it is an uptick and your math is right, still pretty low levels if you go back, you know.

It is an uptick in your math is right, it's still pretty low levels. If you go back.

Speaker 4: 10 years. But what you're seeing on that, there's two things in general. One, obviously, the Permian and the DJ that are covered some of the short term.

10 years, but what youre seeing on that Theres two things in general one obviously, the Permian and the DJ better covered some of the short term.

Speaker 4: trends that we really like what we're seeing there. So, you know, that does require us to go out and connect to gas.

Trends that we really like what we're seeing there so that does require us to go out connected gas I think that's a strong thing.

Speaker 4: I think that's a strong thing, you know, in terms of product replacement. So we're seeing some increases in product replacement. You are seeing, as you think about 2022, you know, the applicable increases in the margin and the volumes tied to that. We talked about those two areas being up five to seven percent.

In terms of product replacement. So we're seeing some increases in product replacement you are seeing if you think about 2022.

The applicable increases in the margin and the volumes tied to that we talked about those two areas being up 5% to 7% on the margin side. So thats PR I think that's a good trend obviously that's it.

Speaker 4: on the margin side. So that's PR. I think that's a good trend. Obviously, it is higher than maybe the last couple of years, but it's still, in my mind, very disciplined in terms of the increases we're seeing there. The other thing that hits is sustaining, and I talked about it a little bit in the...

It is higher than maybe the last couple of years, but it's still in my mind very disciplined in terms of the.

The increases we're seeing there the other thing that hits, the sustaining and I talked about it a little bit in the.

Speaker 4: in our remarks is the investments in reliability, the investments in some of the regulatory changes that are coming down the path. So it's a higher reliability year for us. We put a bunch of new assets in about three years ago in the DJ, some very large.

In our remarks is the investments in reliability of the investments in some of the regulatory changes that are coming down the path. So we are it's a higher reliability year for us we put a bunch of new assets in about three years ago in the DJ some very large.

Speaker 4: assets, those require maintenance, they're sort of on a three-year cycle, so we're going to be investing in some of that. And then, you know, with a lot going on the regulatory front, mega rule, emissions, things of that nature, we're investing.

Assets those require maintenance therapy, so Roe on a three year cycle.

So we're going to be investing in some of that.

And then with a lot going on the regulatory front Mega rule emissions things of that nature, we are investing and spending some money on those assets as well or those types of.

Speaker 4: and spending some money on those assets as well, or those types of investments.

Investments the other thing I would point out as those actually do increased top line returns right. The more reliable were run rerun the more gas we keep in the pipeline the more money we make so I don't want you to think that those sustainability investments, we're not driving revenue increases either but those are the primary drivers of the sustaining.

Speaker 4: The other thing I would point out is those actually do increase top line returns, right? The more reliable we run, the more gas we keep in the pipeline, the more money we make. So I don't want you to think that those sustainability investments are not driving.

Speaker 4: revenue increases either. But those are the primary drivers of the sustaining. As you think about growth, Valor kind of covered it earlier. Again, right back to those two areas.

But as you think about growth matter kind of covered it earlier again right back to those two areas.

Speaker 4: Um, you know, outside of just sustaining the volumes, we are seeing some opportunities with, uh, in particular producers in the Delaware Basin there that are investing more in 2022 than they did in prior years. So we're adding some volume growth.

Outside of just sustaining the volumes, we are seeing some opportunities with.

In particular producers in the Delaware basin that are investing more in 2022 than they did in prior years. So we're adding some volume growth and going out and spending some money that's going to be compression thats going to be gathering that's going to be connecting to wells.

Speaker 4: going out and spending some money, that's going to be compression, that's going to be gathering, that's going to be connecting to wells. And the same thing in the DJ.

Same thing in the DJ exactly the same type of investment is not the big plants that wouter talked about down the road, but we do see an uptick in growth again, I see that as a very positive thing. Our two best return regions are the DJ and the Permian and that's where we are if you think about sustaining and growth that's where real.

Speaker 4: exactly the same type of investments. Not the big plants that Valor talked about down the road, but we do see an uptick in growth. Again, I see that as a very positive thing. Our two best return regions are the DJ and the Permian. If you think about sustaining and growth, that's where we're investing money in 2022.

We're investing.

In 2022.

Great. Thank you very much.

Thanks, Michael.

Our next question coming from the line of Kristen Richardson with <unk> Securities. Your line is open.

Speaker 1: Our next question, coming from the line at Tristan Richardson with True Securities. Your line is open.

Hey, good morning, guys.

Speaker 2: I appreciate those comments on the DJ, around investing your assets and the processing landscape there. And Sean, I think you may have even touched on it in the previous question, but just on the Permian, you know, Vowter, you made DCP's position very clear over the past several years. But just on excess third-party processing.

I appreciate those comments on the DJ around investing in your assets and the processing landscape, there and Sean I think you may have even touched on in the previous question, but just on the Permian.

Router, you may dcp's position very clear over the past several years, but just on access third party processing.

Speaker 2: You're seeing some of your peers, you know, maybe add a plant here and there to the medium-term schedule. Do you see a lot of latent third-party capacity still available, or at some point do we see a tightening begin, and does DCP start to look at internal project developments there?

Youre seeing some of your peers.

At a plant here and there to the medium term schedule D. C. A lot of latent third party capacity still available.

At some point do we see a tightening begin then DCP start to look at internal project developments there.

Speaker 3: Yeah, so you know, Midstream is a regional business, correct? It's a real estate business, so it all depends on location. So there obviously are some areas with some profiles where people say, hey, I'm short and I need to build something. And then there are other areas where you do have some overcapacity. So we see here in kind of the shortish term and whatever short means, you know, 18 months or so, we definitely still see some opportunities for us to utilize a third party. And then the question is, is there an opportunity to do something different in the longer run? And, you know, we'll continue to look at that very, very closely. But, you know, I don't see a situation right here right now where we're sitting and saying, hey, everything is chock-a-block full from a GNP point of view in the Permian, and therefore you got to pivot and go do something else. But we do, I think, you're in general, we started our...

Yes.

Midstream is a is a regional business correct gets a real estate business. So it all depends on location. So.

Obviously are some areas with some profiles, where people say ham shorts and I need to build something and then there are other areas, where you do have some overcapacity. So we see here in kind of the Shortish term and whatever short means 18 months or so we definitely still see some opportunities for us to utilize.

Third party and then the question is is there an opportunity to do something different.

In the longer run.

We'll continue to look at that very very closely but yes.

I don't see a situation right here right now, where we're sitting and saying Hey, everything is chockablock full from a G&A point of view in the Permian and therefore, you got to pivot and go do something else.

I think youre in general we started our.

Speaker 3: supply long capacity short strategy kind of in 2019. So that is, you know, a good three years ago. And at some moment, there is gonna be a change to that where you say, hey, I need to build my own some additional infrastructure that I own myself. I think in general, that would be a good thing, if that's the case. And as I said earlier, Mike, probably we see some of that on the horizon in the DJ basin. And, you know, depending on where things go in the Permian, we may have to go the same route as well.

Supply long capacity short strategy kind of in 2019.

Good three years ago.

At some moment there is going to be a change to that are you, saying, hey, I need to build my own some additional infrastructure that I own myself I think in general that would be a good thing.

If that's the case.

As I said earlier, Mike probably we see some of that on the horizon in the DJ Basin.

Depending on where things go in the Permian, we make premium we may have to go the same route as well.

I appreciate it and then just on potential tailwind this year.

Speaker 2: And then just on potential tailwinds this year, it makes sense what you guys have laid out just from a commodity standpoint, but then just on the third-party ethane opportunity, maybe just give us a scale of what that could look like this year if you do see an incremental pull.

Since what you guys have laid out just from a commodity standpoint, but just on the third party ethane opportunity.

Maybe just give us a scale of what that could look like this year. If you do see an incremental pool.

Speaker 4: Yeah, Tristan, I mean, we've been in, and I think you're alluding to it, we've been in, our plants, our assets have been in recovery for quite a while now, for a couple of years. You know, it's off and on with the third parties. Obviously, third parties have different downstream contracts, they have different downstream economics.

Yes, Tristan I mean, we've been in and I think you're alluding to what we have been in our plants our assets a bit of recovery for quite a while now for a couple of years.

Often on with third parties, obviously third parties have different downstream contracts they have different downstream economics.

Speaker 4: You know, we're very fortunate we have the ICC, we're looking at those decisions on a real-time basis, and you see us optimizing that. But bottom line, we did not see a lot of third-party recovery last year. Maybe a slight uptick in Q4, and as I indicated, we kept that trend in our guidance for 2022.

We're very fortunate we have the ICC, we're looking at those decisions on a real time basis, and Youll see us optimizing that.

But bottom line, we did not see a lot of third party recovery last year.

Maybe a slight uptick in Q4 and as I indicated we kept that trend in our guidance for 2022.

Speaker 4: You know, and I know we've seen the frac spread kind of increase, and obviously the decision, you know, that these guys run the models they run are more than just the frac spread, but at least that's going our way. If we do see...

And we I know, we've seen the frac spreads kind of increase and obviously the decision that these guys run the models. They run there are more than just the frac spread but at least that's going our way if we do see.

Speaker 4: third-party plants go into recovery mode, we think somewhere in that 20,000 barrel per day uplift, you know, and obviously that would be for the full year. And that's substantial, that could be $20, $30 million of additional margin if we see that. So that's a great tailwind. And so far the fundamentals are pointing to that. And the last thing I would say is we do work with individual producers to try and incentivize.

Third party plants go into recovery mode, We think 'twenty.

Somewhere in that 20000 barrel per day.

Uplift.

And then obviously that would be for the full year and that's substantial that could be $20 million to $30 million of additional margin. If we see that so that's a great tailwind.

So far the fundamentals are pointing to that.

But we will.

And the last thing I would say is we do we do work with individual producers are trying to incentivize them.

Speaker 4: As I mentioned, we didn't see a ton of that last year, but maybe some more opportunities this year, so it could be a good tailwind for the company. Appreciate it.

As I mentioned, we didn't see a ton of that last year, but maybe some more opportunities. This year. So it could be a good tailwind for the company.

Appreciate it thank you guys very much.

Thanks Tristan.

Our next question coming from the line of Jeremy Tonet with Jpmorgan. Your line is open.

Speaker 1: Our next question coming from the line of Jeremy Tonnet with J.P. Morgan. Your line is open.

Speaker 6: Hi, everyone. This is Dan Walker on for Jeremy. I just have a couple of questions. The first is on the tax payments on Sandhills and Southern Hills that you pointed out in the release and in your prepared remarks. Could you quantify those for us? And I guess by timing, when were those payments expected? And does this mean that these tax payments were pulled forward? And if so, would that have, I guess, positive implications for 1Q or this year? Yeah.

Hi, everyone. This is Dan <unk> on for Jeremy I, just have a couple of questions. The first is on the tax payments on sand Hills and southern Hills that you.

Pointed out in the release in your prepared remarks.

You quantify those for us.

I guess my timing when were those payments expected and does this mean that these tax payments were pulled forward and if so would that have positive implications.

Locations for <unk> ore or this year, yes.

Yes, Dan.

Speaker 4: You know, the way I would think about it as a whole, we talked about sort of the Q4, you know, and areas where we had some timing and maybe a mess.

The way I would think about it.

<unk> as a whole we talked about sort of the Q4.

And in areas, where we had some timing and may be a miss.

Speaker 4: The cash distributions from our pipelines, essentially, we had zero. If you really look at it, they were zero in Q4. Typically, they're running $20 to $30 million a quarter. Two-thirds or more of that was the tax payments. So you're talking about maybe $24, $25 million.

Cash distributions from our pipelines essentially we had zero if you really look at it there were zero in Q4, typically they're running 20% to $30 million a quarter.

Two thirds or more of that was the tax payments. So you don't have maybe $24 million to $25 million.

Speaker 4: I wouldn't say they were pulled forward, you know, typically we pay them either in late

I Wouldnt say that were pulled forward typically we pay them either in late December or in early January So just and obviously if you think about 2020 being a COVID-19 year things were a little bit slower that payment didn't it didn't happen in Q4 of 'twenty going into 'twenty one.

Speaker 4: December or in early January . So just, you know, and obviously if you think about 2020 being a COVID year, things were a little bit slower. That payment didn't, you know, didn't happen in Q4 of 20, going into 21, it happened in 21. So we actually made that payment in Q1. And then obviously things, you know, back a little more efficient. We made those payments in Q4 late. So to your point, that is a tailwind. You know, that's why we call it timing. I mean, you're gonna pay your taxes no matter what, but that is something that obviously we paid late last year so we won't have that, you know, the majority of that payment occurring in Q1.

It happened in 'twenty, one so we actually made that payment in Q1, and then obviously things.

<unk> a little more efficient we made those payments in Q4.

Late so to your point that is that is a tailwind that's why we call. It timing I mean youre going to pay your taxes are taxes, no matter, what but that is something that obviously, we paid late last year. So we won't have that the majority of that payment occurring in Q1 of this year and again setting us up pretty good.

Speaker 4: of this year, and again, setting us up pretty good for the quarter.

For the quarter.

Speaker 6: Okay. Okay. Got it. Thanks. And then the second question we had was just on the costs versus top line. I mean, you talked about the escalators in the second half kicking in and cost reductions that were largely, you know, you kind of held the line in 21. But what kind of OPEX pressures are you seeing, if any, and what are you budgeting? What's kind of baked in, I guess, for the 22 guide? Yeah, in terms of...

Okay. Okay got it thanks and then the second question. We had was just on the the costs versus top line. I mean, you talked about the escalators in the second half kicking in in cost reductions that were largely.

You've kind of held the line in 'twenty one but.

What kind of Opex pressures are you seeing if any and what are you budgeting, what's kind of baked in I guess for the 22 guide in terms of pressures.

Speaker 4: Um, you know, everyone's dealing with inflation. Um, yeah, you've got the great resignation. So the company's doing some really smart things around investing in our people. I think those are prudent. I think, you know, the company's done an amazing job. I'll reiterate some of the things that I mentioned. I mean, we cut $150 million out in 2020, obviously during COVID. Um, you know, we held onto all of that. We stayed flat in 21. Um, I, our very few companies did that. And then again, we're going on to have, you know, two years later.

Everyone's dealing with inflation, you've got the great resignation. So the company is doing some really smart things around investing in our people I think those are prudent I think.

The company has done an amazing job I'll reiterate some of the things that I mentioned I mean, we cut $150 million out in 2020, obviously during COVID-19 .

We held on to all of that we stayed flat in 'twenty one.

Very few companies did that and again.

Speaker 4: But the pressures to your question, definitely some inflation, definitely some investments in our people. You heard me, I mentioned we're taking this opportunity to, I think it's, we're gonna

Speaker 4: productive fundamental environment. I think we're going to invest in our assets.

Speaker 4: And on the regulatory front, on the ESG front, you'll see us get ahead of a few things there. I think those are all prudent.

And on the regulatory.

Tori front on the ESG front and Youll see us get ahead of a few things there I think those are all prudent.

Speaker 4: investments, and we're still holding on to half of those $150 million savings that we delivered two years ago. So I think they're all manageable. I think they're things that we clearly have our eye on, and then I think you highlighted something important.

Investments and we're still holding on to half of those $150 million savings that we delivered two years ago. So.

I think they are all manageable I think there are things that.

We clearly have our eye on and then I think you highlighted something important that we do as a company have offsets to inflation.

Speaker 4: that, you know, we do as a company have offsets to inflation.

Speaker 4: Commodity is a great one, it tends to correlate with inflation and we talked about the $140 million of forward curve uplift.

Commodity is a great one, but it tends to correlate with the inflation and we talked about the $140 million of forward curve uplift.

Speaker 4: And then in the second half of the year we do have those escalators to kick in on some of our G&P contracts but the bigger ones

And then in the second half of the year, we do have those escalators to kick in on some of our G&P contracts, but the bigger ones are tied to our pipelines and those are meaningful as well. So the good news is we have good offsets to inflation.

Speaker 4: are tied to our pipelines, and those are meaningful as well. So the good news is we have good offsets to inflation.

Speaker 4: But those are some of the pressures we're seeing. I think we're doing a better job than many in terms of trying to mitigate some of that.

Okay.

But those are some of the pressures we're seeing I think I think we're doing a better job than many in terms of trying to mitigate some of those maybe Dan just one quick kind of macro unlikely all saw the numbers. This morning. So.

Speaker 3: Yeah, maybe Dan, just one quick kind of macro, I'm like, we all saw the numbers this morning. So, you know, seven and a half percent inflation, the highest we've seen in four decades.

Seven 5% inflation the highest we've seen in four decades.

Speaker 3: I can guarantee you that we will beat those numbers. You're not going to see our numbers go up by 7.5 percent. And we're going to continue, as Sean mentioned, to invest in our business. So not only are we going to beat 7.5 percent by quite a bit, we're also going to, on top of that, invest in our business. So you know what, I think we have a great track record of running a tight ship, making sure that we deal with costs really, really well. Sean mentioned two years after, you know, the big COVID savings, we held on to 100 percent of those savings. If you start giving a little bit back in an environment like we are today, I think that is a pretty good place to be. And you're still going to be well below all those cost levels that you were two years ago, or even well below cost levels that we were four or five years ago. While we're running a lot more assets, billions of dollars more assets, we're running them more profitable, more reliable, safer, and with lower emissions. So net net, I think around the cost story, it continues to be a really, really great story.

I can guarantee you that we will beat those numbers, you're not going to see our numbers go up by seven 5%.

We're going to continue as Sean mentioned to invest in our business. So not only are we going to be to seven 5% by quite a bit. We're also going to on top of that invest in our business. So I <unk>.

We have a great track record of running a tight ship, making sure that we deal with costs really really well Sean mentioned two years after the.

Big Covid savings, we held on to a 100% of the savings if you start giving a little bit back.

Environment like we are today I think that is a pretty pretty good place to be and you're still going to be well below the.

Cost levels that you're more two years ago, or even well below cost levels that we were four or five years ago, while we're running a lot more assets billions of dollars more assets, we're running a more profitable more reliable safer.

With lower emissions. So net net I think around the cost story. It continues to be a really really great story.

Speaker 6: Okay. All right. Thanks a lot. Appreciate it. Thanks, Dan.

Okay, alright, thanks, a lot I appreciate it.

Thank you Dan.

Speaker 1: And as a reminder, ladies and gentlemen, to ask a question, please press star 1. Our next question coming from the line of Michael Kusimano from Pickering Energy Partners. Your line is open.

And Thats, all my ladies and gentlemen to ask a question. Please press star one our next question coming from the line of Michael <unk>.

Pickering Energy partners. Your line is open.

Thanks, Sean.

Morning.

Speaker 7: Looking at the mid-con, you point to moderate decline there.

Looking at the mid Con you point to moderate decline there.

Speaker 7: I'm just curious if that's consistent with your view on the basin as a whole, or just your system?

Curious if that's consistent with your view on the basin as a whole or just your system I know, it's competitive G&P regions. So can you just talk about what you're seeing now.

Speaker 4: Yeah. So a couple of things, Michael, on the VidCon, and it's actually a slightly favorable story. So we are seeing, as we gave the guidance for 2022, we're seeing modest declines. When I look back at 2021 and even 2020, our portfolio has been outperforming the basin declines.

Yes, so a couple of things Michael into mid Con Ed. Thanks Lee.

Slightly favorable stores. So we are seeing.

As we gave the guidance for 'twenty, two we're seeing modest declines.

When I look back at 'twenty, one and EBIT 20.

Our portfolio has been outperforming the.

The basin declines so we've seen we've actually I guess back into some increases in market share. So we've been able to do some interesting things you may recall, we consolidated a bunch of plants. There. We've we have taken a lot of the gas to our most efficient plants, that's increasing our earnings one of our most new and most technologically.

Speaker 4: you know, backed into some increases in market share. So we've been able to do some interesting things. You may recall we've consolidated a bunch of plants there. We've, we're taking a lot of the gas to our most efficient plants. That's, that's increasing our earnings. You know, one of our most new and most technologically driven plants. So.

Logically driven plants, so I think it could be in 'twenty, one it was a slight positive surprise.

Speaker 4: I think it could be, you know, in 21, it was a slight positive surprise.

Speaker 4: to the company. I think slight declines. I don't think you're going to find anyone that's seeing big growth out of the mid-continent. But we have been slightly beating

For the company.

And I think slight declines I don't think you're going to find anyone that seeing big growth out of the mid continent, but we have been slightly beating in my opinion, what I see we've been beating the trends of the of the basin. So kudos to the team for that.

Speaker 4: in my opinion, what I see, we've been beating the trends of the basin, so kudos to the team for that. But I'll remind you, you know, it's a good area, but our best, you know, profitable, most

But I'll remind you it's a good area, but our best.

<unk>, most highest return areas of the two that where.

Speaker 4: highest return areas are the two that we are seeing some growth back to the Permian and the DJ. But overall, a decent story in the mid-continent when considering the environment.

We are seeing some growth back to the Permian and the DJ but overall a decent story in the mid continent, when you're considering the environment.

Got it that's helpful. That's all for me. Thank you.

Thanks.

Yes.

Speaker 1: Our next question coming from the line of James Carrick with U.S. Capital Advisors. Your line is open.

Our next question coming from the line of James Jang with U S Capital Advisors. Your line is open.

Speaker 8: Hey guys, thanks for the question. I appreciate your comments about returning additional capital to equity, but just kind of curious if you have any thoughts around that plus or minus $500 million of excess free cash flow.

Hey, guys. Thanks for the question.

I appreciate your comments about returning additional capital to equity, but just kind of curious if you have any thoughts around that plus.

Plus or minus $500 million of excess free cash flow.

Speaker 8: you know, a 10% raise is an additional $30 million. I guess, how do you think about...

A 10% raise additional $30 million I guess, how do you think about.

Speaker 8: allocating the rest of that for this year and then, you know, assuming you'll have free cash flow in 23 and beyond.

Allocating the rest of that for this year, then assuming youll have free cash flow in 'twenty three and beyond.

Speaker 3: Yeah, no, James, thanks for that. Hey, no good deed goes unpunished. And, you know, I think the way we look at this, you know, we have an all of the above.

Yes, James Thanks for that Hey, no good deed goes unpunished.

Yes, I think the way we look at this.

We have all of the above guidance.

Speaker 3: kind of broad menu of opportunities that are available to us.

<unk> got enough broad menu of opportunities that are available to us.

Speaker 3: I want to take people back, our goal was to be at 4.0 at the end of 2021. We were at 4.1 at the end of the third quarter, at 3.8 at the end of the fourth quarter. So massive improvement. So what we kind of said is like, you know what, there's an opportunity to start accelerating capital return to unit holders instead of the second half of 2022. Let's kind of start targeting the middle. And where we believe we need to target is with the distributions. At the same time, we're going to continue to have a commitment to the balance sheet. So we've got to get first from 3.8 to 3.5. And then what we always say is that, hey, 3.5 should really be a mid-cycle type of leverage. I think at the current prices that we're seeing, we're probably above mid-cycle. So you're going to continue to see additional dollars go back to the balance sheet. So we continue to lower our overall leverage so that if things go the other direction and we get into some type of a lower cycle, which at some moment we will, the balance sheet is still ironclad and we can still run a really, really good business. So.

Think people back we our goal is to be at four <unk> at the end of 'twenty 2021, we were at four one at the end of the third quarter at three eight at the end of the four corners. So a massive improvement so what we kind of status like theres, an opportunity to start accelerating capital return.

To unit holders instead of the second half of 2022, and lets kind of start targeting the middle and we believe we need to target this with the distributions at.

At the same time, we're going to continue to have a commitment to the balance sheet. So we've got to get first from three eight to three and a half and then what we always say is that the phase III and the half should really be a mid cycle type of leverage I think at the current prices that we're seeing we're probably above mid cycle. So youre going to continue to see additional dollars go back too.

The balance sheet. So we continue to lower our overall leverage so that if things go the other direction and we get into some type of a lower cycle, which at some moment, we will the balance sheet still iron clad.

And we can still run a really really good business so but at the same time once we hit that three and a half it's going to be kind of a dual pronged approach race of distributions and continue to have dollars go to the balance sheet at that time, where I think also having a much broader view around what else is possible at that time.

Speaker 3: But at the same time, once we hit that 3.5, it's going to be kind of a dual-pronged approach. Raise the distributions and continue to have a dollar of code to the balance sheet. At that time, we're, I think, also having a much kind of broader view around what else is possible at that time. You know, we spoke a lot about, hey, some growth in the DJ, some growth in the Permian. You know what? That's things that you want to do as long as it is good growth and it's

We spoke a lot about hey, some growth in the DJ some growth in the Permian.

Thinks that you want to do as long as it is good growth and it's growth, but that makes a lot of sense and I think we have a pretty good history in both the DJ and the Permian off of putting profitable growth in place.

Speaker 3: sense and I think we have a pretty good history in both the DJ and the Permian of putting profitable growth in place. Additional raises is something that could be on the table and then things around, you know, your common or your preferred. Is that something that you want to put on the table? All of those things we're going to be looking at here over the next number of months and the next number of quarters. What is available? What makes sense? Why are we trading? So from a cost of capital, what makes most sense? I think the good thing and the takeaway is we're in a great position. We're going to be at three and a half leverage here, you know, sometime in the middle of this year. We're going to raise the distribution, start putting cash back to unit holders. And then on top of that, we have a tremendous amount of option. As you pointed out, there's an unbelievable amount of excess free cash flow still available. We're going to see what the most, what the smartest thing is to do with that.

Additional raises as something that could be on the table and then things around common or you prefer to start something that you want to put on the table all of those things we're going to be looking at here over the next number of months in the next number of quarters. One is available and what makes sense why are we trading so from a cost of capital what makes most sense.

I think the good thing and a takeaway is we're in a great position, we're going to be at three and a half leverage here.

Timing in the middle of this year, we're going to raise the distribution start putting cash back to unit all of ours and then on top of that we have a tremendous amount of option. As you pointed out there is an unbelievable amount of excess free cash flow is still available and we're going to see what the most on what the smartest thing has to do with us.

Speaker 8: Thanks for those comments, and then maybe as a follow-up,

Thanks for those comments and then maybe as a follow up.

Speaker 8: Just any comments about, I guess, M&A, kind of on either side? One of the partners in GCX just sold out a piece of theirs that, you know.

Just any comments about I guess M&A kind of on either side.

One of the partners and Gtx just sold out a piece of there is it.

Speaker 8: eight hundred fifty million dollars is that a valuation that's interesting to you and you know on the flip side

800.

$50 million is that evaluation thats interesting to you and then on the flip side.

Speaker 3: Do you see a use of free cash flow of going out and being strategic and acquiring any assets or maybe both, selling and buying? Great questions. I think earlier in the call, we spoke about GCX a little bit. We were the original developer. For us, massively strategic assets, we like it, we like the earnings power, it's core to the business. We spoke a little bit about wellhead-to-water strategy. Well, that's not only NGL pipelines, it's also residue gas pipelines.

Do you see a use of free cash flow of going out and being strategic in acquiring any assets or maybe both.

Yes.

Great Great questions I think earlier in the call we spoke about <unk>, a little bit Liberty original developer.

For us massively strategic asset and we like it we like the earnings power, it's core to the business.

Poke a little bit about wellhead to water strategy, well, that's not only NGL pipelines Thats also a residue gas pipelines. We have gtx, we have Guadalupe we have Cheyenne connector that we have out of the DJ basin. So all of those fit really nicely into our system. We have a strong outlook for the Permian basin, we have strong outlook for <unk>.

Speaker 3: We have GCX, we have Guadalupe, we have the Cheyenne Connector that we have out of the DJ Basin. So all of those fit really nicely into our system. We have a strong outlook for the Permian Basin. We have a strong outlook for GMP assets and our gas needs to find a way to go to market. And so owning your own pipes and infrastructure, paying yourself is always a good thing. So we do have a call option on GCX. You know, we're going to review that. We have some time to review that. The other partners have the same. We are not anticipating to be a seller of GCX, of our interest in GCX. Then in broader M&A, you know, we do believe that the market will continue to consolidate. We went from this high growth kind of decade.

And our gas needs to find a way to go to market and so owning your own <unk> infrastructure being yourself is always a good thing. So we do have a call option on gcs.

We're going to review that we have some time to reviewed at the auto partners have the same.

We are not anticipating to be a seller of gtx.

Of our interest in <unk> and broader M&A.

We do believe that the market will continue to consolidate we went from this high growth kind of decades to a much more mature industry, where we are now lower growth. That's normally leads to M&A cycle, starting up we've seen some of that in 2020 , one think youre going to see more of it in 'twenty two 'twenty three.

M&A is not a strategy, it's a way to execute your strategy. If there is an opportunity to do something from our sites, where we can expand the business in a in a logical way either use a strong balance sheet, our strong currency and do something.

We believe that strategically we will make the business stronger for the next five years decades, we're obviously going to look at that.

Speaker 9: Thank you.

Thank you.

Thanks, James James.

Speaker 5: Our next question coming from the line of Gabe Mooring with Mizzou Health Security. Your line is open. Hey, good morning, everyone. Just quick ones for me on the capital allocation question following up on James' question around whether getting to investment grade is a priority at this point and to what extent that may or may not be a gating factor to capital return or going below the three and a half times leverage target? You know, Gabe, Walter here, for us, the number, the three and a half, and the investment grade rated metrics, that's the most important thing. If the rating agencies then are going to follow suit, that would be really nice.

Speaker 1: Our next question coming from the line of Gabe Mooring with Mizzou Health Security. Your line is open.

Our next question is coming from the line of Gabe Moreen with Mizuho Securities. Your line is open.

Speaker 5: Hey, good morning, everyone. Just quick ones for me on the capital allocation question following up on James's question around whether getting to investment grade is a priority at this point and to what extent that may or may not be a gating factor to capital return or going below the three and a half times leverage target.

Hey, good morning, everyone.

Just two quick ones for me on the capital allocation question following up on James's question around weather getting to investment grade.

Priority at this point and to what extent that may or may not be a gating factor to capital return are going below the three five times leverage target.

Speaker 3: You know, Gabe, Walter here, for us, the number, the three and a half, and the investment-grade rated metrics

Okay, Walter here for us the number the three and a half and the investment grade ratings metrics. That's the most important thing if the rating agencies are going to follow suit that would be that would be really nice okay, but for us, it's not something where we're saying that if the rating agencies.

Speaker 3: That's the most important thing. If the rating agencies then are going to follow suit, that would be really nice, OK? But for us, it's not something where we're saying that.

Speaker 3: If the rating agencies are going to move the goalposts on us, that we say, OK, we're going to hold off on raising the distribution. That 3 and 1 half is still kind of a gating item for us. And we would like to be investment grade rated. We think we deserve it. Our outlook deserves it. I think a number of the agencies have put us on positive outlook or have taken positive action. And what I said earlier, I'm like, it's not when you hit 3 and 1 half, then the other almost half a billion dollars of excess free cash flow is just going to be spent. No, there's still money going to the balance sheet. So we think we will exit 2022 well below 3 and 1 half.

Going to move the goalpost from us that we say, okay, we're going to hold off.

On raising the distribution that three and a half is still kind of a gating item for us.

We would like to be investment grade rated we think we deserve it our outlook deserves it I think a number of the agencies.

Put us on positive outlook or have taken positive actions and what I said earlier, Mike It's not when you hit three and a half then <unk>.

On our almost $5 billion of excess free cash flow is just going to it's going to be spent there is still money going to the balance sheet. So we think we will exit 2022, well below three and a half.

Speaker 5: Thanks, Fowler. And then maybe I can follow up on the comments around competing for incremental barrels, I think specifically maybe in the Permian. Has anything changed significantly since last quarter or two with that language? I mean, obviously, there's been some changes in assets, which may affect the competitive dynamic out there. Can you just speak to that a little bit, contract roll-offs, et cetera, et cetera?

Thanks, Roger and then maybe I can follow up on the comments around competing for incremental barrels I think specifically maybe in the Permian does anything changed significantly since last quarter or two.

With that language I mean, obviously theres been some changes in assets, which may affect the competitive dynamic out there can you just speak to that a little bit contract roll offs et cetera et cetera.

Speaker 3: Not a lot of contract roll-off for us. I think the first contract roll-off is in early 2024 or mid-2024 that we have.

Not a lot of contract roll off for us.

The first contract roll off.

In early 2024 or mid 2024 that we have.

Speaker 3: So not a lot of contract roll-off. There is still quite significant overcapacity from an NGL point of view. So if you're thinking about, hey, we spoke about processing in the Permian, we spoke about residue gas. If you take NGL now, there's more overcapacity in NGLs than there is in processing or residue gas. So from that point of view, competing for new barrels.

So not a lot of contract roll off there is still quite significant overcapacity from an NGL point of view, so if youre thinking about hey, we spoke about processing in the Permian, we spoke about residue gas if you take NGL now.

Moreover capacity in Ngls than there is in processing a residue gas so from that point of view competing for new barrels.

Speaker 3: is definitely happening at lower rates today than where we were three, four, five years ago. And I think that was the comment that Sean was alluding to.

Definitely happening at lower rates today that in Barbie more 345 years ago.

And I think that's just a comment that you are alluding to.

Got it thanks, Brian .

Thanks Keith.

Speaker 1: Our next question coming from the line of Elvira Escudero with RBC Capital. Your line is open.

Our next question coming from the line of Eric <unk> with RBC capital. Your line is now open.

Speaker 10: Hi, everyone. Thanks for taking the question. I had a follow-up call just on the question on the sustaining CapEx. How much of that is unique to 2022 that won't repeat next year? For example, I know you mentioned, you know, reliability spend. I mean, is that an ongoing expense or is that more of just a 2022 expense?

Hi, everyone. Thanks for taking my question I had a follow up call just on the <unk>.

Question on the sustaining capex.

How much of that is unique to 2022 that won't repeat next year. For example, I know you mentioned reliability spend I mean is that in.

And ongoing expense or is that more of just a 2022.

Speaker 4: Hey, Elvira. 22 on the reliability side, and I alluded a little bit to it. I think in some ways, it'll be a little bit of a higher year. We had some big assets that went into the DJ. You know, if you go back prior to the COVID year, we invested a lot

Hey, Elvira.

<unk> 22 on the reliability side that I alluded a little bit to it I think.

Some ways there'll be a little bit of a higher year, we had some big assets that went into the DJ. If you go back prior to the Covid year, we invested a lot.

Speaker 4: And they are due every three years for some pretty good maintenance and reliability spent. So, from that perspective, I would see it more as a little bit of, you know, as timing. When I reference the spend on the regulatory, I see that more as continuing. You know, I think the environment we're in.

And they are due every three years for some some pretty good maintenance and reliability spend so from that perspective, I would see it more as a little bit of timing.

Timing when I referenced the.

The spend on the regulatory I see that more is continuing I think the environment. We're in.

Speaker 4: We're going to continue to invest in ESG, we're going to continue to invest in our pipelines and try and stay ahead of the regulatory environment. Now, I remind you, obviously, we're in Colorado and Southeast New Mexico, two very regulated states.

We're going to continue to invest in ESG, we're going to continue invest in our pipelines.

And try and stay ahead of the regulatory environment and I'll remind you that obviously, if we're in Colorado in southeast New Mexico, two very regulated states, we take a very proactive approach. So the answer is yes, I think a little bit higher if youre going to focus on the reliability spend.

Speaker 4: we take a very proactive approach. So the answer is yes, I think, a little bit higher if you're gonna focus on the reliability spending. I hope the product replacement spend continues at that rate. That'll be a great sign for our industry. But from a reliability, probably a little bit higher a year.

I hope the product replacement spend continues at that rate that will be a great sign for our industry.

From a liability probably a little bit higher year.

Speaker 10: Okay, thanks. That's helpful. And then just looking at your...

Okay. Thanks, that's helpful and then just looking at here.

Speaker 10: 2022 adjusted EBITDA guidance, what drives the low end versus the high end? And that 140 million of upside from the forward, is that...

2022, adjusted EBITDA guidance.

The low end.

The high end and that $140 million of upside from that forward is that.

Speaker 10: Should we think about that as versus the midpoint of your guidance or potentially from the high end of your guidance?

Should we think about that versus the midpoint of your guidance or potentially from the high end of your guidance.

Speaker 4: The 140th versus the midpoint of our guidance.

The $140 versus the midpoint of our guidance.

Speaker 4: So, you know, if you take the mid, we gave you the mid commodity deck that we used, and obviously the forward curve, so that's 140 over the midpoint. Look, the things that can take you to the low end, obviously, you know, it could be, the big ones, and they haven't changed, are going to be, does the commodity dampen?

So if you take the bid.

We gave you the mid commodity deck that we used and obviously the forward curve. So thats a 140 over the midpoint.

The things that can take you to the low end obviously.

It could be the big ones and they haven't changed it are going to be does the commodity dampened.

Speaker 4: You know, we always have a range on the commodity deck. Right now, we're very fortunate that, as we look at that range, it's pointing significantly to the up. You know, and then volume growth, again.

We always have a range on the commodity deck right now we're very fortunate.

As we look at that range is pointing significantly to the app.

And then volume growth again.

Speaker 4: things could transpire a little bit slower on those two areas that we talked about in terms of volume growth. But as we sit here six weeks into the year almost, so things are looking good on that front. But those are the types of things that we think about when you're talking about what would take you to the lower end of the guidance. Commodity dampens quite a bit and producer activity dampens quite a bit. Those are the big ones. There's others, but those are the primary ones you're going to focus on.

Thanks, good could transpire, a little bit slower on those two areas that we talked about in terms of volume growth.

Got.

As we sit here six weeks into the year almost so things are looking good on that front, but those are the types of things that we think about.

When youre talking about what would take you to the lower end of the guidance commodity dampens quite a bit and producer activity dampens quite a bit those are the big ones Theres others, but those are the primary what you're going to focus on.

Speaker 10: Got it. And then just one last one for me. Any significant weather impact that we should think about in the first quarter, given some of the recent storms?

Got it and then just one last one for me.

Significant weather impact that we should think about in <unk>.

First quarter, given some of the recent storms.

Speaker 3: Well, I can't talk to you about the rest of the quarter, but I can talk to until February 10th. And, you know, we obviously had the storm last week. I would say, you know, we were all match given Yuri last year.

Well I can talk to you about the rest of the quarter, but I can talk to until February .

Obviously at the storm last week I would say we were all of that given <unk> last year, but I think it.

Speaker 3: But I think it was more like a normal storm. So yes, you have a little bit of impact from it and a little negative impact, but it's nothing to worry about vis-a-vis what the country saw and the state of Texas saw with Yuri last year. So I would say it was more kind of a normal weather event. Great, thank you very much.

It went well.

More like a normal storm. So yes, you have a little bit of impact from it in a little magnitude of impact, but it's nothing to worry about vis vis what the country saw on the state of Texas saw with jewelry last year. So I would say it was more kind of a normal.

Normal winter event.

Great. Thank you very much thank you Barry.

Speaker 1: And we have a follow-up question from the line of Jeremy Tonnett with JP Morgan. Your line is open.

And we have a follow up question from the line of Jeremy Tonet with Jpmorgan. Your line is open.

Speaker 11: Hi, good morning. Thanks for squeezing us back in. Just a real quick clarification here with regards to the potential for opportunistic buybacks and the thought process whether to point that towards preferreds or common, if you had anything you could share there.

Hi, good morning, Thanks for squeezing us back in.

Just a real quick clarification here with regards to the potential for opportunistic buybacks and the thought process whether to point that towards preferred or common. If you had anything you could share there.

Speaker 3: Yeah, you know, nothing really, really to share other than it is something that we're going to take a look at, as James pointed out, there's a half a billion dollars of excess free cash flow available and, you know, a meaningful double digit distribution raise is, I think, is very important, but there is still a lot of optionality after that.

Yes, nothing really ready to share at our data into something that we're going to take a look at as James pointed out Theres $5 billion that just free cash flow available on <unk>.

A meaningful double digit distribution raise.

I think it's very important but there is still a lot of optionality after that.

Speaker 3: You know, it's going to be a little bit of, hey, what makes most sense? And what do we see from a growth point of view? What do we see from a distribution point of view? How are we executing? And then, you know, where are the units trading? Obviously, with a common and with the preferred, it's all about the cost of capital and what makes most sense in the short run and the long run. And we'll be weighing all of that here in the next number of months and see where we go.

It's going to be a little bit of hey, what makes most sense and how do we see from a growth point of view when do we see from a distribution point of view, how re executing and then already units units trading obviously.

<unk> with the preferreds all of our cost of capital and what makes most sense in the short run in the long run we'll be weighing all of that here in the next number of months and see where we come out.

Speaker 11: Got it. That makes sense. I'll leave it there. Thank you. Thanks, Jeremy. Thanks.

Got it that makes sense I'll leave it there. Thank you.

Jeremy Thanks.

Speaker 1: I'm showing no further questions at this time. I would now like to turn the call back over to our speakers for any closing remarks.

I'm showing no further questions at this time I would now like to turn the call back over to our speakers for any closing remarks.

Speaker 12: I appreciate you guys joining us today. If you have any more follow-up questions, please feel free to reach out. Thanks, have a good day.

I appreciate I appreciate you guys joining us today, if you have it.

Any more follow up questions.

Please feel free to reach out thanks have a good day.

Speaker 1: Please enjoy the conference for today. Thank you for your participation. You may now disconnect.

Ladies and gentlemen that does go conference for today. Thank you for your participation you may now disconnect.

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Speaker 1: Good morning ladies and gentlemen, thank you for standing by and welcome to the DCP Midstream Quarter 4, 2021 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star, then the one key on your touchtone telephone.

Ladies and gentlemen, thank you for standing by and welcome to the DCP Midstream fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press. The Star then the one key on your Touchtone telephone.

Speaker 1: Please be advised today's conference may be recorded. If you recall operations at any time, please press star then zero.

Please be advised today's conference maybe recorded.

Recall offers as any time, please press star then zero.

Speaker 1: I would now like to turn the conference over to our speaker host, Mike Solman. Please go ahead, sir.

I would now like to turn the conference over to our Speaker host Mike Zelman. Please go ahead Sir.

Speaker 12: Thank you. Good morning and welcome to the DCP Midstream fourth quarter 2021 earnings call. Today's call is being webcast and I encourage those listening on the phone to view the supporting slides which are available on our website at dcpmidstream.com.

Thank you good morning, and welcome to the DCP Midstream fourth quarter 2021 earnings call today's call is being webcast and I encourage those listening on the phone to view the supporting slides, which are available on our website at DCP midstream Dot com.

Before we begin I'd like to point out that our discussion today includes forward looking statements.

Results may differ due to certain risk factors that affect our business. Please review the second slide in the deck that describes our use of forward looking statements and for a complete listing of the risk factors. Please refer to the partnership's latest SEC filings.

Speaker 12: We will also use various non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measure in schedules in the appendix section of the slides. Wouter van Kempen, CEO , and Sean O'Brien, CFO , will be our speakers today. And after their remarks, we will take your questions. With that, I'll turn the call over to Wouter. Thank you, Mike, and good morning, everyone. We appreciate you joining us.

We will also use various non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measure and schedules in the appendix section of the slides the other van Kempen, CEO and Sean O'brien CFO will be our speakers today and after their remarks, we will take your questions with that I'll turn the call over to Wouter. Thank you, Mike and good morning, everyone.

Appreciate you joining us.

Speaker 3: Before we cover our Q4 results and our outlook for 2022, I'd like to spend some time reviewing our 2021 performance.

Where we cover our Q4 results and our outlook for 2022 I'd like to spend some time reviewing our 2021 performance.

Speaker 3: Entering the year, we said 2021 would be successful if we could accomplish three things.

Entering the year, we said 2021 would be successful if we could accomplish three things.

Speaker 3: First, control what we can control by maintaining our cost savings and strict approach to capital disincentives.

<unk> control, what we can control by maintaining our cost savings and strict approach to capital discipline.

Speaker 3: Second, reduce our absolute debt and further strengthen our balance sheet.

Reduce our absolute debt and further strengthen our balance sheet and finally accelerated progress on sustainability and emissions reductions.

Speaker 3: Finally, accelerate our progress on sustainability and emissions.

Speaker 3: While we found ourselves battling through a continued global pandemic and the impact of winter storm Yuri, I'm once again extremely proud of our team performance.

While we found ourselves battling through continued global pandemic and the impact of winter storm Yuri I am once again extremely proud of our team performance.

Speaker 3: For the year, the business exceeded all of our financial targets, generating record results for the partner.

For the year the business exceeded all of our financial targets generating record results for the partnership.

Speaker 3: We produced approximately $1.3 billion of adjusted EBITDA and approximately $870 million of DCF, $59 million over the high end of our guidance.

We produced approximately one $3 billion of adjusted EBITDA and approximately $870 million of DCF.

$59 million over the high end of our guidance.

Speaker 3: We also generated a record $500 million of excess free cash flow, which has more than doubled year over year. And we accomplished all of this while maintaining approximately 100% of our 2020 cost.

We also generated a record $500 million of excess free cash flow, which has more than doubled year over year and.

And we accomplished all of this while maintaining approximately 100% of our 2020 cost savings.

Speaker 3: These results highlight the strength of our fully integrated business.

These results highlight the strength of our fully integrated business model, which includes diversified GNP franchise that positions us to benefit from strong commodity environments and supplies volumes to our downstream logistics network.

Speaker 3: which includes a diversified GNP franchise that positions us to benefit from strong commodity environments and supplies volumes to our downstream logistics network.

Speaker 3: During the year, we took critical actions to accelerate our progress towards successfully executing a long-term sustainability strategy.

During the year, we took critical actions to accelerate our progress towards successfully executing our long term sustainability strategy.

Speaker 3: We were recognized with the GPA Environmental Excellence Award for the sixth time. We established a board level.

We were recognized with a GPA Environmental Excellence award for the sixth time.

We established a board level sustainability Committee.

Speaker 3: we added an executive leadership position to lead our sustainability and energy transition effort.

We added an executive leadership position to lead our sustainability and energy transition efforts.

Speaker 3: And we released our second annual sustainability report, which substantially increased our transparency at large.

And we released our second annual sustainability report, which substantially increased our transparency at large.

We had great activity, but more importantly, we delivered great results from 2018 to 2020, we saw a 16% reduction in our total greenhouse gas emissions and a 23% reduction in methane emissions and we fully expect to see those trends continue when we report our 2021 emissions number.

Speaker 3: From 2018 to 2020 we saw a 16% reduction in our total greenhouse gas emissions and a 23% reduction in methane emissions.

Later, this year and as we make continued progress towards accomplishing a 30 by 30 targets.

Speaker 3: We were also able to make significant progress in strengthening our balance.

We were also able to make significant progress in strengthening our balance sheet. We entered the year with the goal of finishing 2021 at four times leverage and I am extremely pleased to report that we exited the year with leverage of three eight times.

Speaker 3: We entered the year with a goal of finishing 2021 at 4.0 times leverage. And I'm extremely pleased to report that we exited the year with leverage at 3.8 times.

This trajectory is enrollment accelerated pace to reach our three five times target and allows us to advance our strategy towards returning additional capital to our unitholders this year.

Speaker 3: We plan to execute the strategy by increasing our distribution in 2022 and pursuing additional capital allocation options, which I will discuss later on the call. But first, I'll turn it over to Sean to walk through our Q4 results and 2022 guidance.

We plan to execute the strategy by increasing our distribution in 2022 and pursuing additional capital allocation options, which I will discuss later on the call, but first I'll turn it over to Shaun to walk through our Q4 results and 2022 guidance.

Speaker 4: Thanks Valder and good morning. On slide four, I'll walk you through our fourth quarter performance and the drivers that impacted our results. For the quarter, we generated $330 million of adjusted EBITDA, $219 million of distributable cash flow, and $122 million of excess free cash.

Thanks, Wouter and good morning on slide four I'll walk you through our fourth quarter performance and the drivers that impacted our results for the quarter, we generated $330 million of adjusted EBITDA $219 million of distributable cash flow was $122 million of excess free cash flow.

Speaker 4: Fourth quarter earnings came in lower than expectations, primarily due to timing and marketing results. However, the earnings power of the business remains intact, and we're seeing improving trends so far this year.

Fourth quarter earnings came in lower than expectations, primarily due to timing and marketing results. However, the earnings power of the business remains intact, and we're seeing improving trends so far this year.

Speaker 4: Going back to the fourth quarter, we realized higher costs in sustaining capital as we proactively managed the Q1 impact of Winter Storm Yuri and shifted spend into the second half of the year. Our L&M business was impacted by the timing of tax payments on Sandhills and Southern.

Going back to the fourth quarter, we realized higher costs and sustaining capital as we proactively manage the Q1 impact of winter storm jewelry and shifted spend into the second half of the year.

Our <unk> business was impacted by the timing of tax payments on sand Hills, and southern Hills, and the very warm start to the winter dampened our marketing results as a limited volatility impacted our trading business and we saw fewer opportunities to optimize our gas and NGL storage assets.

Speaker 4: And the very warm start to the winter dampened our marketing results as limited volatility impacted our trading business and we saw fewer opportunities to optimize our gas and NGO storage assets.

Speaker 4: While NGL and crude prices roped approximately 10% from the third quarter, we did realize a lower natural gas price versus NIMAX due to widening base distribution.

While NGL and crude prices were up approximately 10% from the third quarter, we did realize a lower natural gas price versus Nymex due to widening basis differentials during the quarter, our Permian and DJ Basin G&P regions continued to perform well with Permian volumes up 5% versus the third quarter.

Speaker 4: During the quarter, our Permian and DJ Basin GNP regions continue to perform well, with Permian volumes up 5% versus the third quarter.

Speaker 4: And while our DJ volumes were impacted by the timing of new wells coming online, the asset performed extremely well, delivering higher margins quarter over quarter.

And while our DJ volumes were impacted by the timing of new wells coming online the asset perform extremely well delivering higher margins quarter over quarter.

Speaker 4: I'm extremely pleased with our full year results as we exceeded all of our financial targets.

Extremely pleased with our full year results as we exceeded all of our financial targets and what the month of January behind US we are seeing some positive trends.

Speaker 4: And with the month of January behind us, we are seeing some positive trends.

Speaker 4: Costs and sustaining capital are returning to normalized levels. And strong commodity pricing has provided an uplift to the base business.

Cost and sustaining capital returning to normalized levels and strong commodity pricing has provided an uplift to the base business, creating opportunities to optimize our portfolio like our gas storage asset.

Speaker 4: creating opportunities to optimize our portfolio, like our gas storage asset. Now let's move to slide five and our.

Now, let's move to slide five and our guidance for 2022.

Speaker 4: For the year, we are set up to deliver increased earnings and continue to generate excess free cash.

For the year, we are set up to deliver increased earnings and continue to generate excess free cash flow. Our 2022 adjusted EBITDA range is 135 to $1 5 billion.

Speaker 4: Our 2022 adjusted EVDOT range is $1.35 to $1.5 billion. And our DCF range is $900 billion to $1.01 billion.

And our DCF range is $900 to one point of $1 billion driven by increased producer activity, we expect sustaining capital to increase to $100 million to $140 million and our growth capital range of $100 million to $150 million.

Speaker 4: Driven by increased producer activity, we expect sustaining capital to increase to $100 to $140 million and a growth capital range of $100 to $150 million.

Speaker 4: For the year, we will see increased costs associated with absorbing the impacts of inflation, increased reliability spend to improve runtime and profitability of our assets, and additional spend to ensure we stay in front of regulatory changes. These increased costs are all

For the year, we will see increased costs associated with absorbing the impacts of inflation increase reliability spend to improve runtime and profitability of our assets and additional spend to ensure we stay in front of regulatory changes.

These increased costs are all very manageable and we are committed to maintaining approximately 50% of our post COVID-19 savings over two years after they were realized.

Speaker 4: And we are committed to maintaining approximately 50% of our post-COVID savings over two years after they were realized.

Speaker 4: Even with this uptick, our costs are some of the lowest we've seen in the past decade, and these inputs lead to an excess-free cash flow target of $425 to $585 million.

Even with this uptick or costs or some of the lowest we've seen in the past decade, and these inputs lead to an excess free cash flow target of $425 million to $585 million.

Speaker 4: Our guidance outlined today assumes a 1.56 per unit distribution, but as Valor mentioned, we anticipate using a portion of our excess free cash flow to make a distribution increase later this year.

Our guidance outlined today assumes a $1 56 per unit distribution, but as Wouter mentioned, we anticipate using a portion of our excess free cash flow to make a distribution increase later this year.

Speaker 4: At the bottom of the slide, you can see the commodity price assumptions that drive the midpoint of our guidance ranges and our sensitivities to help you adjust expectations based on your commodity outlook. If the current forward curve holds up, we will realize $140 million of uplift to our outlook and our adjusted EBITDA and DCF would exceed our guidance ranges, demonstrating how well positioned we are to benefit from improved pricing outcomes.

At the bottom of the slide you can see the commodity price assumptions that drive the midpoint of our guidance ranges and our sensitivities to help you adjust expectations based on your commodity outlook. If the current forward curve holds up we will realize $140 million of uplift to our outlook and our adjusted EBITDA and DCF.

Would exceed our guidance ranges, demonstrating how well positioned we are to benefit from improved pricing outlooks.

Speaker 4: Moving on to slide six, I'd like to provide some additional details on our 2022 assumption.

Moving on to slide six I would like to provide some additional details on our 2022 assumptions on the G&P side of the house, we expect overall volumes to increase 2% to 5% driven by growth in our DJ Basin and Permian assets. This growth is partially offset by expected declines in our south and mid con businesses.

Speaker 4: On the GNP side of the house, we expect overall volumes to increase 2% to 5%, driven by growth in our DJ basin and permeant assets.

Speaker 4: This growth is partially offset by expected declines in our south and mid-con business.

Speaker 4: Our favorable GNP outlook feeds the L&M business, and we're assuming 3% to 5% growth on our NGO pipeline.

Our favorable G&P outlook feeds the O&M business, and we're assuming 3% to 5% growth on our NGL pipelines.

Speaker 4: For the full year, we are forecasting DCP operating plans remain in ethane recovery while third-party customers operate and reject.

For the full year, we are forecasting DCP operating plans remain in ethane recovery, while third party customers operate in rejection.

Speaker 4: With expected increases to domestic and international ethane demand, we could see a benefit of around 20,000 barrels per day on sandhills if pricing supports a third-party switch into ethane recovery, which would be another significant tailwind for our outlook.

With expected increases to domestic and international ethane demand, we could see a benefit of around 20000 barrels per day on sand Hills, if pricing supports a third party switch into ethane recovery, which would be another significant tailwind for our outlook.

Speaker 4: Our L&M business will benefit from FERC escalators on NGL pipeline tariffs during the second half of the year, which provides a natural hedge to inflation and will help us mitigate any margin pressure we may face as we work to secure incremental NGL supply.

Our <unk> business will benefit from FERC escalators on NGL pipeline tariffs during the second half of the year, which provides a natural hedge to inflation and will help us mitigate any margin pressure, we may face as we work to secure incremental NGL supply.

Speaker 4: Lastly, we are entering the year with an 82% fee and hedge earnings match.

Lastly, we are entering the year with an 82% fee and hedged earnings mix.

Speaker 4: and will continue to take advantage of strong markets to add additional hedges for the second half of the year and for 2020.

And we will continue to take advantage of strong market stat additional hedges for the second half of the year and for 2023 now.

Speaker 4: Now I'll turn it back to Wouter to provide some additional details on our 2022 strategy and business outlooks. Thanks, Sean. On slide seven, I'll cover some key themes for 2022.

Now I'll turn it back to about or to provide some additional details on our 2022 strategy and business outlooks. Thanks, Sean on slide seven I will cover some key themes for 2022.

Speaker 3: Fundamentals are strong and we continue to see demand strengthening with U.S. shale playing a critical role in supplying international markets.

Fundamentals are strong and we continue to see demand strengthening with U S shale, playing a critical role in supplying international markets.

Speaker 3: Producers remain committed to prioritizing capital discipline and shareholder returns, which supports the near-term commodity output.

Producers remain committed to prioritizing capital discipline and shareholder returns, which supports the near term commodity outlook.

Speaker 3: And there are signs from our customers that activity levels are ramping up, leading to moderate growth.

And our signs from our customers and activity levels are ramping up leading to moderate growth. This constructive environment is driving an uptick in opportunities for DCP.

Speaker 3: This constructive environment is driving an uptick in opportunities for D.C.

Speaker 3: Generally, the projects we have line of sight to are organic bolt-on projects that will provide strong cash-on-cash returns in short payback periods.

Generally the projects, we have line of sight to our organic bolt on projects that will provide strong cash on cash returns and short payback periods.

Speaker 3: Along with advancing these growth opportunities, we plan to make some critical and strategic investments in our business that will strengthen DCP's position for the long term.

Along with advancing these growth opportunities, we plan to make some critical and strategic investments in our business.

Trenton Dcp's position for the long term.

Speaker 3: And lastly, 2022 is an inflection point for DCP as we advance our capital allocation strategy.

And lastly, 2022 is an inflection point for DCP as we advance our capital allocation strategy.

Speaker 3: For the last two years, our strategy was to use every single dollar available to reduce our absolute debt and strengthen our financial position.

For the last two years, our strategy was to use every single dollar available to reduce our absolute debt and strengthen our financial position.

Speaker 3: By the end of 2022, we expect to have reduced our debt by approximately $1 billion since 2020, all while growing our DCF and EBITDA.

By the end of 2022, we expect to have reduced our debt by approximately $1 billion since 2020, all while growing our DCF and our EBITDA.

Speaker 3: These accomplishments provide us a clear path to reach three and a half times leverage on an accelerated timeline, and the ability to meaningfully increase our distribution, which leads me to our capital allocation strategy.

These accomplishments provide us a clear path to reach three five times leverage on an accelerated timeline and the ability to meaningfully increase our distribution, which leads me to our capital allocation strategy.

Speaker 3: We set a target to reach three and a half times leverage to ensure DCP's ability to manage through any commodity environment.

We set a target to reach three five times leverage to ensure dcp's ability to manage through any commodity environment at today's prices. We are looking at a high commodity cycle with Ngls crude and natural gas trading at some of the best levels that we've seen in years.

Speaker 3: At today's prices, we are looking at a high commodity cycle with NGLs, crude and natural gas trading at some of the best levels that we've seen in years.

Speaker 3: Historically, this industry has been considered a long-cycle business, but in recent years, the duration of these cycles has significantly shortened, and we've experienced some very quick transitions that can prove challenging for any balance sheet.

Historically this industry has been considered a long cycle business, but in recent years to duration of these cycles has significantly shortened and we've experienced some very quick transitions. That's kept proved challenging for any balance sheet.

Speaker 3: When we build our long-term plans and do our scenario planning, we do not assume commodities stay at the current levels forever. Instead, we take a disciplined approach to our planning to ensure we're sustainable in any environment.

When we built our long term plans and do our scenario planning, we do not assume commodity stay at the current levels forever and stat, we take a disciplined approach to our planning to ensure were sustainable in any environment.

Speaker 3: March 23, 2020 was a very difficult day as we had to take the necessary steps to manage through the last down cycle and reduce our distribution.

March 23, 2020 was a very difficult day as we have to take the necessary steps to manage through the last down cycle and reduce our distribution.

Speaker 3: 50% reduction to the distribution was very measured relative to what was happening in the market. However, it is a lever that we never want to pull again.

The 50% reduction due to distribution was very measured relative to what was happening in the market, However, and as a lever that we never want to pull again.

Speaker 3: So while you see us continue to de-lever to ensure we stay below 4.0 in a down commodity cycle, we believe that reaching 3.5x will provide financial flexibility to take a much more balanced stand.

So while youll see us continue to delever to ensure we stay below 4.1 of them.

Commodity cycle, we believe that reaching $3 five FX will provide the financial flexibility to take a much more balanced approach.

Speaker 3: And given the significant progress made in Q4, reducing our leverage from 4.1 to 3.8, we are quickly approaching our leverage.

And given the significant progress made in Q4, reducing our leverage from four 1% to $3. Eight we are quickly approaching our leverage goal.

Speaker 3: Once reached, we have multiple options available to us to utilize the half a billion dollars of excess free cash flow we will generate this year and we will execute a sustainable plan to return additional capital to our unit.

<unk> reached we have multiple options available to us to utilize the half a billion dollars of excess free cash flow, we will generate this year.

Execute a sustainable plan to return additional capital to our unitholders.

Speaker 3: In order to deliver immediate value, we believe a meaningful distribution race is an important first step. And we should be able to execute this race as soon as the middle of the year.

In order to deliver immediate value, we believe a meaningful distribution rates is an important first step and we should be able to execute this race as soon as the middle of this year.

Speaker 3: Following this race, our strong, access-free cash flow will afford us the optionality to consider additional capital allocation options, such as distribution increases, opportunistic repurchases, or execute low-multiple and capital-efficient investments that fit our footprint and strengthen DCP's competitive position.

Following these rates are strong excess free cash flow will afford us the optionality to consider additional capital allocation options such as distribution increases opportunistic repurchases are execute low multiple and capital efficient investments that fit our footprint and strengthen dcp's competitive position.

Speaker 3: On slide nine, I'd like to highlight the strengths of the DCP portfolio.

On slide nine I'd like to highlight the strength of the DCP portfolio over.

Speaker 3: Over the last decade, we were able to leverage our GNP footprint to transform the company from a pure play GNP business to a fully integrated midstream provider.

It allows a decade, we were able to leverage our G&P footprint to transform the company from a pure play G&P business to a fully integrated midstream provider.

Speaker 3: Our L&M earnings grew by almost 400% during this time as we built Sandhills, Southern Hills, and we supported the development of Front Range, Texas Express, Gulf Coast Express, and the Cheyenne Connector, all underpinned by strong supply from our GNPM.

Our <unk> earnings grew by almost 400% during this time as we built sand Hills Southern Hills, and we supported the development of front range, Texas Express Gulf Coast Express and the Cheyenne connector, all underpinned by strong supply from our G&P assets.

Speaker 3: Looking to 2022 and beyond, we will continue to advance our value chain position and securing and maintaining NGL supply will be critical to meeting this.

Looking to 2022 and beyond we will continue to advance our value chain position and securing and maintaining NGL supply will be critical to meeting this goal.

Speaker 3: For DCP, key areas of opportunity for supply growth will come from our DJ and our Permian Basin.

For DCP key areas of opportunity for supply growth will come from our DJ and our Permian basin positions.

Speaker 3: Starting with the DJ basin, we've seen incredible growth over the last.

Starting with the DJ Basin, we've seen incredible growth over the last decade.

Speaker 3: Gas volumes are up over 250% and NGL production is up well over 400%.

<unk> volumes are up over 250% and NGL production is up well over 400%.

Speaker 3: This growth has allowed us to drive downstream investments and provide much-needed takeaway optionality for our customers.

This growth has allowed us to drive downstream investments and provide much needed takeaway optionality for our customers.

Speaker 3: With the major infrastructure in place, we will have the ability to support DJ growth by making incremental investments to our gathering system over the next two years.

With a major infrastructure in place, we will have the ability to support DJ growth by making incremental investments to our gathering system over the next two years.

Speaker 3: Depending on producer permitting and local approval of development blends, we see the potential for a larger scale capacity expansion, and we are working with our key producers to ensure the alignment and timing of our blends.

Depending on producer permitting local approval of development plans, we see the potential for a larger scale capacity expansion and we're working with our key producers to ensure the alignment and timing of our plans.

Moving to the Permian Basin, we benefit from a large scale footprint provides exposure to both the Delaware and Midland basins, we've been executing a capital efficient strategy focused on building out our Delaware basin gathering infrastructure, while utilizing excess third party processing capacity.

Speaker 3: we benefit from a large-scale footprint that provides exposure to both the Delaware and Midland basin.

Speaker 3: We've been executing a capital-efficient strategy focused on building out our Delaware Basin gathering infrastructure while utilizing excess third-party processing capacity.

Speaker 3: In the near term, we will continue to execute this strategy to support our customers drilling plants while maintaining flexible processing options.

In the near term, we will continue to execute the strategy to support our customers drilling plans, while maintaining flexible processing options.

Speaker 3: within our Midland Basin footprint. We see a lot of opportunity driven by private producers ramping up their activities.

Within our Midland Basin footprint, we see a lot of opportunity driven by private producers ramping up to our activity levels.

Speaker 3: And with this increased activity, we're well-positioned to participate in Midland Basin growth by executing on some smaller scale projects to enhance our gathering system and fill open capacity.

And with this increased activity, we are well positioned to participate in Midland basin growth by executing on some smaller scale project to enhance our gathering system and fill open capacity.

Speaker 3: As we develop these targeted GNP investments to aggregate supply, this strategy will drive value through our downstream assets, providing steady fee base.

As we develop these targeted GNP investments to aggregate supply this strategy will drive value through our downstream assets, providing steady fee based earnings.

Speaker 3: Moving to slide 10 to close us out. I'd like to reiterate how we will measure our success in 2020.

Moving to slide 10 to close this up.

To reiterate how we will measure our success in 2022.

Speaker 3: As a starting point, it's imperative for us to maintain our focus on operational excellence. Providing safe and reliable operations is critical to the success of DCP and our customers.

The starting point to imperative for us to maintain our focus on operational excellence, providing safe and reliable operations is critical to the success of DCP and our customers.

Speaker 3: Second, we will continue to strengthen our balance sheet and investment grade metrics while returning additional capital to units.

Second we will continue to strengthen our balance sheet to investment grade metrics, while returning additional capital to unitholders.

Speaker 3: Third, we set measurable sustainability targets to improve our emissions performance and increase our workforce diversity.

Third we set measurable sustainability targets to improve our emissions performance and increase our workforce diversity.

Speaker 3: DCP has a record of not just meeting, but exceeding goals. And as we issue our third sustainability report later this year, I expect to announce our continued progress towards these targets.

DCP has a record of not just meeting, but exceeding goals and as we issue. Our third sustainability report later this year I expect to announce our continued progress towards these targets.

Speaker 3: Finally, improving fundamentals are creating some attractive growth.

Finally, improving fundamentals are creating some attractive growth opportunities we will capitalize on these new.

Speaker 3: We will capitalize on these new prospects while maintaining our strategy of capital distribution.

Prospects, while maintaining our strategy of capital discipline, we're investing in our business, which includes our assets and our people to ultimately lead to improved profitability.

Speaker 3: We're investing in our business, which includes our assets and our people, to ultimately lead to improved profitability.

Speaker 3: On our third quarter call, I noted that this is the best setup Sean and I've seen in the roughly 10 years we've been leading the group.

Our third quarter call I noted that this is the best setup Sheldon and I've seen a rough roughly 10 years, we've been leading the company.

Speaker 3: And as we look at today's macro landscape, our improved balance sheet and our record access free cash flow, DCP is set up extremely well in 2022 and beyond.

And as we look at today's macro landscape, our improved balance sheet and a record excess free cash flow DCP is set up extremely well in 2022 and beyond.

Speaker 3: Our team has built a strong track record of executing our strategy and meeting our commitments, and we look forward to delivering exceptional results once again in 2022. With that, we'll open it up to your questions.

Our team has built a strong track record of executing our strategy and meeting our commitments and we look forward to delivering exceptional results once again in 2022.

With that we'll open it up to your questions.

Thank you so much.

Speaker 1: Ladies and gentlemen, to ask a question at this time, you will need to press the star then the one key on your touchtone telephone. You may withdraw your question.

Ladies and gentlemen to ask a question at this time, you will need to let the spud under one key on your Touchtone telephone.

I mean with your question.

Keith.

Speaker 1: Our first question coming from the line of Spiro Dunis with Credit Suisse, your line is open.

Our first question coming from the line of narrow Dennis with Credit Suisse. Your line is now open.

Thanks, Operator, hey, better John .

Speaker 2: Two things I want to start on, just based on your comments and the slides. So one, Valerie, you mentioned the larger scale capacity increases to the system that could be coming. The other item was extending the value chain down towards the export dock. So on expanding the system, can you talk a little bit more about how much of that is actually incorporated in the guidance already, if at all, and then just how you're thinking about the timing of when those assets or expansions could start cash flowing?

Two things I want to start on.

Just based on your comments in the slides. So one Barry you mentioned the larger scale capacity increases so the system that could be coming.

Other item was extending the value chain down towards the export dock. So on expanding the system can you talk a little bit more about how much of that is actually incorporated in the guidance already if at all.

And then just how youre thinking about the timing of when those assets are expansions could start cash flowing and then on extending the value chain down to the dock I know Thats something you guys have talked about in the past as kind of a longer term strategy, but noticed that put into the slides in and around the 2022 outlook context. So just curious if that's becoming kind of a more imminent strategy. We should expect you guys.

Speaker 2: And then on extending the value chain down to the dock, you know, I know that's something you guys have talked about in the past. It's kind of a longer term strategy, but notice that put into the slides in and around the 2022 Outlook context. So just curious if that's becoming kind of a more imminent strategy. We should expect you guys to execute on going forward.

Execute on going forward.

Speaker 3: Yes, Spiro, thanks. Let me take those, you know, starting with the larger scale capital.

Yes, <unk>. Thanks, Let me let me take those.

Starting with the larger scale capital and.

Speaker 3: and processing. That's really what we're talking about, potential additions. What we're looking at is the DJ basin. So a little bit more insight around the DJ basin. As I mentioned, we've seen massive, tremendous growth over the last, you know, call it decade or so, both on the NGL side, on the processing side. We've built a number of different plants there. We are pretty full. And if you look at the DJ basin overall, we're the largest processor, and we're also the ones that are the fullest from our system point of view. So what we're doing is working very closely with our producer customers, who I think are looking through some of the regulatory changes that we've had here in the last couple of years, looking at a little bit more calmer waters, knowing how to work the regulatory construct that we have in place. And within that, they're seeing some really, really nice growth going forward. What it is not going to be, though, is kind of exponential type of growth. So what we see is some pretty good steady growth. Our kind of next, call it year or two, we think we will have to do a number of investments around our gathering system and making sure that we can move the gas that will come to us from our producers to our plants or potentially third party plants and make sure that we kind of deal with that growth. Then what we're looking at, in no way, shape or form is certain yet. It really depends on.

Processing, that's really what we're talking about potential additions.

Looking at the DJ basin, so little bit more insight around the DJ basin as I mentioned, we've seen massive tremendous growth over the last.

Call it decade ourselves from the NGL side on the processing side, we felt a number of different plants. There. We are we're pretty full and so if you look at the DJ Basin overall are the largest processor and we're also in a month stats are.

The fullest from our system point of view. So what we're doing is working very closely with our producer customers, who I think are looking through some of the regulatory.

Changes that we've had here in the last couple of years looking at a little bit more calmer waters, knowing how to work through regulatory.

Construct that we have in place and within that Theyre seeing some really really nice growth going forward, but it is not going to be though is kind of exponential type of growth. So, but we see some pretty good steady growth or kind of next call. It year or two we think we will have to do a number of.

<unk> around our gathering system and making sure that we can move to gas that will come to us from our producers to our plants are potentially third party plants and make sure that we kind of deal with that growth than what we're looking at.

This in no way shape or form as certain yet it really depends on what the producers are going to get from a.

Speaker 3: what the producers are going to get from their big growth programs in 2023, 2024, 2025, 2026. There is a potential for us that we may have to build another plant. We already hold a permit, so that is great. So we can do that. So we are working together with the producers, looking at their plans and say, okay,

From their big growth platform programs in 'twenty, three 'twenty four 'twenty five 'twenty six.

As a potential for us that we may have to build another plant we already hold the permit so that is great. So we can do it up so.

So we are working together with the producers looking at our plans and say okay.

Speaker 3: What is needed in 22? What is needed in 23? Again, mostly around the infrastructure of the of the gathering footprint. And then if you go further out, there may be a potential to build another plant in the DJ Basin, which I think would be an excellent thing if we can, if that comes to fruition. So.

What is needed in 'twenty two what is needed in 'twenty three again, mostly around the infrastructure of the gathering footprint and if you go further out there may be a potential to build another plant in the DJ Basin, which I think would be an excellent thing if we can.

Comes to fruition. So to the question of what is build hidden inherent 22, 2022 is really more focused around the smaller infrastructure type of capital.

Nothing is building for maybe in 234 years, where we have to build some processing capacity.

To your question around well.

Speaker 3: Wellhead to water has been a big part of our strategy. We believe that in the long run, the wellhead to water players will be the main players and the winners in this industry. We've obviously worked ourselves from a strategy from a gathering and processing footprint only to now a company that has residue pipelines, NGL pipelines. We have spread a lot of fractionator interests. And so our L&M or logistics and marketing business now is 60% of our overall earnings profile. And yeah, we absolutely have a desire and believe there is an opportunity for us to go further downstream. How, if, and when that will take place, that is.

I'll have to water well up to water has been a big part of our strategy. We believe that in the long run and wellhead to water players will be.

The main players in the winners in this industry we.

We've obviously worked ourselves from a strategy from a gathering and processing footprint only to now a company that has residue pipelines NGL pipelines.

Speaker 3: We have spread a lot of fractionator interests, and so our L&M or logistics and marketing business now is 60% of our overall earnings profile. And yeah, we absolutely have a desire and believe there is an opportunity for us to go further downstream. How, if, and when that will take place, that is to be seen. Hard for me to comment on at this very stage, but I think...

Spread a lot of fractionator interests, and so our <unk>, our logistics and marketing business now is 60% of our overall earnings profile.

Yes, we absolutely have a desire and believe there is an opportunity for us to go further downstream.

If and when that will take place.

That has to be seen.

Hard for me to comment on that at this very stage, but I think but what we've tried to kind of show you in that slide that you mentioned is how do we look at the future what do we believe strategically needs to happen.

Speaker 3: What we tried to kind of show you in that slide that you mentioned is how do we look at the future, what do we believe strategically needs to happen, and the well-head-to-water strategy is one of them.

The well had to what our strategy is one of those.

Speaker 2: Got it. That's helpful, Culler. Thanks for that, Bowder. Second question.

Got it that's helpful color thanks for that router.

Second question.

Speaker 2: I can't let Ernie's call go by without talking about everybody's favorite topic this season, which is Permian Gas Takeaway. You guys in the past were able to utilize the Guadalupe Pipeline pretty well, take advantage of some wider spreads. I think since then, you've contracted a lot of that capacity.

Kaelin earnings call go by without talking about everybody's favorite topic. This season, which is Permian gas takeaway.

You guys in the past, we're able to utilize the Guadalupe pipeline pretty well take advantage of some wider spreads I think since then you have <unk>.

Contract at a lot of that capacity out so I'm not sure what the tenor of those contracts looks like if that could be coming up for renewal maybe around a good time, but it seems like there is a potential for spreads to maybe break out again in 'twenty three and 'twenty four curious how you see the impact to you and then just more broadly how do you think this gas takeaway issue gets resolved.

Speaker 2: So, I'm not sure what the tenor of those contracts looks like, if they could be coming up for renewal, maybe around a good time, but seems like there's a potential for spreads to maybe break out again in 23 and 24. Curious how you see the impact to you, and then just more broadly, how do you think this gas takeaway issue gets resolved?

Speaker 4: Yeah, I can start with the spread comments, Bira. This is Sean in Nevada making talk about the long term takeaway.

Yes, I can start with the spread comment Spiro. This is Sean it about make it talked about the long term takeaway. So we have taken we took advantage of a few years ago and ran contracts out in two forms obviously, some some financial contracts and then we actually did some physical contracts on Guadalupe.

Speaker 4: We took advantage a few years ago and ran contracts out in two forms, obviously some financial contracts and then we actually did some physical.

Speaker 4: contracts on Guadalupe. They typically went out on average, you know, five years. We don't hedge the whole

Typically went up on average five years, we don't hedge the whole.

Speaker 4: 100% of the capacity. So as you think about our portfolio, it declines in terms of the hedge percentage over the years. We were close to 80, 90% last year. We're probably a little bit on the lower end of that, but similar this year. So there's still some.

100% of the capacity so as you think about our portfolio.

Declines in terms of the hedge percentage over the years, we were close to 80% to 90% last year were probably a little bit on the lower end of that but similar this year. So there's still some that's our strategy as a whole we still leave ourselves some room to take advantage as you mentioned of the <unk>.

Speaker 4: you know, that's our strategy as a whole. We still leave ourselves some room to take advantage, as you mentioned, of the spread widening. And then that diminishes.

Fred widening and then that diminishes.

Speaker 4: in terms of the amount hedged over time. So if you're thinking about 23, 24, you're going to get closer and closer to about 50% hedged based on some of those contracts rolling off. We still, just like we do in our normal business, we'll look at opportunities to hedge that when the spreads are wide. But we definitely have, I think it's a nice balanced approach. We have enough.

In terms of the amount hedged over time, so if youre thinking about 'twenty three 'twenty, four youre going to get closer and closer to about 50% hedged based on that.

Some of those contracts rolling off we still just like we do in our normal business, we will look at opportunities to hedge that when when the spreads are wide, but we definitely have I think it's a nice balanced approach we have enough.

Speaker 4: Fee-based type revenue stream and we leave ourselves, you know anywhere between probably 30 to to 20 percent of upside on

Fee based type revenue stream, and we leave ourselves anywhere between probably 30%.

<unk>.

20% of upside on Guadalupe and then maybe to add to that too Spiro could you just go back to the first residue by new residue buys that came out of the Permian.

Speaker 3: Yeah, and then maybe to add to that, Spiro, if you just go back to the first residue pipe, new residue pipe that came out of the Permian was Gulf Coast Express. And between us and Kinder, we were the co-developers on that pipe. So I think we have a history of looking at the basin and saying, is there an opportunity to develop a pipe or to co-develop a pipe? It's very important to our business. We have a large GNP business. So being able to have our own takeaway on the residue side and the NGL side is something that we're always keenly interested in. You know, for a Permian residue takeaway pipe to happen, you need long-term commitments. And what that will mean is that some producers will have to step up with some type of long-term commitment.

Gulf Coast Express on between US and Kinder, we were co developers on the pipe. So I think we have a history of looking at the basin and saying is there an opportunity to develop a buying for to co develop a five it's very important to our business. We have a large G&P business, so being able to have our own takeaway on the residue.

On the NGL side is something that is because we are always keenly interested in.

For Permian residue takeaway five to happen you need you need long term commitments.

What that will mean is that some producers will have to step up with some type of long term commitment.

Speaker 3: The most significant growth that we're currently seeing in the Birmingham is from the private sector.

The most significant growth that we're currently seeing in the Permian as from the privates the pre.

Speaker 3: The privates historically do not have a tendency to sign up for five or ten-year commitments. That may change. And the question is, are the large publics, are they going to be willing to sign up? So I think that is one thing that...

<unk> historically do not have a tendency to sign up for five or 10 year commitments that may change and the <unk>.

Question is already already large publics are they going to be willing to sign up. So I think that is one thing.

Speaker 3: is to be seen and to be worked. But that is very important. And then lastly, I think what I would like to have to show them like, yes, we have Guadalupe, we have GCX, that's existing steel. Existing steel is always better from a rate point of view than new steel. So I think over time, when we have some contract roll off, maybe that at either GCX at Guadalupe, we will have an opportunity to recontract that probably at significantly higher rates than what we currently have in place. So that's a pretty good outlook for us overall.

It's to be seen and to be work, but that is very important and then lastly, I think what I would like to add to show them. Unlike yes, we have Guadalupe gcs, that's existing steel existing steel is always better from a rate point of view.

The new steel so I think over time, and we have some contract roll off they beat us at either Gtx at Guadalupe we will have an opportunity to re contract thats probably at significantly higher rates than what we currently have in place. So that's a pretty pretty good outlook for us overall.

Speaker 2: Yep, agreed. Okay, go ahead. Helpful as always. Thanks for your time, guys. Thank you.

Yes, great.

So I had outflows as always thanks for the time guys.

Yes.

Sure.

Speaker 1: Our next question coming from the line of Michael Bloom at Wells Fargo. Your line is open.

Our next.

<unk> coming from the line of Michael Blum with Wells Fargo. Your line is open.

Speaker 5: Thanks. Good morning, everyone. I apologize for maybe kind of a naive question to start here, but you show on the slide here the upside to your guidance based on the current forward curve. My question is simply, what's preventing you from hedging more of that and locking that in the current pricing environment?

Thanks, Good morning, everyone.

I apologize for maybe kind of a naive question to start here, but.

You show on the slide here the upside to your guidance based on the current forward curve.

My question is simply like Wyatt.

What's preventing you from from locking in hedging more of that in locking that in the current pricing environment.

And to your numbers for 2022.

Speaker 4: Yeah, Michael, I can start and give you a couple of things, you know, just the process itself, you know, there's always going to be a difference between when we come out with our, you know, guidance and when we approve our budgets, and I know that wasn't your question, but just to give you a little bit, you know, that stuff happens, you know, good six weeks ago, we're locking in getting getting 22 approved. And obviously, guidance is going to be in line with what our formal budget is.

Yeah, Michael I can start and give you a couple of things just the process itself. There is always going to be a difference between when we come out with our guidance and when we approve our budget and I know that wasn't your question, but just to give you a little bit that stuff happens good.

Six weeks ago, we're locking in getting getting 22 approved and obviously guidance is going to be in line with what our formal budget as to your second question.

Speaker 4: To your second question on the $140 million of upside, we are out hedging some of that. I think I showed we're 82%

The $140 million of upside we are out hedging some of that.

I think I showed where 82% fee or hedged. So we continue to take those opportunities to go out and add some hedges I'll remind you that the hedges in terms of another tailwind the hedges that we have on the books for 2022 or at better commodity prices and the hedges we have for 'twenty, one that should make sense to everyone. So the answer.

Speaker 4: fear hedged. So we continue to take those opportunities to go out and add some hedges. I'll remind you that the hedges

Speaker 4: In terms of another tale, when the hedges that we have on the books for 2022 are at better commodity prices than the hedges we had for 2021, that should make sense to everyone. So the answer is yes.

Yes, we are taking advantage we are going out.

Speaker 4: We are taking advantage. We are going out and locking in some of that forward curve for sure, you know, out the curve and adding to our hedge percentage. On the flip side, maybe the last thing I would say is that spot prices are higher than the forward curve. So as we sit here six weeks into the year, we're even benefiting even more than that forward because spot prices are, you know, you typically have backward dated curves.

And locking in some of that forward curve for sure.

Out the curve and adding to our hedge percentage on the flip side.

Maybe the last thing I would say is that spot prices are higher than the forward curve. So as we sit here six weeks into the year, where even benefited even more than that forward because spot prices are you typically have backward dated curve spot prices are stronger. So that's one reason, obviously youre still trying to take advantage in the shorter term although.

Speaker 4: spot prices are stronger. So that's one reason, obviously, you're still trying to take advantage in the shorter term.

Speaker 4: of an even stronger market than what the Ford would show you, but we will take advantage of those curves. You will see us go out and layer on some additional.

Even stronger market than what the forward would show you, but we will take advantage of those curves you will see us go out.

Layer on some additional hedges.

Speaker 3: Yeah, and I think maybe the last one even even to add to that, you never want to be in a position where you hedge 100% of your position, that would be great if we're in a perfectly completely steady business. But, you know, you take events like Yuri, you take a winter storm, like we had a week or two ago, or last weekend, in Texas, you know, there's all kinds of upsets that can happen. And you don't want to want to be at 100% hedged situation

Yes, I think maybe the last one even even to add to that you never want to be in a position where you hedge 100% of your position that would be great. If we're in a perfectly completely steady business.

If you take events like Youri think of winter storm like we had a week or two ago, our last weekend in Texas.

I'll kind of upsets that can happen and you don't want to want to be at 100% hedged situation either.

Speaker 14: Got it, that makes sense. Second question I just wanted to ask was on CapEx.

Got it that makes sense.

Second question I, just wanted cash goes on.

Thanks.

Speaker 14: Really on both, but particularly on sustaining CapEx, I went back and looked, I mean, the last time you were at $100 million or this level or higher was literally like 2018, it's been much lower the last few years, so I just wanted to understand what's going on there, and then just what is in the growth capital.

On both but particularly on sustaining capex.

So I went back and looked I mean.

The last time, you were at 100 million or this level or higher was literally like 2018, it's been much lower in the last few years. So I just wanted to understand what's going on there and then just what is the gross capital numbers there.

Speaker 4: Yeah, so on the sustaining side, Michael, you know, it is an uptick and your math is right, still pretty low levels if you go back, you know.

Yes, so on the sustaining side Michael.

It is an uptick in your math is right, it's still pretty low levels. If you go back.

Speaker 4: 10 years. But what you're seeing on that, there's two things in general. One, obviously, the Permian and the DJ that are covered some of the short term.

10 years, but what youre seeing on that Theres two things in general one obviously, the Permian and the DJ better covered some of the short term.

Speaker 4: trends that we really like what we're seeing there. So that does require us to go out and connect to gas.

Trends that we really like what we're seeing there so that does require us to go out connected gas I think that's a strong thing.

Speaker 4: I think that's a strong thing, you know, in terms of product replacement. So we're seeing some increases in product replacement. You are seeing, as you think about 2022, you know, the applicable increases in the margin and the volumes tied to that. We talked about those two areas being up 5 to 7%.

In terms of product replacement. So we're seeing some increases in product replacement you are seeing if you think about 2022.

The applicable increases in the margin and the volumes tied to that we talked about those two areas being up 5% to 7% on the margin side. So thats PR I think that's a good trend obviously that's it.

Speaker 4: on the margin side. So that's PR. I think that's a good trend. Obviously, it is higher than maybe the last couple of years, but it's still, in my mind, very disciplined in terms of the increases we're seeing there. The other thing that hits sustaining, and I talked about it a little bit in the...

It is higher than maybe the last couple of years, but it's still in my mind very disciplined in terms of the increases we're seeing there the other thing that hits, the sustaining and I talked about it a little bit.

Speaker 4: in our remarks, is the investments in reliability, the investments in some of the regulatory changes that are coming down the path. So we are, you know, it's a higher reliability year for us. We put a bunch of new assets in about three years ago in the DJ, some very large.

In our remarks is the investments in reliability of the investments in some of the regulatory changes that are coming down the path. So we are it's a higher reliability year for us we put a bunch of new assets in about three years ago in the DJ some very large.

Speaker 4: assets, those require maintenance, they're sort of on a three-year cycle, so we're going to be investing in some of that. And then, you know, with a lot going on the regulatory front, mega rule, emissions, things of that nature, we're investing.

Assets those require maintenance therapy, so Roe on a three year cycle.

So we're going to be investing in some of that.

And then with a lot going on the regulatory front Mega rule emissions things of that nature, we're investing and spending some money on those assets as well or those types of.

Speaker 4: and spending some money on those assets as well, or those types of investments.

Speaker 4: The other thing I would point out is those actually do increase top line returns, right? The more reliable we run, the more gas we keep in the pipeline, the more money we make. So I don't want you to think that those sustainability investments are not driving.

Investments the other thing I would point out as those actually do increased top line returns right. The more reliable were run rerun the more gas we keep in the pipeline that where money we would make so I don't want you to think that those sustainability.

<unk> are not driving revenue increases either but those are the primary drivers of the sustaining but as you think about growth of outer kind of covered it earlier again right back to those two areas.

Speaker 4: revenue increases either. But those are the primary drivers of the sustaining. As you think about growth, Valor kind of covered it earlier. Again, right back to those two areas.

Speaker 4: You know, outside of just sustaining the volumes, we are seeing some opportunities with in particular producers in the Delaware Basin that are investing more in 2022 than they did in prior years. So we're adding some volume growth and going out and spending some money. That's going to be compression. That's going to be gathering. That's going to be connecting to wells. And the same thing in the DJ.

Outside of just sustaining the volumes, we are seeing some opportunities with.

In particular producers in the Delaware basin that are investing more in 2022 than they did in prior years. So we're adding some volume growth and going out and spending some money that's going to be compression thats going to be gathering thats going to be connecting the wells.

The same thing in the DJ <unk>.

Speaker 4: exactly the same type of investments, not the big plants that Valor talked about down the road, but we do see an uptick in growth. Again, I see that as a very positive thing. Our two best return regions are the DJ and the Permian. If you think about sustaining and growth, that's where we're investing money in 2022.

Exactly the same type of investment is not the big plants that wouter talked about down the road, but we do see an uptick in growth again.

That is a very positive thing our two best return regions are the DJ and the Permian and Thats, where we are.

If you think about sustaining and growth, that's where we're investing money in 2022.

Great. Thank you very much.

Michael.

Speaker 1: Our next question coming from the line at Tristan Richardson with TruSecurities. Your line is open.

Our next question coming from the line of Kristen Richardson with <unk> Securities. Your line is open.

Hey, good morning, guys.

Speaker 15: I appreciate those comments on the DJ around investing your assets and the processing landscape there. And, Sean, I think you may have even touched on it in the previous question, but just on the Permian, you know, Vowter, you made BCP's position very clear over the past several years. But just on excess third-party processing.

Just I appreciate those comments on the DJ around investing in your assets and the processing landscape, there and Sean I think you may have even touched on it in the previous question, but just on the Permian.

Router, you may dcp's position very clear over the past several years, but just on access third party processing.

Speaker 15: You're seeing some of your peers, you know, maybe add a plant here and there to the medium-term schedule. Do you see a lot of latent third-party capacity still available, or at some point do we see a tightening begin, and does CCP start to look at internal project developments there?

Youre seeing some of your peers.

Maybe at a plant here and there to the medium term schedule D. C. A lot of latent third party capacity still available or at some point do we see a tightening begin in DCP start to look at internal project developments there.

Speaker 3: Yeah, so, you know, Midstream is a regional business, correct? It's a real estate business, so it all depends on location. So there obviously are some areas with some profiles where people say, hey, I'm short and I need to build something. And then there are other areas where you do have some overcapacity. So we see here in kind of the shortish term and whatever short means, you know, 18 months or so, we definitely still see some opportunities for us to utilize a third party. And then the question is, is there an opportunity to do something different in the longer run? And, you know, we'll continue to look at that very, very closely. But, you know, I don't see a situation right here, right now, where we're sitting and saying, hey, everything is chock-a-block full from a GNP point of view in the Permian, and therefore you got to pivot and go do something else. We do, I think, in general, we started our...

Yes.

Midstream is a is a regional business correct, it's a real estate business. So it all depends on location. So there.

Obviously are some areas with some profiles, where people say, hey, I'm short and I need to build something and then there are other areas, where you do have some overcapacity. So we see here in kind of the Shortish term and whatever short means 18 months or so we definitely still see some opportunities for us to utilize.

A third party and then the question is is there an opportunity to do something different in the longer run.

<unk>.

We will continue to look at that very very closely but no.

I don't see a situation right here right now, where we're sitting and saying Hey, everything is chockablock full from a G&A point of view in the Permian and therefore, you're going to pivot and go do something else.

We do I think Youre in general we started our.

Speaker 3: supply long capacity short strategy kind of in 2019. So that is, you know, a good three years ago. And at some moment, there is gonna be a change to that where you say, hey, I need to build my own some additional infrastructure that I own myself. I think in general, that would be a good thing, if that's the case. And as I said earlier, Mike, probably we see some of that on the horizon in the DJ basin. And, you know, depending on where things go in the Permian, we may have to go the same route as well.

Supply long capacity short strategy kind of in 2019.

Three years ago.

At some moment there is going to be a change to that are you, saying, hey, I need to build my own some additional infrastructure that I own myself I think in general that would be a good thing.

If that's the case.

As I said earlier, Mike probably we see some of that on the horizon in the DJ Basin.

Depending on where things go in the Permian, we make EMEA and we may have to go the same route as well.

Speaker 15: And then just on potential tailwinds this year, it makes sense what you guys have laid out just from a commodity standpoint, but then just on the third-party ethane opportunity, maybe just give us a scale of what that could look like this year if you do see an incremental pull.

I appreciate it and then just on potential tailwind this year.

It makes sense, what you guys have laid out just from a commodity standpoint, but just on the third party ethane opportunity.

Maybe just give us a scale of what that could look like this year. If you do see an incremental pool.

Speaker 4: Yeah, Tristan, I mean, we've been in, and I think you're alluding to it, we've been in, our plants, our assets have been in recovery for quite a while now, for a couple of years. You know, it's off and on with the third parties. Obviously, third parties have different downstream contracts, they have different downstream economics.

Yes, Tristan I mean, we've been in and I think you're alluding to what we have been in our plants our assets a bit of recovery for quite a while now for a couple of years.

Off and on with third parties, obviously third parties have different downstream contracts they have different downstream economics.

Speaker 4: You know, we're very fortunate we have the ICC, we're looking at those decisions on a real-time basis, and you see us optimizing that. But bottom line, we did not see a lot of third-party recovery last year. Maybe a slight uptick in Q4, and as I indicated, we kept that trend in our guidance for 2022.

We're very fortunate we have the ICC, we're looking at those decisions on a real time basis, and Youll see us optimizing that.

But bottom line, we did not see a lot of third party recovery last year.

Maybe a slight uptick in Q4 and as I indicated we kept that trend in our guidance for 2022.

Speaker 4: You know, and we, I know we've seen the frack spread kind of increase and obviously the decision, you know, that these guys run the models they run are more than just the frack spread, but at least that's going our way. If we do see

And we I know, we've seen the frac spreads kind of increase and obviously the decision that these guys run the models. They run there are more than just the frac spread but at least that's going our way if we do see.

Speaker 4: third-party plants go into recovery mode, we think somewhere in that 20,000 barrel per day uplift, you know, and obviously that would be for the full year. And that's substantial, that could be $20, $30 million of additional margin if we see that. So that's a great tailwind. And so far, the fundamentals are pointing to that. And the last thing I would say is we do work with individual producers to try and incentivize.

Third party plants go into recovery mode, We think.

Somewhere in that 20000 barrel per day.

Uplift.

And then obviously that would be for the full year and that's substantial that could be 20 $30 million of additional margin. If we see that so that's a great tailwind.

So far the fundamentals are pointing to that but.

But we will.

And the last thing I would say is we do we do work with individual producers to try and incentivize them.

Speaker 4: As I mentioned, we didn't see a ton of that last year, but maybe some more opportunities this year, so it could be a good tailwind for the company. Appreciate it.

As I've mentioned, we didn't see a ton of that last year, but maybe some more opportunities. This year. So it could be a good tailwind for the company.

Appreciate it thank you guys very much.

Thanks Tristan.

Speaker 1: Our next question coming from the line of Jeremy Tonnet with J.P. Morgan.

Our next question coming from the line of Jeremy Tonet with Jpmorgan. Your line is open.

Speaker 6: Hi, everyone. This is Dan Walker on for Jeremy. I just have a couple of questions. The first is on the tax payments on Sandhills and Southern Hills that you pointed out in the release and in your prepared remarks. Could you quantify those for us? And I guess by timing, when were those payments expected? And does this mean that these tax payments were pulled forward? And if so, would that have positive implications for 1Q or this year? Yeah.

Hi, everyone. This is Dan Walker on for Jeremy I, just have a couple of questions. The first is on the tax payments on sand Hills and southern Hills that you.

Pointed out in the release in your prepared remarks could you quantify those for us.

I guess my timing when were those payments expected and does this mean that these tax payments were pulled forward and if so would that have positive implications for <unk> ore or this year.

Yes, Dan.

Speaker 4: You know, the way I would think about it in as a whole, we talked about sort of the Q4, you know, and areas where we had some timing and maybe a mess.

The way I would think about it.

As a whole we talked about sort of the Q4.

And in areas, where we had some timing and may be a miss.

Speaker 4: The cash distributions from our pipelines, essentially, we had zero. If you really look at it, they were zero in Q4. Typically, they're running $20 to $30 million a quarter. Two-thirds or more of that was the tax payment. So you're talking about maybe $24, $25 million.

Cash distributions from our pipelines essentially we had zero if you really look at it there were zero in Q4, typically they're running 20% to $30 million a quarter.

Two thirds or more of that was the tax payments. So you don't have maybe $24 million to $25 million.

Speaker 4: I wouldn't say that we're pulled forward, you know, typically we pay them either in late.

I Wouldnt say that were pulled forward typically we pay them either in late December or in early January .

Speaker 4: December or in early January . So it's just the, you know, and obviously, if you think about 2020 being a COVID year, things were a little bit slower. That payment didn't, you know, didn't happen in Q4 of 20, going into 21, it happened in 21. So we actually made that payment in Q1. And then obviously things, you know, back a little more efficient. We made those payments in Q4 late. So to your point, that is a tailwind. You know, that's why we call it timing. I mean, you're gonna pay your taxes no matter what, but that is something that obviously we paid late last year so we won't have that, you know, the majority of that payment occurring in Q1.

So just and obviously as you think about 2020 being a COVID-19 year things were a little bit slower that payment didn't didn't happen in Q4 of 'twenty going into 'twenty. One it happened in 'twenty. One so we actually made that payment in Q1, and then obviously things.

Back a little more efficient we made those payments in Q4.

So to your point that is that is a tailwind that's why we call. It timing I mean youre going to pay your taxes are taxes, no matter, what but that is something that obviously, we paid late last year. So we won't have that the majority of that payment occurring in Q1 of this year and again setting us up pretty good.

Speaker 4: of this year and again setting us up pretty good for the quarter.

For the quarter.

Speaker 6: Okay. Okay. Got it. Thanks. And then the second question we had was just on the costs versus top line. I mean, you talked about the escalators in the second half kicking in and cost reductions that were largely, you know, you kind of held the line in 21. But what kind of OPEX pressures are you seeing, if any, and what are you budgeting? What's kind of baked in, I guess, for the 22 guide? Yeah, in terms of...

Okay. Okay got it thanks and then the second question. We had was just on the the costs versus top line. I mean, you talked about the escalators in the second half kicking in in cost reductions that were largely.

Yes.

You've kind of held the line in 'twenty one but.

What kind of Opex pressures are you seeing if any and what are you budgeting, what's kind of baked in I guess for the 22 guide in terms of pressures.

Speaker 4: You know, everyone's dealing with inflation, you've got the great resignation, so the company's doing some really smart things around investing in our people. I think those are prudent. I think, you know, the company's done an amazing job. I'll reiterate some of the things that I mentioned. I mean, we cut $150 million out in 2020, obviously during COVID. You know, we held on to all of that. We stayed flat in 21. Very few companies did that. And then again, we're going to hold on to half of that, you know, two years later. But the pressures to your question, definitely some inflation, definitely some investments in our people. You heard me, I mentioned we're taking this opportunity to, I think it's

Everyone's dealing with inflation, you've got the great resignation. So the company is doing some really smart things around investing in our people I think those are prudent I think.

The company has done an amazing job I'll reiterate some of the things that I mentioned I mean, we had $150 million out in 2020, obviously during COVID-19 .

We held on to all of that we stayed flat in 'twenty one.

Very few companies did that and then again, we're going to hold on to half of that two years later, but the pressures to your question definitely some inflation definitely some investments in our people and you heard me I mentioned, we're taking this opportunity to I think we.

Speaker 16: You were in a very...

We're in a very productive fundamental environment, I think we're going to invest in our assets.

Speaker 4: productive, fundamental environment, I think we're going to invest in our assets.

Speaker 4: And on the regulatory front, on the ESG front, you'll see us get ahead of a few things there. I think those are all prudent.

And on the regulatory front on the ESG front Youll see us get ahead of a few things there I think those are all prudent.

Speaker 4: investments, and we're still holding on to half of those $150 million savings that we delivered two years ago. So, I think they're all manageable. I think they're things that we clearly have our eye on, and then I think you highlighted something important.

Investments and we're still holding on to half of those are $150 million savings that we delivered two years ago. So.

I think they're all manageable I think there are things that.

We clearly have our eye on and then I think you highlighted something important that we do as a company have offsets to inflation.

Speaker 4: that we do as a company have offsets to inflation. Commodity is a great one. It tends to correlate with inflation. And we talked about the $140 million of forward curve uplift.

Commodity is a great one tends to correlate with inflation and we talked about the $140 million of forward curve uplift.

Speaker 4: And then in the second half of the year, we do have those escalators that kick in on some of our GNP contracts, but the bigger ones are tied to our pipelines and those are meaningful as well. So the good news is we have good offsets to inflation.

And then in the second half of the year, we do have those escalators that kick in on some of our G&P contracts, but the bigger ones are tied to our pipelines and those are meaningful as well. So the good news is we have good offsets to inflation.

Speaker 4: But those are some of the pressures we're seeing. I think we're doing a better job than many in terms of trying to mitigate some of that.

But those are some of the pressures we're seeing I think I think we're doing a better job than many in terms of trying to mitigate some of those maybe Dan just one quick kind of macro unlikely all saw the numbers. This morning. So.

Speaker 3: Yeah, maybe Dan, just one quick kind of macro. I'm like, we all saw the numbers this morning. So, you know, seven and a half percent inflation, the highest we've seen in four decades.

Seven 5% inflation the highest we've seen in four decades.

Speaker 3: I can guarantee you that we will beat those numbers. You're not going to see our numbers go up by 7.5 percent. We're going to continue, as Sean mentioned, to invest in our business. Not only are we going to beat 7.5 percent by quite a bit, we're also going to, on top of that, invest in our business. I think we have a great track record of running a tight ship, making sure that we deal with costs really, really well. Sean mentioned two years after the big COVID savings, we held on to 100 percent of those savings. If you start giving a little bit back in an environment like we are today, I think that is a pretty good place to be, and you're still going to be well below all those cost levels that you were two years ago, or even well below cost levels that we were four or five years ago while we're running a lot more assets, billions of dollars more assets. We're running them more profitable, more reliable, safer, and with lower emissions. So, net-net, I think around the cost story, it continues to be a really, really great story.

I can.

I can guarantee you that we will beat those numbers are not going to see our numbers should go up by seven 5%.

We're going to continue as Sean mentioned to invest in our business. So not only are we going to be to seven 5% by quite a bit.

So kind of on top of that invest in our business. So.

Think we have a great track record of running a tight ship, making sure that we deal with costs really really well as Sean mentioned two years after.

Big Covid savings, we held on to 100% of those savings if you start giving a little bit back.

An environment like we are today I think that is a pretty pretty good place to be and you're still going to be well below all of those.

Cost levels that you're more two years ago, or even well below cost levels that we were four or five years ago, while we're running a lot more SaaS billings dollars more assets, we're running a more profitable more reliable safer.

Lower emissions. So net net I think around the cost story. It continues to be a really really great story.

Speaker 6: All right. Thanks a lot. Appreciate it. Thanks, Dan.

Okay, alright, thanks, a lot I appreciate it.

Thank you Dan.

Speaker 1: And as a reminder, ladies and gentlemen, to ask a question, please press star 1. Our next question coming from the line up, Michael Kusimano from Pickering Energy Partners. Your line is open.

And so my ladies and gentlemen to ask a question. Please press star one our next question coming from the line of Michael Cusimano from Pickering Energy Partners. Your line is open.

Without any Sean.

Meaning.

Speaker 7: Looking at the mid-con, you point to a moderate decline there.

Looking at the meantime, you point to moderate decline there.

Speaker 7: I'm curious if that's consistent with your view on the basin as a whole, or just your system.

That's consistent with your view on the basin as a whole and just your system I know, it's dependent Gpus and so can you just talk about what youre seeing now.

Speaker 4: Yeah. So a couple of things, Michael, on the midcontinent. It's actually a slightly favorable story. So we are seeing, as we gave the guidance for 2022, we're seeing modest declines. When I look back at 2021 and even 2020, our portfolio has been outperforming the base in declines.

Yes, so a couple of things Michael in the Midcon Thankfully.

Slightly favorable stores. So we are seeing.

As we gave the guidance for 'twenty, two we're seeing modest modest declines.

When I look back at 'twenty, one and EBIT 20.

Our portfolio has been outperforming.

The basin declines so we've seen we've actually I guess back.

Speaker 4: you know, backed into some increases in market share. So we've been able to do some interesting things. You may recall we've consolidated a bunch of plants there. We've, we're taking a lot of the gas to our most efficient plants. That's, that's increasing our earnings. You know, one of our most new and most technologically driven plants. So.

Backed into some increases in market share. So we've been able to do some interesting things you may recall, we've consolidated a bunch of plants there we.

We're taking a lot of the gas to our most efficient plants, that's increasing our earnings one of our most new and most technologically driven plants. So I think it could be in 'twenty. One it was a slight positive surprise to the company.

Speaker 4: I think it could be, you know, in 21, it was a slight positive surprise.

Speaker 4: to the company. I think slight declines. I don't think you're going to find anyone that's seeing big growth out of the mid-continent, but we have been slightly beating.

And I think slight declines I don't think you're going to find anyone that seeing big growth out of the mid continent, but we have been slightly beating in my opinion, what I see we've been beating the trends of the of the basin. So kudos to the team for that but I'll remind you.

Speaker 4: in my opinion, what I see, we've been beating the trends of the basin. So kudos to the team for that. But I'll remind you, you know, it's a good area, but our best, you know, profitable, most.

It's a good area, but our best.

Profitable most.

Speaker 4: highest return areas are the two that we are seeing some growth back to the Permian and the DJ. But overall, a decent story in the mid-continent when considering the environment.

Highest return areas of the two that we.

We are seeing some growth back to the Permian and the DJ but overall a decent story in the mid continent, when considering the environment.

Got it that's helpful. That's all for me. Thank you.

Thanks.

Speaker 1: Our next question coming from the line of James Carrick with U.S. Capital Advisors. Your line is open.

Our next question coming from the line of James Carreker with U S Capital Advisors. Your line is open.

Speaker 8: Hey guys, thanks for the question. Appreciate your comments about returning additional capital to equity, but just kind of curious if you have any thoughts around that plus or minus $500 million of excess free cash flow.

Hey, guys. Thanks for the question.

Appreciate your comments about returning additional capital to equity, but just kind of curious if you have any thoughts around that.

Plus or minus $500 million of excess free cash flow.

Speaker 8: you know a ten percent raise additional thirty million dollars how do you think about

A 10% raise additional $30 million I guess, how do you think about.

Speaker 8: allocating the rest of that for this year and then, you know, assuming you'll have free cash flow in 23 and beyond.

Allocating the rest of that for this year and then assuming youll have free cash flow in 'twenty three and beyond.

Speaker 3: Yeah, no, James, thanks for that. Hey, no good deed goes unpunished. And, you know, I think the way we look at this, you know, we have an all of the above.

Yes, James Thanks for that no good deed goes unpunished.

I think the way we look at this.

We have all of the advanced got.

Speaker 3: kind of broad menu of opportunities that are available to us.

<unk> got enough broad menu of opportunities that are available to us.

Speaker 3: I want to take people back, our goal was to be at 4.0 at the end of 2021. We were at 4.1 at the end of the third quarter, at 3.8 at the end of the fourth quarter. So massive improvement. So what we kind of said is like, you know what, there's an opportunity to start accelerating capital return to unit holders instead of the second half of 2022. Let's kind of start targeting the middle. And where we believe we need to target is with the distributions. At the same time, we're going to continue to have a commitment to the balance sheet. So we've got to get first from 3.8 to 3.5. And then what we always say is that, hey, 3.5 should really be a mid-cycle type of leverage. I think at the current prices that we're seeing, we're probably above mid-cycle. So you're going to continue to see additional dollars go back to the balance sheet. So we continue to lower our overall leverage so that if things go the other direction and we get into some type of a lower cycle, which at some moment we will, the balance sheet is still ironclad and we can still run a really, really good business. So.

Think people back we our goal is to be at four <unk> at the end of 'twenty 2021, we were at four one at the end of the third quarter at three eight at the end of the four corners. So a massive improvement so what we can to service like Theres, an opportunity to start accelerating capital return.

To unit holders instead of the second half of 2022, and lets kind of start targeting the middle and we believe we need to target. This with the distributions at the same time, we're going to continue to have a commitment to the balance sheet. So we've got to get first from three eight to three and a half and then what we always say is that the phase III and the half should really.

B a mid cycle type of leverage I think at the current prices that we're seeing we're probably above mid cycle. So youre going to continue to see additional dollars goes back to the balance sheet. So we continue to lower our overall leverage so that if things go the other direction and we get into some type of a lower cycle, which at some moment we will.

The balance sheet still iron clad.

And we can still run a really really good business. So.

Speaker 3: But at the same time, once we hit that 3.5, it's going to be kind of a dual-pronged approach. Raise the distributions and continue to have dollars go to the balance sheet. At that time, we're, I think, also having a much kind of broader view around what else is possible at that time. You know, we spoke a lot about, hey, some growth in the DJ, some growth in the Permian. You know what? That's things that you want to do as long as it is good growth and it's

At the same time once we hit that three and a half it's going to be kind of a dual pronged approach race of distributions and continue to have thoughts go to the balance sheet at that time, where I think also having a much broader view around what else is possible at that time, we spoke a lot about some growth in the DJ some growth in the Permian.

Thats thinks that you want to do as long as it is good growth.

Speaker 3: growth that makes a lot of sense. And I think we have a pretty good history in both the DJ and the Birmingham of putting profitable growth in place. Additional raises is something that could be on the table and then things around your common or your preferred. Is that something that you wanna put on the table? All of those things we're gonna be looking at here over the next number of months and the next number of quarters. What is available? What makes sense? Why are we trading? So from a cost of capital, what makes most sense? I think the good thing and the takeaway is we're in a great position. We're gonna be at three and a half leverage here. You know, sometime in the middle of this year, we're gonna raise the distribution, start putting cash back to unit holders. And then on top of that, we have a tremendous amount of option. As you pointed out, there's an unbelievable amount of excess free cash that's still available. And we're gonna see what the smartest thing is to do with that.

It's growth that makes a lot of sense and I think we have a pretty good history in both the DJ and the Permian off of putting profitable growth in place.

Additional raises as something that could be on the table and then things around common or you prefer to start something that you want to put on the table all of those things we're going to be looking at here over the next number of months in the next number of quarters. One is available and what makes sense why are we trading so from a cost of capital and what makes most sense.

I think the good thing and a takeaway is we're in a great position, we're going to be at three and a half leverage here sometime in the middle of this year, we're going to raise the distribution start putting cash back to unit holders and then on top of that we have a tremendous amount of option. As you pointed out there is an unbelievable amount of excess free cash flow is still available.

And we're going to see what the most.

Hardest thing is to do with us.

Speaker 8: Thanks for those comments, and then maybe as a follow-up,

Thanks for those comments and then maybe as a follow up.

Speaker 8: Just any comments about, I guess, M&A, kind of on either side. One of the partners in GCX just sold out a piece of theirs that, you know.

Just any comments about I guess M&A kind of on either side.

One of the partners and Gtx just sold out a piece of there is it.

<unk>.

Speaker 8: eight hundred fifty million dollars is that a valuation that's interesting to you and you know on the flip side

$850 million is that a valuation that's interesting to you and then on the flip side.

Speaker 5: Do you see a use of free cash flow of going out and being strategic and acquiring any assets, or maybe both, selling and buying? Great questions. I think earlier in the call we spoke about GCX a little bit. We were the original developer. For us, massively strategic assets. We like it. We like the earnings power. It's core to the business. We spoke a little bit about wellhead-to-water strategy. Well, that's not only NGL pipelines. It's also residue gas pipelines.

Do you see a use of free cash flow of going out and being strategic in acquiring any assets or maybe both.

Hi.

Great Great questions I think earlier in the call we spoke about <unk>, a little bit Liberty original developer.

For us massively strategic assets and the like it we like the earnings power, it's core to the business.

Poke a little bit about a wellhead to water strategy well, that's not only NGL pipeline. So it's also a residue gas pipelines. We have <unk>, we have Guadalupe we have to Cheyenne connector that we have on the DJ basin. So all of those fit really nicely into our system. We have a strong outlook for the Permian basin, we have strong outlook for <unk>.

Speaker 3: We have GCX, we have Guadalupe, we have the Cheyenne Connector that we have out of the DJ Basin. So all of those fit really nicely into our system. We have a strong outlook for the Permian Basin. We have a strong outlook for GMP assets and our gas needs to find a way to go to market. And so owning your own pipes and infrastructure, paying yourself is always a good thing. So we do have a call option on GCX. You know, we're going to review that. We have some time to review that. The other partners have the same. We are not anticipating to be a seller of GCX, of our interest in GCX. Then in broader M&A, you know, we do believe that the market will continue to consolidate. We went from this high growth kind of decade.

And our gas needs to find a way to go to market and so owning your own box and infrastructure paying yourself is always a good thing. So we do have call option on gcs.

We're going to review that we have some time to reviewed at the auto partners have the same.

We are not anticipating to be a seller of gtx.

Of our interest in <unk> and broader M&A.

We do believe that the market will continue to consolidate we went from this high growth kind of decades to a much more mature industry, where we are now lower growth.

Emily leads to M&A cycle, starting up we've seen some of that in 2020 , one think youre going to see more of it in 'twenty two 'twenty three.

M&A is not a strategy, it's a way to execute your strategy. If there is an opportunity to do something from our sites, where we can expand the business in a in a logical way and either use a strong balance sheet, our strong currency and do something.

We believe that strategically we will make the business stronger for the next five years in like a decade, we're obviously going to look at that.

Speaker 9: Thank you.

Thank you.

Thanks, James James.

Speaker 5: Our next question coming from the line of Gabe Mooring with Mizzou Health Securities. Your line is open. Hey. Good morning, everyone. Just quick ones for me on the capital allocation question following up on James' question around whether getting to investment grade is a priority at this point and to what extent that may or may not be a gating factor to capital return or going below the three and a half times leverage target? You know, Gabe, Walter here, for us, the number, the three and a half, and the investment grade rated metrics, that's the most important thing. If the rating agencies then are going to follow suit, that would be really nice.

Speaker 1: Our next question coming from the line of Gate Monitoring with Mizzou Health Security. Your line is open.

Our next question coming from the line of Gabe Moreen with Mizuho Securities. Your line is open.

Speaker 5: Hey, good morning, everyone. Just quick ones for me on the capital allocation question following up on James's question around whether getting to investment grade is a priority at this point and to what extent that may or may not be a gating factor to capital return or going below the three and a half times leverage target.

Hey, good morning, everyone.

Just a quick one for me on the capital allocation question following up on James's question around weather getting to investment grade.

It is a priority at this point and to what extent that may or may not be a gating factor to capital return are going below the three five times leverage target.

Speaker 3: You know, Gabe, Walter here, for us, the number, the three and a half and the investment grade rate of metrics.

Okay Walter here.

For us the number the three and a half and the investment grade ratings metrics.

Speaker 3: That's the most important thing. If the rating agencies then are gonna follow suit, that would be really nice, okay? But for us, it's not something where we're saying that.

That's the most important thing if the rating agencies are going to follow suit that would be that would be really nice okay, but for us, it's not something where we're saying that if the rating agencies are going to move the goalpost from us simply say, okay, we're going to hold off.

Speaker 3: if the rating agencies are going to move the goalposts on us that we say, okay, we're going to hold off on raising the distribution that three and a half is still kind of a gating item for us. And, you know, we would like to be investment grade rated. We think we deserve it. Our outlook deserves it. I think a number of the agencies have put us on positive outlook or have taken positive action. And what I said earlier, I'm like, it's not when you hit three and a half, then, you know, the other almost, you know, half a billion dollars of excess free cash flow is just going to be spent. No, there's still money going to the balance sheet. So we think we will exit 2022 well below three and a half.

On raising the distributions at three and a half is still kind of a gating item for us.

We would like to be investment grade rated we think we deserve it our outlook deserves it I think a number from the agencies.

Put us on positive outlook are taking positive action and what I said earlier, Mike it's not when you hit three and a half of them.

On our almost $5 billion of excess free cash flow is just going to it's going to be spent there is still money going to the balance sheet. So we think we will exit 2022, well below three and a half.

Speaker 5: Thanks, Fowler. And then maybe I can follow up on the comments around competing for incremental barrels. I think specifically maybe in the Permian, has anything changed significantly since last quarter or two with that language? I mean, obviously, there's been some changes in assets, which may affect the competitive dynamic out there. Can you just speak to that a little bit, contract roll offs, et cetera, et cetera?

Thanks, Roger and then maybe I can follow up on the comments around competing for incremental barrels I think specifically maybe in the proud of the Permian does anything changed significantly since last quarter or two with that language I mean, obviously theres been some changes in assets, which may affect the competitive dynamic out there can you just speak to that a little bit.

Contract roll offs et cetera et cetera.

Speaker 3: Not a lot of contract roll-off for us. I think the first contract roll-off is in early 2024 or mid-2024 that we have.

Not a lot of contract roll off for US I think the first contract roll off.

In early 2024 or mid 2024 that we have.

Speaker 3: So not a lot of contract roll-off. There is still quite significant overcapacity from an NGL point of view. So if you're thinking about, hey, we spoke about processing in the Permian, we spoke about residue gas. If you take NGL now, there's more overcapacity in NGLs than there is in processing or residue gas. So from that point of view, competing for new barrels.

Not a lot of contract roll off there is still quite significant overcapacity from an NGL point of view, so if youre thinking about hey, we spoke about processing in the Permian, we spoke about residue gas if you take NGL now.

Moreover capacity in Ngls than there is in processing a residue gas so from that point of view competing for new barrels.

Speaker 3: is definitely happening at lower rates today than where we were three, four, five years ago. And I think that was the comment that Sean was alluding to.

It's definitely happening at lower rates today than Barbie were 345 years ago, and I think that those two comments that youre alluding to.

Got it thanks, Brian .

Thanks, guys.

Speaker 1: Our next question coming from the line of Elvira Escada with RBC Capital. Your line is open.

Our next question coming from the line of Scott.

With RBC capital your line is now open.

Speaker 10: Hi, everyone. Thanks for taking the question. I had a follow-up call just on the question on the sustaining CapEx. How much of that is unique to 2022 that won't repeat next year? For example, I know you mentioned, you know, reliability spend. I mean, is that an ongoing expense or is that more of just a 2022 expense?

Hi, everyone. Thanks for taking my question I had a follow up call on me.

Question on the sustaining capex.

How much of that is unique to 2022 that won't repeat next year. For example, I know you mentioned reliability spend I mean is that in.

And ongoing expense or is that more of just a 2022.

Speaker 4: Hey, Elvira. 22 on the reliability side, and I alluded a little bit to it. I think in some ways, it'll be a little bit of a higher year. We had some big assets that went into the DJ. If you go back prior to the COVID year, we invested a lot

Hey, Elvira.

22 on the reliability side that I alluded a little bit to it I think.

In some ways there'll be a little bit of a higher year, we had some big assets that went into the DJ. If you go back prior to the Covid year, we invested a lot.

Speaker 4: and they are due every three years for some pretty good maintenance and reliability spent. So, from that perspective, I would see it more as a little bit of, you know, as timing. When I reference the spend on the regulatory, I see that more as continuing. You know, I think the environment we're in.

And they are due every three years for some some pretty good maintenance and reliability spend so from that perspective, I would see it more as a little bit of.

Timing when I referenced the.

The spend on the regulatory I see that more is continuing I think the environment. We're in.

Speaker 4: You know, we're going to continue to invest in the ESG, we're going to continue to invest in our pipelines, and try and stay ahead of the regulatory environment. Now I'll remind you, you know, obviously we're in Colorado and Southeast New Mexico, two very regulated states.

We're going to continue to invest in ESG, we're going to continue invest in our pipelines.

And trying to stay ahead of the regulatory environment and I'll remind you that obviously, we're in we're in Colorado in Southeast New Mexico, two very regulated states, we take a very proactive approach. So the answer is yes, I think a little bit higher if youre going to focus on the reliability spend.

Speaker 4: we take a very proactive approach. So the answer is yes, I think, a little bit higher if you're gonna focus on the reliability spend. I hope the product replacement spend continues at that rate. That'll be a great sign for our industry. But from a reliability, probably a little bit higher here.

I hope the product replacement spend continues at that rate that will be a great sign for our industry.

But from a reliability, probably a little bit higher year.

Speaker 10: Okay, thanks. That's helpful. And then just looking at your...

Okay. Thanks, that's helpful and then just looking at here.

Speaker 10: 2022 adjusted EBITDA guidance, what's the low-end versus the high-end, and that $140 million of upside from the forward, is that...

2022, adjusted EBITDA guidance.

The low end.

The high end and that $140 million of upside from that forward is that.

Speaker 10: Should we think about that as versus the midpoint of your guidance or potentially from the high end of your guidance?

Should we think about that versus the midpoint of your guidance or potentially from the high end of your guidance.

Speaker 4: The 140th versus the midpoint of our guidance.

The $140 versus the midpoint of our guidance.

Speaker 4: So, you know, if you take the mid, we gave you the mid commodity deck that we used and obviously the forward curve. So that's 140 over the midpoint. Look, the things that can take you to the low end, obviously, you know, it could be the big ones and haven't changed are going to be does the commodity dampen?

So if you take the bid.

We gave you the mid commodity deck that we used and obviously the forward curve. So thats a 140 over the midpoint.

The things that can take you to the low end obviously.

It could be but the big ones and they haven't changed it are going to be does the commodity dampen.

Speaker 4: You know, we always have a range on the commodity deck. Right now, we're very fortunate that as we look at that range, it's pointing significantly to the up. You know, and then volume growth, again.

We always have a range on the commodity deck right now we're very fortunate that that has.

As we look at that range is pointing significantly to the app.

And then volume growth again.

Speaker 4: you know, things could transpire a little bit slower on those two areas that we talked about in terms of volume growth. But, you know, as we sit here six weeks into the year almost, so, you know, things are looking good on that front. But those are the types of things that we think about when you're talking about what would take you to the lower end of the guidance. You know, commodity dampens quite a bit and producer activity dampens quite a bit. Those are the big ones. There's others, but those are the primary ones you're gonna focus on.

Thanks, good could transpire, a little bit slower on those two areas that we talked about in terms of volume growth.

Got it.

As we sit here six weeks into the year almost so things are looking good on that front, but those are the types of things that we think about.

When youre talking about what would take you to the lower end of the guidance commodity dampens quite a bit and producer activity dampens quite a bit those are the big ones Theres others, but those are the primary what you're going to focus on.

Speaker 10: Got it. And then just one last one for me. Any significant weather impact that we should think about in the first quarter, given some of the recent storms?

Got it and then just one last one for me.

All significant weather impact that we should think about in <unk>.

First quarter, given some of the recent storms.

Speaker 3: Well, I can't talk to you about the rest of the quarter, but I can talk to you until February 10th. And, you know, we obviously had the storm last week. I would say, you know, we were all match given Yuri last year.

Well I can talk to about the rest of the quarter, but I can talk to until February 10th.

Obviously at the storm last week.

I'd say, we were all of that given <unk> last year, but I think it.

Speaker 3: But I think it was more like a normal storm. So yes, you have a little bit of impact from it and a little negative impact, but it's nothing to worry about vis-a-vis what the country saw and the state of Texas saw with Yuri last year. So I would say it was more kind of a normal weather event. Great, thank you very much.

It went well.

More like a normal storm. So yes, you have a little bit of impact from it in a little negative impact, but it's nothing to worry about vis vis <unk>.

What's the country saw on the state of Texas saw with jewelry last year. So I would say it was more kind of a normal winter events.

Great. Thank you very much thank you Barbara.

Speaker 1: And we have a follow-up question from the line of Jeremy Tonnett with JP Morgan. Your line is open.

And we have a follow up question from the line of Jeremy Tonet with Jpmorgan. Your line is open.

Speaker 11: Hi, good morning. Thanks for squeezing us back in. Just a real quick clarification here with regards to the potential for opportunistic buybacks and the thought process whether to point that towards preferreds or common, if you had anything you could share there.

Hi, good morning, Thanks for squeezing us back in.

Just a real quick clarification here with regards to the potential for opportunistic buybacks and the thought process whether to point that towards preferred or common. If you had anything you could share there.

Speaker 3: Yeah, you know, nothing really to share other than it is something that we're going to take a look at. As James pointed out, there's a half a billion dollars of access-free cash flow available and you know, a meaningful double-digit distribution rate is, I think, is very important, but there is still a lot of optionality after.

Yeah, nothing really ready to share other than it is something that we're going to take a look at as James pointed out theres, a $5 billion of excess free cash flow available.

A meaningful double digit distribution raise.

As I think.

It's very important but there is still a lot of optionality after that.

Speaker 3: You know, it's going to be a little bit of, hey, what makes most sense and how? What do we see from a growth point of view? What do we see from a distribution point of view? How are we executing?

It's going to be a little bit of hey, what makes most sense and how do we see from a growth point of view, but do we see from a distribution point of view how are we executing and then already units units trading obviously.

Speaker 3: And then, you know, where are the units trading? Obviously, with the common and with the preferred, it's all about the cost of capital and what makes most sense in the short run and the long run. And we'll be weighing all of that here in the next number of months and see where we...

Coleman and with the preferreds and it's all about cost of capital and what makes most sense in the short run in the long run we'll be weighing all of that here in the next number of months.

And see where we come out.

Speaker 11: Got it. That makes sense. I'll leave it there. Thank you. Thank you. Thanks.

Got it that makes sense I'll leave it there. Thank you. Thank.

Thanks, Jeremy Thanks.

Speaker 1: I'm showing no further questions at this time. I would now like to turn the call back over to our speakers for any closing remarks.

I'm showing no further questions at this time I would now like to turn the call back over to our speakers for any closing remarks.

Speaker 12: I appreciate you guys joining us today. If you have any more follow-up questions, please feel free to reach out. Thanks, have a good day.

I appreciate it appreciate you guys joining us today, if you have any more follow up questions. So please feel free to reach out and have a good day.

Speaker 1: Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect.

Ladies and gentlemen that does go conference for today. Thank you for your participation you may now disconnect.