Q4 2021 EnLink Midstream LLC Earnings Call
Good day, and woke up to the Enlink Midstream fourth quarter 2021 earnings conference call.
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I would now like to turn the conference over to Brian Brungardt Director of Investor Relations. Please go ahead. Thank you and good morning, everyone. Welcome to Enlink fourth quarter of 2021 earnings call participating on the call today are Barry Davis, Chairman and Chief Executive Officer, Ben Lamb, Executive Vice President and Chief operating.
Sure and Pablo Mercado Executive Vice President and Chief Financial Officer.
We issued our earnings release and presentation. After the markets closed yesterday and those materials are on our website.
Replay of today's call will also be made available on our website at www Dot Enlink Dot com.
Today's discussion will include forward looking statements, including expectations and predictions within the meaning of the federal securities laws for forward looking statements speak only as of the date of this call and we undertake no obligation to update or revise.
Actual results may differ materially from our projections and a discussion of factors that could cause actual results to differ can be found in our press release presentation and our SEC filings.
This call also includes discussions pertaining to certain non-GAAP financial measures death.
Definitions of these measures as well as reconciliations of comparable GAAP measures are available in our press release and the appendix of our presentation. We encourage you to review the cautionary statements and other disclosures made in our press release, and our SEC filings, including those under the heading risk factors.
We'll start today's call with a set of brief prepared remarks by Barry Ben and Pablo and then leave the remainder of the call open for questions and answers.
With that I would now like to turn the call over to Barry Davis.
You, Brian and good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2021 results.
We will also discuss our 2022 outlook, which will advance our vision to become the future of midstream by leading in innovation and creating sustainable value.
Additionally, we will share an exciting opportunity ahead of us in Louisiana and discuss how we plan to build a substantial carbon solutions business and play a big role in the energy transition.
We headed into 2021 with the intent to drive value for our unit holders partners and employees and to make our business more resilient and sustainable for the long term.
I am very proud of our team for their focus and relentless execution and doing just that.
Their dedication resulted in exceptional progress in 2021 and has allowed us to enter 2022 from a position of strength.
For the fourth quarter Enlink achieved adjusted EBITDA of $286 $4 million.
Taking our full year adjusted EBITDA of 1.15 billion.
The robust fourth quarter results placed us within the upper end of the increased guidance range that we provided in June .
I am also proud to report that on a year over year basis, we delivered adjusted EBITDA growth of over 17% in the fourth quarter. After excluding the impact of MB sees that rolled off in 2020.
Enlink delivered robust growth in our Permian and Louisiana segments, and we began to see the stability, we projected in Oklahoma and North, Texas as higher commodity prices spur an increase in activity.
Through our innovative operational excellence program, which we called the Enlink way and is the roadmap for how we operate we've been able to sustain peer leading cost structure reductions enacted in 2020, despite returning to a growth environment and seeing some inflationary pressures.
With the strength of our business and our disciplined financial approach Enlink delivered another year of cash flow of over $300 million, which allowed us to reach our leverage goal with a ratio of under three nine times.
As a result of this solid execution, we were pleased to announce in December several actions that reflect a more balanced approach to capital allocation and increase returns to our unit holders.
Our base business has shown tremendous execution and I am excited about the progress we are seeing in our carbon solutions business, which is pursuing carbon capture and other opportunities that will allow enlink to play an even more active role in energy transition.
In a few short months, we have begun to make real progress in building a comprehensive offering in Louisiana.
Yesterday afternoon, we announced an alliance with Palo synergy to provide customers a complete solution for their carbon emissions in Louisiana.
Each of these successes is impressive and combined they made 2021 one of our best years to date and have positioned us well to further excel in 2022.
Last night, we issued our 2022 financial guidance, which showcases the tremendous improvement across our business.
We are forecasting adjusted EBITDA year over year growth of approximately 10% at the midpoint.
The robust growth of our business, coupled with our capital discipline allows us to continue to generate significant free cash flow and to maintain our strong financial flexibility.
At the midpoint, we are forecasting our third consecutive year with free cash flow after distributions in excess of $300 million.
We are entering 2022 with an incredibly bright future ahead.
And links path forward, we focused on becoming the future of midstream.
We believe the midstream company of the future must have the following five key characteristics.
And integrated business model, a large scale cash flow generating platform.
Proven operational excellence.
Focus on delivering energy solutions for the future.
And our focus on environmental and responsible operations.
We believe Enlink is well on its way and these five areas and we are focused on moving them forward with diligence and urgency as the future of midstream demands.
Here's how.
First our large scale cash flow generating platform generates over $1 billion of EBITDA and is delivering growth.
Our robust free cash flow allows us to invest in our growing our business.
Providing attractive capital returns to our unit holders and continuing to improve our balance sheet.
Second we have an integrated business model with scale positions of GMP across multiple basins connected to key downstream demand markets.
Third we are powered by operational excellence.
We are deploying new technology to build on our position as one of the lowest cost most efficient operators in our industry.
Our leading experienced operations teams maintained both a customer centric mindset and a strong safety focus.
Fourth we are well positioned to deliver energy solutions for the future.
Our business is approximately 90% natural gas and Ngls, which are expected to show demand growth through the energy transition and we are building a promising carbon solutions business.
Last but certainly not least we are focused on environmentally responsible operations.
Few short months after establishing near term emission targets, we have made solid progress as demonstrated by an agreement to capture and sales C. O two at our Bridgeport facility in North Texas.
As I touched on earlier, we have a unique and very real opportunity to build a significant ccs business overtime by repurposing existing assets in Louisiana.
I'd like to provide some color on the efforts enlink is pursuing.
We believe Ccs provides a meaningful path forward to help industrial cotr mirrors achieve their emission reduction goals.
Within the United States C O two emissions from industrial and power generation make up nearly half of all C O two emissions.
The state of Louisiana is the second largest industrial meeting state in the country and also ranks as the state with the second greatest sequestration potential due to its geology.
The majority of the emission sources are industries that are critical to our daily lives like for fertilizer plants and chemical plants that make a key component used to make plastics.
Enlink is the natural service provider in the state of Louisiana, particularly with the highly dense area of the Mississippi River corridor, where we bring decades of relationships and reliable operating experience plus over 4000 miles of pipe already in place.
In addition, our pipeline systems are located within close proximity to multiple potential sequestration site.
All of that brings me to our latest announcement, we were excited to be working with telos energy to jointly develop a complete C O two capture transportation and sequestration solution or industrial scale Limiters in Louisiana.
Palace bring substantial subsurface expertise and access to potential sequestration sites, while we bring the significant midstream assets customer relationships and the other elements that I mentioned.
As a result, we are very excited for 2022 and beyond both for the trajectory of our base business and for the transformational potential of our carbon solutions endeavors with that I'll turn it over to you Ben for an operational update.
Thanks, Barry and good morning, everyone.
I'd like to start by thanking all of our team members are out in the field they.
They not only operated in tough conditions during 2021, which included winter storm, Yuri and Hurricane Ida, but most importantly, they did it safely.
Enlink followed up a record safety performance in 2020 with another record in 2021.
Our 2021 total recordable injury rate came in at 0.4 for less than half the industry average of a little over one point out.
This is testament to the actions we take to operate our assets with excellence, while never compromising on safety.
Now, let's walk through our assets and let's start with the Permian, where we achieved another record by generating segment profit of $73 $8 million during the fourth quarter of 2021.
Segment profit in the quarter included approximately $5 million of operating expenses tied to plant relocations and unrealized derivative losses.
Excluding plant relocation opex and unrealized derivative activity segment profit in the fourth quarter of 2021 grew an impressive 16% sequentially and.
And over 66% from the prior year quarter.
The fourth quarter of 2021 also marked the sixth consecutive quarter of positive segment cash flow.
Average natural gas gathering volumes for the fourth quarter were approximately 8% higher compared to the third quarter of 2021, and approximately 28% higher compared to the fourth quarter of 2020.
Average natural gas processing volumes for the fourth quarter were approximately 7% higher sequentially and approximately 25% higher compared to the fourth quarter of 2020.
Producer activity across our footprint has remained robust from the fourth quarter of 2021 and into early 2022.
As previously announced we reactivated the Tiger plant in December of 2021.
Additionally, we continue to make solid progress with project Phantom, which is on schedule to be placed into service in the fourth quarter of 2022.
When we look forward, we are projecting another year of significant growth for our Permian business.
At the midpoint, we are forecasting that segment profit will increase by nearly 40% to $320 million, which includes $40 million of operating expenses related to our plant relocation.
As we grow alongside our customers. The Permian is likely to exit 2022 is our largest segment after adjusting for the Phantom relocation expenses.
Unlike last year when the growth was primarily driven by Midland activity. The Delaware will also be adding more to the pie following the Tiger plant restarting for.
For example, one of our customers in the Delaware Exxonmobil has announced plans to grow their Permian volumes by 25% in 2022.
Turning now to Louisiana, we experienced expected favorable seasonality with segment profit for the fourth quarter of 2021 coming in at $111 $7 million.
Segment profit included unrealized derivative gains of $19 $3 million with the majority of this associated with our gas and NGL storage positions.
Excluding the impact of unrealized derivative activity and hurricane Ida in the third quarter of 2021.
Segment profit in the fourth quarter of 2021 increased approximately 21% sequentially and 16% from the prior year quarter.
Relative to the prior year, both the gas and NGL businesses are showing strong growth benefiting from increased volume and higher margins.
The robust segment profit drove record segment cash flow of $107 $8 million.
Looking forward, Louisiana segment profit for 2022 is forecasted to be $355 million at the midpoint of guidance, representing a 9% increase from 2021.
The growth is largely driven by the NGL side of the business through increased volumes and higher margins compared to 2021.
Moving up to Oklahoma, We delivered segment profit of $99 $4 million for the fourth quarter of 2021.
Segment profit in the quarter included approximately $1 $4 million of operating expenses tied to plant relocations and unrealized derivative gains of approximately $9 $4 million.
Excluding plant relocation opex and unrealized derivative activity segment profit in the fourth quarter of 2021 increased 2% sequentially.
Segment profit grew nearly 10% from the prior year quarter after excluding $17 $6 million of now expired MVC deficiency payments received in the fourth quarter of 2020.
The volume story out of Oklahoma continues to improve as producers have responded to the improving pricing environment.
Natural gas gathering volumes increased 2% sequentially and decreased only 2% compared to the prior year quarter.
Natural gas processing volumes increased 4% sequentially and decreased only 2% over the prior year quarter.
Oklahoma continues to deliver solid and stable cash flow for us during.
During the fourth quarter of 2021, we generated $86 $1 million in segment cash flow.
For 2022, Oklahoma segment profit is forecasted to be $345 million at the midpoint, which includes $5 million of operating expenses related to our plant relocation.
This outlook is approximately flat from 2021, when you exclude the adverse impact of winter storm Yuri.
We continue to be very encouraged with producer activity in the basin.
We discussed in our last earnings call the expected well connect activity in Oklahoma in the fourth quarter came in as expected with December having more well connects than we saw in the entire first half of 2021.
This improved activity gives us great momentum and confidence that volumes will be approximately flat in 2022.
Wrapping up with North Texas segment profit for the quarter was $56 1 million and included unrealized derivative losses of $3 $5 million.
Excluding unrealized derivative activity segment profit in the fourth quarter of 2021 declined only 1% sequentially and 4% from the prior year quarter.
Natural gas gathering volumes actually increased 1% sequentially and were flat compared to the prior year quarter.
We're 2022 the North Texas segment profit is forecasted to be $230 million at the midpoint.
This outlook reflects a stable source of cash flow when you exclude the modest impact of winter storm here.
We continue to be encouraged with producer activity in the basin as BK V is expected to commence a modest new drilling program in 2022.
Finally, I want to give a quick update on the enlink way and driving value for our stakeholders.
We completed 25 operational excellence initiatives in 2021 for example, we piloted the remote operation of our processing facility and now our Silver Creek plant has operated entirely by the team at our Bridgeport facility.
As an example outside of operations, we've begun implementing robotic process automation to reduce manual work and manipulating data.
Giving our team time to do more value added work and reducing the chance for errors.
These efforts are part of an ongoing process to always operate our business better and to create sustainable value.
With that I'll pass it over to Pablo to discuss our financial update.
Thank you Ben and good morning, everyone I'll start with the fourth quarter highlights.
As Barry mentioned Enlink delivered a solid fourth quarter, achieving $286 million of adjusted EBITDA.
Excluding the impact of the MVC that rolled off in 2020, adjusted EBITDA increased over 17% from the fourth quarter of 2020.
This result reflects robust growth out of the Permian solid growth in Louisiana, and relatively stable operations in Oklahoma and North Texas.
Enlink also achieved $67 million of free cash flow after distributions for.
For the fourth quarter of 2021.
With all four of our asset segments once again delivering positive cash contributions.
For the full year of 2021, Enlink delivered adjusted EBITDA of 1.15 billion and free cash flow after distributions of $314 million.
On the cost control front, our teams focus on efficiency allowed us to sustain our peer leading reduction in operating and general and administrative expenses from 2020.
After adjusting for plant relocation costs and the noise from winter storm here, our total cost structure in 2021 was still 23% lower than in 2019.
Capital expenditures net to Enlink and plant relocation expenses were approximately $85 million for the fourth quarter and $220 million for the full year of 2021.
These investments were flat from the prior year, despite the growth at our operations delivered.
This can be attributed to the excellent work the team has done to execute on our capital light strategy, which includes optimizing the use of existing assets as we have done by relocating significant processing capacity from Oklahoma to the Midland Basin.
Going forward, we remain focused on the disciplined investment approach with high return hurdle rates and quick paybacks.
On the balance sheet side, our actions over the past two years have put us in a solid financial position with ample financial flexibility.
During the quarter, we repaid the remaining balance of our term loan and ended the year with a debt to adjusted EBITDA ratio of under three nine times.
Consistent with the strategy that we have been discussing with you over the last several quarters we.
We announced at the end of December plans to deploy a more balanced capital allocation approach.
In the fourth quarter of 2021, we increased our common unit distribution by 20% and accelerated our common unit buybacks, bringing the 2021 total to $40 million of spend.
We also redeemed $50 million of our preferred b units in the fourth quarter and then another $50 million at the beginning of this year, both at a price of 101% of par.
The net impact of the distribution increase and the repurchases on redemptions on our overall distribution payout is approximately $25 million on an annualized basis.
Also in December our board refreshed, our common unit repurchase authorization to $100 million and we expect to continue to be active with the program.
To that end, we recently entered into an agreement with VIP and which they will participate on a pro rata basis in the common unit buyback activity.
This will have the effect of protecting our public float on a percent basis and maintaining Gi piece current economic ownership level flat at approximately 46%.
Next let me turn to the 2022 guidance that we announced yesterday.
We are forecasting another year of solid growth driven by disciplined investments and a continued focus on cost efficiencies.
From an adjusted EBITDA standpoint, we are forecasting a range of 111 to $1 one 9 billion.
This represents growth of approximately 10% at the midpoint of the range and it's driven by robust growth in the Permian.
<unk> growth in Louisiana, and stable operations in Oklahoma and North Texas.
Exiting 2022, the Permian will likely be our largest segment as we continued to execute on our disciplined growth strategy to meet customer needs.
While approximately 90% of our business is fee based we do benefit from the strong commodity prices, we're seeing today.
Current forward prices as of yesterday are sufficient to put adjusted EBITDA at the top end of our range.
More importantly, strong commodity prices can drive incremental producer activity as we experienced in 2021.
Now as a reminder, while we don't provide quarterly guidance, we typically experienced some seasonality, especially in our Louisiana business.
With our strongest quarterly results in the fourth quarter and a small sequential decline in the first quarter.
On the investment front total capital expenditures plus operating expenses associated with project Pantone are forecasted to be between $285 and $325 million in 2022.
Aside from project paint them, we expect 2022 capital to be heavily weighted to well connects and gathering infrastructure.
<unk> that have very high returns and quick paybacks.
Our capital light approach allows us to grow alongside our customers in a disciplined manner, while generating very significant free cash flow.
With robust forecasted EBITDA balanced by modest increases in Capex and the previously announced 20% increase to the distribution.
We forecast free cash flow after distributions in the range of $285 million to $345 million.
This will mark at the midpoint, the third consecutive year of free cash flow after distributions of over $300 million.
In summary, the Enlink team delivered solid results in 2021 and the outlook for our operations in 2022 is even better.
We're seeing a welcome shift in activity in our Oklahoma, and North, Texas segments, which we expect to be much more stable in 2022, resulting in an overall growth forecast for enlink with that I'll turn it back to Barry.
Thank you Pablo as you can see Enlink continues to deliver and we are entering 2022 with an incredibly bright future ahead, including the realization of our vision to become the future of midstream by leading in innovation and creating sustainable value for the long term with that you may now open the call for questions.
Thank you we will now begin the question and answer session.
To ask a question you May press Star then one on their Touchtone phone.
If you're using a speaker phone we ask you. Please pickup your handset before pressing the keys.
The majority of your question. Please press Star then two.
We will pause momentarily to assemble our roster.
And today's first question comes from Michael whose mono with Progressive Energy partners. Please go ahead.
Hey, good morning, everyone. Thanks for the so the details today.
I was hoping we could start on on where we are today with Oklahoma activity and how the I believe the comment previously then you need less than seven rigs to hold volumes flat I'm curious how that.
Plays out with 'twenty, two guidance and if that expectation has changed at all.
Yes, good morning, Michael It's Ben.
That's about right today, we are seeing a higher level of activity than that.
Just right at the moment.
11 rigs on the footprint.
What's most encouraging about that is those rigs are operated by eight different customers.
And.
The most exciting news.
These days is the addition of a third rig to the Devon Dow JV. When you take all of that together along with the level of activity that we saw in the fourth quarter that we talked about in the prepared remarks. It gives us a lot of momentum going into 2022 and confidence that the decline in Oklahoma has stopped.
Okay great.
And then pivoting a little bit.
Can you talk about how much of an increase in for your 'twenty two guidance.
Was the result of any like inflation adjustments that you'll have in your contracts I don't think you quantified that in the release, but I'm curious if you saw any.
Any green shoots there.
Yeah, Michael I would say in general.
On the revenue side of the equation.
We made an assumption that was not very different from our historical assumptions around inflation.
So theres not.
An outsized benefit built in there now we were we were thoughtful in doing our opex forecast and our capital budget to.
To incorporate in there to the best that we are able the expected inflation that we'll that.
We may see in materials prices as the year goes on but.
To date it has not been a major factor for us.
Yes, Michael this is Pablo I'd, just add that you know.
We are seeing a little bit of inflation that has been baked into our forecast.
At the same time, we're working on our operational excellence initiatives, which <unk>.
Yielded really good results.
Part of the focus there is to be able to maintain a cost structure thats flat.
Particularly on the G&A side.
Even even despite the inflation pressures that we're seeing in labor and on the Opex on chemicals, and lubricants and that kind of thing.
Okay.
Its helpful. I do have one more if I can.
You realized about 24 million of hedge losses this quarter.
Hum.
I'm curious if you can just give us an idea of how maybe like in a stable.
Strip scenario or like flat with today with those hedge realizations look like in 'twenty two.
Because I know.
They've been material for the last few quarters. So.
It would be helpful. If you can give us an idea of what that looks like going forward.
Yeah, Mike Ballistics, Pablo again, let me sort of take that up a notch just to remind everyone that we're about 90% fixed fee and so we've got limited commodity price exposure.
We do benefit.
From commodity prices directly, but even more importantly through the activity you get higher commodity prices.
Today It can drive.
I'd say in 2021, we saw.
Some hedge losses.
<unk>.
And layering some hedges at lower prices than where we are in a rising commodity price environment.
I think thats going to be different in 2022.
We entered the year less hedged and.
As I commented before we see it more curve currently.
Higher.
The midpoint.
And at the midpoint of our range and it would point us to the upper end of the range.
We have been here recently able to.
Layer in some hedges along with our programmatic approach.
Higher prices and so we expect to see some of that benefit as well.
All right that's really helpful.
Thank you all and appreciate all the color.
Our next question today comes from TJ Schultz of RBC capital markets. Please go ahead.
Great. Good morning, maybe Barry to the extent possible on the Ccs opportunity can you just give us any.
Framework on timing to market the project.
Any expected costs and cash flow from the overall project considering.
The advantage you have on capital avoidance by Repurposing pipe.
Yes T J. Good morning. This is Barry thank you.
First of all again, we're really excited to be where we are.
This is something that we've worked very diligently on for just over a year, it's very fast moving opportunity and I think we have a great opportunity to be a first mover.
In saying that I think it makes the answer to your question a little complicated because there are so many things we're doing that there are no precedents for.
And so as we negotiate with customers as we go through the permitting process et cetera. Much of this will be the first time that it's been done so I'm going to hand, it over to Ben I think you will go into some details as to what we think this process looks like.
Yes, T J from the perspective.
The timing.
With towers, having secured the lease of 26000 acres, all of which lie directly under or adjacent to our existing pipe.
The critical path item on operations is securing classics permits for for sequestration wells.
Catalyst expects to file for those later this year and then today, it's about an 18 month process, perhaps that gets stirred up a bit if louisiana.
Get primacy over the permitting process as we expect them to do later later this year.
From a customer perspective, the marketing process is happening now.
And what we have heard from potential customers is that they're looking for two things.
Number one they are looking for a complete solution not a partial solution.
And with today's announcement.
We now have the complete solution.
We have a transportation solution, we have a sequestration solution and to the extent that the customer desires that we have a capture solution.
The second thing they are looking for is a cost effective option.
And with the advantage that we bring with pipeline already in the ground, we have a cost advantage over the competition and so the marketing is ongoing.
We're probably a couple of years away from operation when you consider the permitting timeline.
But we've.
As Barry said, we've never been more excited about the Ccs potential than we are with the announcement in today's alliance.
Okay that all makes sense, we'll stay tuned.
Just shifting gears.
At Slide 18, and 19 were pretty helpful. In your deck on capital allocation and Capex. The first part of your question just on <unk>.
Growth Capex on slide 18.
The other bucket if you can kind of detail what's in there what type of projects, you're considering outside of GMP.
And then the second car for free cash flow after distributions on slide 19, you have $165 million allocated to either.
Additional growth projects or debt reduction just any color on how you are considering that allocation.
Is it just a function of rig activity that that you may need to react to it with additional well connects.
Yes, let me start on the Capex question and then we'll move to the capital allocation question I'll, probably have spent too to chime in on Capex as well.
So P J.
Our capex budget for this year.
Just about the best capital you can spend.
The biggest piece is the plant relocation with the Phantom facility. It's our second plant relocation first one as you know went really well.
And of course, that's had a fraction of the cost of a new build plans.
The the rest of the capital is really focused on well connects and gathering infrastructure that goes with that which again.
Some of the best capital you can spend quick paybacks.
So to support the growth in volume that we're seeing not only in the Permian basin, but now good activity across the board.
Then what would you add to that on the Capex side.
In terms of the other.
T J, it's mostly well connect adjacent.
So compression projects.
Larger pipelines that aggregate volumes for multiple well connects into into the main system and also some work.
Would describe is around enhancing the Louisiana NGL business. When you think about that NGL business. It was originally scope for pages about pipeline was originally scope is about 110000 barrels a day today were running 185, or so day in and day out to those Louisiana Fracs and so some rely.
Ability work to make sure that we can do that day in and day out those words projects.
And TJ on your capital allocation question.
I'd start by saying, we're in a fortunate position, where we've been able to invest in growing the business in a very disciplined way and also pivoted to a more balanced.
Distribution of capital <unk>.
Including a 20% increase to the distribution so with all that we're still generating in excess of $300 billion of free cash flow after distributions as we've done in the last couple of years thats higher than that at the midpoint of our guidance range.
And if you look at that slide 19 in our deck first of all the board has authorized us to spend another $100 million stone common unit repurchases. We've been active at the beginning of the year have already spent $10 million and expect to continue to be active returning capital to unitholders halfway.
<unk>.
We've also importantly.
Zinc bought $100 million.
Preferred Bs.
We did $50 million in the fourth quarter and followed that up early this year with another 50, which opens the door to potentially doing more of that.
It's at a good price yielding almost eight 5%. So it's another great way to reduce leverage on the balance sheet.
You pointed that to that $165 million slice them sort of on identified talks about growth projects and leverage reduction we would expect and hope that we can do more of the preferred buybacks with that capital.
In terms of growth projects as you know we are always looking to build our downstream business with projects like the venture global deal that came online at the beginning of last year.
So we're looking at similar things.
And now with the <unk>.
Ccs announcement.
I don't expect much capital this year.
But that's certainly another good use of capital down the road.
Okay. That's all helpful I'll stop there.
Thank you Sir.
Our next question comes from Colton Bean of Tudor Pickering Holt. Please.
Please go ahead.
Good morning.
The year on year step up in the premium segment profit is any rough breakdown you can provide in terms of the relative contribution from higher commodity margins versus higher throughput.
Hey, Colton, it's Ben it's a little bit hard to get to that.
Level of detail, but I'd say look if youre looking sequentially.
<unk> to <unk>.
And you're correcting for the plant relocation opex and the unrealized derivatives that we gave you.
Detail on.
There was not a huge difference in the price deck, where theres a bit of a difference in the price deck as from <unk> of last year or even <unk> of last year or two.
This past quarter.
And so there's both elements are contributing in the year over year growth, but its primarily been volumetric growth in in recent days.
The broader picture.
On our Permian growth for this year, which is in the 40% range.
Is that it's driven by both sides of the basin.
So last year, the vast majority of the growth in the Permian came for Midland and particularly from the Midland gas business. This year it will be more balanced.
We expect to see a significant additional contribution from our Delaware business and also to see significant additional contributions from our <unk> businesses those are a bit smaller than the gas businesses, but they still make a difference. So this year. The Permian business is going to be firing on all cylinders to deliver greater than 40% growth over last year.
Sure.
Okay, and Thats actually a good segue there. So you mentioned the growth you're expecting in the Delaware I know you've spoken to this in the past, but with the sixth anniversary of the Delaware JV coming up later this year can you just update us on how you all are thinking about that partnership you know whether consolidation might make sense down the road or any changes there.
Yeah. This is pablo.
<unk> been a great partnership in GP.
Six of the World the same way we do.
It's been growing nicely here recently with the.
<unk> at the Tiger plant back on and we see really good growth prospects.
I'd say, they're very patient all private equity firms have become a little bit more patient in terms of seeing good returns in this space. So I wouldn't expect anything in the near term we are.
Over time, it would make sense for hospital accounts.
Great I appreciate it.
Thank you and our next question today comes from Spiro <unk> with Credit Suisse. Please go ahead.
Thanks, operator, good morning, guys.
Two quick follow ups for me first one sticking with the Permian and just thinking about processing plant capacity, obviously, you mentioned Exxon growing at about 25% clip this year and so as you think about the need for the next processing plant beyond Phantom.
How are you thinking around that timing and is another relocation option available to you guys again.
Hey, Spiro yet on that I would say.
First in the Delaware, we are well taken care of for this year with the restart of Tiger.
Tigers good for $2 40, and so it's a nice addition of capacity and that will take care of the growth, we expect to see from Exxonmobil and from a variety of other customers in the Delaware business. This year.
Phantom is projected to come online in the second half later in the second half.
Of this year and that will add 200 million cubic feet a day of capacity to the Midland Basin I think it's too early to talk about timing on the next Midland expansion I think we need to get through this year.
The Phantom plant online and see how the market develops into 2023 before before we can pinpoint timing on another expansion.
I would say when we get there we'll be very disciplined.
Our approach and look at the full range of options as we did here.
Including building up off loans for a period of time.
And we will get the capital efficient alternatives as we've done in the past yeah. In fairness you did ask there whether there is another relocation alternative there is another relocation alternative obviously, we chose to relocate Thunderbird.
Now now as Phantom because it was the best option that we had but we do have other options for plant relocations and as Pablo says, we'll take those into consideration when the time is right.
Great. Good color. Thanks for that guys second one just shifting gears over to LNG. When you think about scaling up your relationship with venture global going forward you mentioned cap. She passed obviously up and running now is there an opportunity to do.
More there and when you think about Plaquemines I think that's kind of a stone's throw away from being sanctioned here should we imagine a similar setup with with that facility and how you think about utilizing some of your current network to facilitate that as well.
Yes.
Broadened that and say that we're very well positioned to support LNG growth in Louisiana.
And the deal that we did on Calcasieu pass is a great example of that we don't think that that will be the last one as you point out Calcasieu pass is in the very early stages.
Its initial operations and so I think it's probably too soon to talk too much about about what comes next.
Fair enough. Thanks for the time guys.
Thanks, Bill extending the next question today comes from Tony <unk> with Jpmorgan. Please go ahead.
Yes.
Hi, Good morning, maybe I just wanted to follow up on the <unk>.
Bob question Pablo Thank you Bill.
I remember you.
Can you just bolt on projects are viable.
I don't think sustaining quantify your tax structure, but we have heard some of your destocking that could be mechanical and integrations and conversion also noncash.
Despite extensive.
Maybe just wanted to ask you.
Let me talk somewhat the same 90 book, what kind of cost savings could you see some.
Cash <unk> device and also talking.
Talking specifically about this partnership if you could shed any guidance on what capex.
On the adult side, you could see in the next year, yes.
Yes. He has been a several parts of your question. There. Let me start and then I expect Pablo and Barry will probably want to add on so let me start with <unk>.
Question about the conversion of natural gas pipelines.
Because I do think theres been a little bit of misinformation out there.
The advantage that we have.
Is that our existing natural gas network number one has significant redundancy in it today.
Because we own two pipeline systems that both serve the Louisiana industrial market, the LIG system and the bridge line system.
So we have the ability to repurpose some of those lines without having a significant impact on the gas business that we have today secondly.
Those pipelines tend to be a very large diameter. So we're talking 24 inch 30 inch and 36 inch pipelines.
And because those pipelines are so large we have the ability to move very significant quantities of <unk> in the gaseous phase without having to be in the supercritical phase.
We're highly confident of that having done a tremendous amount of engineering work and I would say that everyone. We've spoken to in terms of potential partners in terms of potential customers when they see the work they agree with us.
So thats not a concern at all from our perspective.
45 Q.
At $50 today.
The meters that we are targeting are economic.
Now if the Congress worthy of increased 45, Q, whether to $85 or some other number.
Then certainly that further expands the pie, but even in today's regime. There are sufficient emissions available that are economic.
To build a scale business in Ccs in Louisiana.
And then I think a third part of your question was the cost savings that comes from having pipeline in the ground.
And the answer is it's savings both in terms of time.
And in terms of capital.
As you will see when you look at the map.
Of the Enlink Talis Alliance all three of the land parcels in the River Bend.
Sequestration.
Scope.
Our directly beneath.
Or directly adjacent to existing Enlink pipelines.
Which means that we expect very limited additional pipeline infrastructure to be needed to move to those sites. So thats. The savings of time in terms of permitting and construction and savings in term of capital and frankly, an environmental benefit to the state of Louisiana.
You're not crossing sensitive wetlands with new pipelines youre using assets there already in the ground today.
Please answer.
Got it thanks, a lot for all the color that Jeff.
One one follow up on that.
Is it possible to maybe Guan.
Quantify a potential big opportunity.
Capex.
I think too early for that.
No.
Yes. This is Barry let me, let me say that it is early.
And much of that will be determined.
The thing that we would say is this is going to play out in the near term.
As Ben mentioned earlier contracting with our customers is happening now as we speak.
We are defining plans in terms of exactly hit the layout of the systems.
And so we will know more in the very near future.
I think from a timing perspective, we've just highlighted we believe this business starts to operate in late 'twenty three early 'twenty four and the amount of capital between here and there would be very limited on our side again because of the proximity of the sequestration sites and the customers the redundancy of pipe.
And so we think what we call phase one will be a very efficient.
Startup process.
Got it thanks, a lot and then just following up on <unk>.
You said activity I guess, you guys have given a lot of commentary on.
All your particular basin.
I just wanted to follow up is that right is the activity upside driven by the need some.
A small level, but it does going on right now or.
I know you have mentioned so I'm talking about 25% growth next year do you see any further upside from lots got panel, one and 2020.
Look in terms of.
In terms of the.
Levels of activity and how it's being driven.
In the Permian It is a very diverse mix of both large public companies and some of the premier private operators, particularly in the Midland Basin, we have a very balanced business there.
In Oklahoma last year, it was mostly driven by the private companies what we've seen in early 'twenty. Two is the addition of a third rig to the debit activity.
So from two to three.
And then a little bit of activity from some of the other public companies. While we have also seen the private activity level continue and even strengthen a bit.
In fact, I think just right today on the 16th of February .
We've got more rigs operating in the basin than we've had since the summer of 2019, which is a really nice thing to see.
In terms of the outlook.
I think that if commodity prices stay strong there is a potential to see a bit more activity, but I do think that particularly among the public companies, they're going to be very disciplined and try to stick to the plans that they've laid out and frankly, thats, okay with us because greater than 40%.
And the Permian is a fine place for us to be in 2022.
Got it that's all channel.
Thank you. That's a brief reminder, if you'd like to ask a question. Please press Star then one today's next question comes from so we also ball with Seaport Global Securities. Please go ahead.
Yes, hi, good morning folks.
The commentary on the call.
Just one clarification on the Ccs opportunity it seems like Capex on this is fairly manageable. So is it fair to assume that you will be funding all of this on your own balance sheet.
Should we think about the structure of that may be put in place funding.
Yes, so the onus Pablo look early on it's going to be minimal capital certainly this year, maybe a few million dollars of capital.
As we see the opportunities develop we will know more about the capital needs. Initially I would expect as Ben was mentioning.
Relatively light because its connections to existing pipe.
So relatively short distances.
We'll see I think we are excited about the prospects of this business on how big it could be over time.
I would say, we will likely funded internally even long term, but you never know and we will consider all of our options for the best and lowest cost of capital.
Got it.
Then on.
On balance sheet could you remind us.
How the preferred stock.
The rating agencies.
In terms of your capital stack.
And then you know.
A little bit of a longer or bigger com question.
How do you think about your ratings. So it seems like when I look at credit markets.
There is kind of limited kind of upside in <unk>.
Terms of credit scoring from.
A high high quality high unit play of US at investment grade. So I was just kind of curious do you see any business kind of you know benefits going to and.
How should we think about that.
The whole issue.
Yes, so the preferred BS.
Or do get equity credit it varies by agency, but we do.
Get some equity credit certainly from our credit facility ratio.
We get full equity treatment for those.
That said it is how our highest cost of capital and the capital structure and buying them back at almost an eight 5% yield. We think is a great way to continue to delever the balance sheet, regardless of the equity treatment.
From a rating agency perspective, I think we've got.
Very good momentum.
The agencies.
I would say that we.
Any forecast that we put in front of them over the last couple of years.
And.
Our credit profile has improved significantly.
I would also add that investment grade ratings are probably not a objective in and of themselves as you point out from a cost of capital perspective, I think we can achieve good cost of capital, but we are working our way back towards those metrics and expect some progress.
Okay.
Okay. Thanks for that.
Thank you ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to the management team for any final remarks.
Thank you Rocco for facilitating our call. This morning, and thank you everyone for being on the call today and for your support as always we appreciate your continued interest and investment in Enlink. We look forward to updating you with our first quarter results in May in the meantime, we wish you all will stay healthy and have a great day.
Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may disconnect your lines and have a wonderful day.