Q1 2022 Energy Transfer LP Earnings Call
Hello, and welcome to the energy transfer first quarter 2022 earnings Conference call. My name is Brandon and I'll be your operator for today at this time all participants are in a listen only mode. Later, we will conduct a question and answer session during which you may Dallas zero. One if you have a question. Please note it is zero.
Thats Star one as a reminder, this conference is being recorded I will now turn the call over to Tom long energy transfer as co CEO and Mr. Long you may begin.
Thank you operator, good afternoon, everyone and welcome to the energy transfer first quarter 2022 earnings call.
I'm also joined today by Mackie Mccrea and other members of our senior management team who are here to help answer your questions. After our prepared remarks, hopefully you saw the press release, we issued earlier this afternoon as well as the slides posted to our website.
As a reminder, we will be making forward looking statements within the meaning of section 20 <unk> of the Securities Exchange Act of $19 34. These statements are based on our current beliefs as well as certain assumptions and information currently available to us and are discussed in more detail and our quarterly report on Form 10-Q.
For the quarter ended March 31, 2022, which we expect to be filed tomorrow may fit.
I'll also refer to adjusted EBITDA, and distributable cash flow or DCF, both of which are non-GAAP financial measures you will find a reconciliation of our non-GAAP measures on our website.
I'd like to start today by looking at some of our first quarter highlights we started the year off with a strong first quarter, where we generated adjusted EBITDA of $3 3 billion.
DCF attributable to the partners of energy transfer as adjusted was $2 1 billion.
This resulted in excess cash flow after distributions of approximately $1 $5 billion on an incurred basis, we had excess DCF of approximately $1 $1 billion after distributions of $618 million and growth capital of approximately 390 million.
On April 26, we were pleased to announced a quarterly cash distribution of <unk> 20 per common unit or <unk> 80 on an annualized basis, which represents a more than 30% increase over the first quarter of 2021.
As a reminder, future increases to the distribution level will be evaluated quarterly with the ultimate goal of returning distributions to the previous level of $30.05 per quarter or $1 22 on an annual basis.
Balancing our leverage target growth opportunities and unit buybacks operationally, we have a brand franchise with assets in all the major producing.
Basins in the U S and solid throughput increases.
Our segments as rig counts continue to improve across the US In addition, we completed construction of several growth projects, which I will provide more details on shortly.
In March of 2022, we announced a definitive agreement to sell our 51% interest in energy transfer Canada for cash proceeds of approximately $270 million in.
The sale is expected to reduce our consolidated debt by approximately $450 million. This sale allows us to divest of these noncore assets at an attractive valuation and utilize the cash proceeds to further deleverage our balance sheet and redeploy capital within our U S footprint the transfer.
Action is on track and expected to close by the third quarter of 2022.
Also in March of this year, we completed a $325 million bolt on acquisition of underground storage assets and an ethylene storage header that further enhanced our Mont belvieu and nederland positions.
This acquisition of the spinel top assets.
Provides us with an exceptional.
Helane storage and transportation header system, located strategically between our Mont Belvieu and our needle and terminals.
A header system is connected to multiple ethylene pipeline customers. In addition, it has two active storage caverns, one coverage under development and the potential to develop at least four or five more storage caverns. We believe this system will play a major role in connecting ethylene supply and markets along with <unk>.
<unk> and Louisiana Gulf Coast, as we are seeing significant and unprecedented interest for many of the pet Chem players and utilizing not only the storage facilities.
But also the ethylene header system now.
Now for a brief update on the integration of the enabled assets. We continue to expect the combined company to generate more than $100 million of annual run rate cost saving synergies of which we expect to achieve $75 million in 2022 <unk>.
The majority of our back office integration is complete including integration of bank accounts General Ledger and Treasury systems, we continue to identify and evaluate a number of commercial and operational synergies that are expected to enhance the operational capabilities of our systems by capitalizing on improved efficiencies.
And increasing utilization and profitability of our combined assets. This includes opportunities to run plants more efficiently potentially converting pipelines to different products as well as optimizing our combined assets to provide customers on are enabled systems with access to premium markets.
Further downstream through our vast energy transfer pipeline network.
I will now walk you through recent developments on our growth projects in March we announced that we have entered into 220 year LNG sale and purchase agreements for our Lake Charles LNG project with ENN natural gas and even in energy Holdings limited.
Under the two SBA.
LNG is expected to supply one 8 million tonnes per annum of LNG to ENN in natural gas and <unk> 9 million tonnes per annum of LNG to Ian in energy on Monday of this week we.
We also announced the signing of a 20 year LNG purchase and sell agreement with a subsidiary of <unk> group for 2 million tonnes of LNG brand them.
And yesterday, we announced the signing of another long term LNG offtake agreement with SK gas and affiliate of the Korean conglomerate SK.
For <unk> four metric tons per annum.
For a term of 18 years.
Purchase price for all these agreements is indexed to the Henry hub benchmark, plus a fixed liquefaction charge and the LNG will be delivered.
Free on board basis.
The sba's will become fully effective upon the satisfaction of the conditions precedent by ETE LNG, including reaching FID.
<unk>.
We're also in active negotiations with a number of other high qualified customers and we expect to make an announcement of additional offtake agreements in the weeks ahead.
As we have previously stated we expect to finance a significant portion of the capital cost of this project by means of the sale of equity in the project to infrastructure funds and possibly to one or more industry participants in conjunction with the LNG offtake agreements.
We are currently targeting for.
For this project in the fourth quarter of this year.
Events in Europe highlighted the importance of LNG from the United States, a country with abundant natural gas supply and strong geopolitical ties to Europe . We are hopeful that our lake Charles LNG project will be a significant factor in the long term solution for global energy needs.
Looking at Mariner East pipeline system during the first quarter of this year, we completed construction of the final phase of the Mariner East pipeline, which brought our total NGL capacity on the Mariner east pipeline system to more than 365000 barrels per day, including ethane.
For the first quarter of 2022 NGL volumes.
<unk> pipeline system and Marcus Hook terminal remained steady since the end of the first quarter, we have seen an uptick in volumes through the pipelines and expect to see incremental revenue and volume growth for the remainder of the year.
And our Pennsylvania access project, which allows refined products to flow from the Midwest supply regions into Pennsylvania, New York and other markets in the northeast started flowing refined products in January of this year.
At our expanded Nederland terminal NGL volumes remained strong during the first quarter, including export volumes under our orbit ethane export joint venture.
For the first quarter, we loaded approximately 8 million barrels of ethane out of the facility and for full year 2022, we continue to expect to load more than 40 million barrels of ethane with that increasing to up to 60 million barrels for 2023.
We also expect our LPG export volumes at <unk> to continue to grow in 2022 and.
In total we continue to export more ngls than any other company or country and our percentage of worldwide NGL exports.
Remain at nearly 20% of the world market.
We are seeing long term increases in NGL demand and market value. Both here in the U S as well as internationally, we expect to participate in this growth as well as increase our market share as our franchise is uniquely well situated to benefit from this expanding market.
We are seeing strong interest from overseas customers seeking additional supply from the United States and we have recently secured sufficient commitments to move forward on the ethane expansion.
Even though we expect to expand our ethane export capabilities at both Marcus Hook and needle in terminals. These commitments provide us with the opportunity of expanding at either terminal.
Therefore, we are evaluating which location would be best suited for our next ethane expansion project.
We continue to evaluate the opportunity to develop a pet Chem project along the Gulf Coast.
If we were able to reach.
We believe that our cracker will be a very unique world class facility, providing unparalleled access to the lowest cost feedstock through our pipeline systems.
As well as unparalleled access to downstream domestic and international ethylene and propylene markets through our pipelines are storage facilities and our export terminal where.
We're in discussions with a number of high quality customers as we work to secure long term tolling type commitments prior to reaching FID.
And we also intend to have a significant partnership with one or more industry participants.
Additionally, we will continue to evaluate potential M&A opportunities in the pet Chem space.
Turning to Cushing South pipeline.
In June 2021, we commenced service almost 65000 barrel per day crude oil pipeline, providing transportation service from our Cushing terminal to our Nederland terminal, which also provides access for powder River and DJ basin barrels to our Nederland terminal being an upstream connection with our white cliffs pipeline.
In the first quarter of 2022, we completed phase two which nearly doubled the pipeline's capacity to 120000 barrels per day.
The majority of the capacity is undertake or pay contracts and the pipeline is already utilized in both phase one and phase two capacity.
To move volumes south to our Gulf coast terminals, providing significant revenue potential as the arbs improve.
Next in April we placed into service the Ted Collins link, which provides market connectivity for our Houston terminal the Ted Collins link gives us the ability to fully load and export <unk> barrels as well as low gravity Bakken barrels out of the Houston market, demonstrating energy transfer's unique ability.
To provide a neat bakken barrel to markets along the Gulf Coast in April we completed our inaugural shipment at all from our Houston terminal for export utility utilizing this system and expect our export volumes to grow throughout the year.
Our Permian Bridge project, connecting our gathering and processing assets in the Delaware and the Midland basis were placed in service in October of 2021 and.
In addition in the first quarter of 2022, we completed an expansion of Permian Bridge, which brought the pipeline. Its total capacity to over 200000 Mcf per day. This project allows us to move rich gas out of the Midland basin to utilize available Delaware processing capacity more efficiently.
While also providing access to additional takeaway options is being utilized to provide operational flexibility between our processing facilities in the two basins current Permian basin plant inlet processing volumes are over two two bcf per day, and we're evaluating our options to meet increasing production from the base.
Construction of our new $200 million.
Cubic foot per day Graywolf processing plant in the Delaware Basin has commenced the gray Wolf plant is supported by new commitments and growth from existing customer contracts and is expected to be in service by the end of this year.
In addition to providing incremental revenue to our midstream segment once in service the volumes from the tailgate of the plant will utilize our gas and NGL pipelines for takeaway, providing additional revenue streams for our intrastate and NGL segments.
And due to significant producer demand, we anticipate moving forward with a second processing plant in the Permian Basin.
For which we are currently determining the best location plan is already included in our 2022 growth capital forecast, we continue to be very excited about our pipeline project from the Permian Basin.
To address the growing needs for additional natural gas takeaway. This project has significant advantages over competing projects.
It would include the construction of a new intrastate pipeline from the Midland Basin to our extensive pipeline network south of the DFW area paralleling existing right away.
From there our vast pipeline systems provide significant flexibility to deliver natural gas to premier markets, along the Texas Gulf Coast, including Kt Beaumont, and the Houston ship channel as well as to Carthage with potential deliveries to most major U S trading hubs in markets.
Given the strong interest we are seeing for this project and ongoing producer discussions we hope to announce additional information soon in the meantime, we are working on time sensitive surveys and the regulatory process has already begun.
This project is an ideal solution for natural gas growth out of the Permian Basin and it's clearly the best choice for customers in regard to timing cost flexibility and the access to multiple premium and liquid markets given the proposed route and our ability to utilize the existing assets. We believe we could complete.
Construction of the project in the two years or less once we have reached.
In the meantime, modernization and Debottleneck and work on our <unk> pipeline continues which will add an incremental 60000 Mcf per day of much needed capacity out of the Permian Basin. This capacity is expected to be available by the end of 2022.
Next construction on the Gulf run pipeline, which is a 42 inch intrastate natural gas pipeline with 165 Bcf of capacity is underway Gulf run is backed by 20 year commitment for one one Bcf per day from Golden pass LNG, and we will provide natural gas transportation.
<unk> between the Haynesville shale and the Gulf coast connecting some of the most prolific natural gas.
We're seeing regions in the United States with the LNG export market pipeline.
Pipeline construction is underway and is expected to be completed by the end of 2022 <unk>.
As demand continues to grow out of the Haynesville, we expect to move forward with an expansion project in the not too distant future.
Turning to our Trans Panama Gateway pipeline, we are working closely with the appropriate entities within Panama to successfully bring this project to fruition animals.
Panama's geographic location and favorable investment climate make this an attractive project.
We remain optimistic about the trans Panama Gateway pipeline and the significant value it will bring to markets around the world.
Now for an update on our alternative energy activities, we continue to pursue a number of projects related to carbon capture including sequestration enhanced oil recovery and utilization projects. We are in active discussions with several developers who have applied for class six sequestration permits.
The EPA in Louisiana, and close proximity to our facilities that would be good candidates for carbon capture and sequestration. Unfortunately, the approval process for these sequestration permits generally takes two to three years to obtain.
However, in addition to our desire to lower our carbon footprint, we remain focused on our primary business, which is providing the essential energy infrastructure necessary to grow domestic energy production, which is vital to ensuring our country's energy security and the growing needs worldwide.
Biding additional supplies of clean affordable and reliable natural gas and vital natural gas liquids is the most logical and quickest way to reduce emissions, while also significantly improving the quality of life for billions of people and developing nations around the world.
With a significant growth in our natural gas transportation and natural gas liquid segments, along with our extensive export capabilities through our NGL terminals and with line of sight to reach FID.
For our Lake Charles LNG project, we expect to continue to play an important role in reducing emissions, while improving living conditions throughout the world.
Now, let's take a closer look at our first quarter results consolidated adjusted EBITDA was $3 3 billion compared to $5 billion for the first quarter of 2021.
For the first quarter of 2021 included a contribution of approximately $2 4 billion.
From Winter Storm Yuri.
Excluding this contribution first quarter 2022, adjusted EBITDA would have been up approximately 25% over the first quarter of 2021.
DCF attributable to the partners as adjusted was $2 1 billion for the first quarter of 2022 compared to $3 9 billion.
For the first quarter of 2021 again as a result of the impact to the prior period from Winter Storm Yuri.
For the first quarter, we saw higher transportation volumes across all of our segments as well as a full quarter contribution from the enable assets that were acquired in December 2021.
On April 26th we announced a quarterly cash distribution of <unk> 20 per common unit or 80 stance on an annualized basis.
This distribution will be paid on may 19th to unitholders of record as of close of business on May nine.
This distribution represents a 30% increase over the first quarter of 2021 and represents another step in our plan to return additional value to unit holders, while maintaining our leverage ratio target of four to four five times debt to EBITDA.
Now turning to results by segment, starting with NGL and refined products adjusted EBITDA was $700 million compared to $647 million for the same period last year.
This was primarily due to higher fractionation and refinery services margins higher terminal services margins related to increased throughput at our Nederland terminal and the first quarter of 2022 as well as an increase in our northeast blending and optimization activities.
NGL transportation volumes on our wholly owned and joint venture pipelines increased to $1 8 million barrels per day compared to $1 5 million barrels per day for the same period last year.
This increase was primarily due to increased export volumes feeding into our Nederland terminal and higher volumes from the Permian and Eagle Ford regions.
And our average fractionated volumes were 804000 barrels per day compared to 726000 barrels per day for the first quarter of 2021, we recently tied our one day maximum throughput record through the Fracs at over 960000 barrels.
And for the month of April we reached an all time monthly throughput record, averaging well over 900000 barrels per day.
For our crude oil segment, adjusted EBITDA was $593 million compared to $510 million for the same period last year. This was primarily due to higher crude transportation volumes on our Texas crude pipelines improved performance on our Bakken and Bayou Bridge pipelines increased <unk>.
Foot at our Gulf Coast terminals as well as the addition of the enable assets in December of 2021.
Crude oil transportation volumes increased $4 2 million barrels per day compared to $3 5 million barrels per day for the same period last year, driven by higher crude oil prices higher refinery demand and winter storm here impacting crude oil production in the prior period.
For our midstream adjusted EBITDA was $807 million compared to $288 million for the first quarter of 2021.
This was primarily due to the acquisition of the enable assets in December of 2021, and an increase related to favorable NGL and natural gas prices as well as increased production in the Permian and South Texas regions. In addition, the first quarter of 2021 included a negative impact related to winter storm year.
<unk> that did not occur in the first quarter of 2022.
Gathered gas volumes were $17 3 million <unk> per day compared to 12 million Btu per day for the same period last year due to the addition of the enable assets increased production in South, Texas as well as additional gathering capacity from the Permian Bridge pipeline in West Texas.
Permian Basin volumes continue to be strong and Midland inlet volumes remain at or near record highs were utilized in the Permian bridge daily to optimize our available processing capacity as well as increasing our processing capacity in the area to accommodate incremental demand we are seeing.
In our Interstate segment, adjusted EBITDA was $453 million compared to $453 million for the first quarter of 2021 during the quarter. We benefited from the addition of the enable assets as well as the volume growth on our trans Western Rover and trunk line systems as a result of.
Increased rates and higher utilization due to more favorable market conditions and volume growth in the Haynesville shale well.
While volumes have continued to improve this growth was partially offset by a decrease due to gains recorded in the first quarter of 2021 related to winter storm Yuri operational gas sales. In addition, adjusted EBITDA was impacted by contract expirations and a shipper bankruptcy on our Tiger pipeline.
More recently, we have seen steady growth in the Interstate segment with France, Western continued to benefit from high prices and demand for gas delivery out west.
And truck line and Tiger about seeing strong demand related to increased activity on the Gulf coast and in the Haynesville shale. In fact, we are currently seeing record volumes from Tiger.
And for our intrastate segment, adjusted EBITDA was $444 million.
Compared to $2 8 million for the first quarter of last year. The change was primarily due to the absence of higher earnings from winter storm here in the first quarter of 2021, which was partially offset by the addition of the enable assets in December of 2021.
Since the end of the first quarter, we have seen heavy utilization on our <unk> system due to increased demand for gas takeaway out of the Permian as well as strong volumes in South Texas. In addition, due to increased activity in the Haynesville shale our rich pipeline system is currently flowing at.
Our near capacity, we expect this demand to continue through the rest of 2022.
Now turning to our 2022 adjusted EBITDA guidance, given our strong performance in the first quarter as well as continued increasing demand for our products as we move through the rest of the year. We now expect our adjusted EBITDA to be between $12 2 billion to $12 6 billion.
This is up compared to our previous guidance of $11 8 billion to $12 2 billion.
And moving to growth capital update for the three months ended March 31, 2022 energy transfer spent approximately $390 million on organic growth projects, primarily in the midstream Interstate and NGL and refined product segment, excluding sun and USA compression capex.
For full year 2022, we now expect growth capital expenditures, including expenditures related to the recently acquired enabled assets to be between one eight to $2 1 billion.
Compared to our previous forecast of one six to $1 9 billion.
Our revised growth capital reflects the addition of spend associated with our new Permian gas takeaway pipeline.
Now looking briefly at our liquidity position as of March 31, 2022, total available liquidity under our revolving credit facilities was approximately $2 billion and our leverage ratio was 355 times per the credit facility. We continue to have strong support from our banking partners and in April <unk>.
'twenty two we amended our 5 billion revolving credit facility to extend the maturity to April 2027% with substantially the same terms and pricing. We continue to expect to generate a significant amount of cash flows in 2022, which will be strategically allocated in the manner that best positions.
To continue to improve our leverage invest in high returning growth projects and returning value to our unit holders and we expect to continue to pay down debt throughout the year with excess cash flow from operations.
During the first quarter, we saw strong performance from all of our segments with significant volume growth supported by improved production and increased demand that we expect to continue throughout 2022, we.
We have already seen further improvements in production and market conditions and domestic and international demand for our products since the end of the first quarter and we expect this to positively impact all of our segments for the remainder of 2022 or.
Our balance sheet remains strong and we remain focused on improving our financial flexibility and paying down debt.
As we approach our leverage target range, we will continue to evaluate returning additional capital to our equity holders through distribution growth on a quarterly basis, we remain bullish about the future of our industry and the need for natural gas and natural gas liquids as we look for additional ways to address existing and new demand for a product.
<unk>, we will continue to evaluate and pursue strategic growth projects that enhance our existing asset base and generate attractive returns like our Permian gas pipeline project.
And we will also look to make progress on the alternative energy front.
Which can further enhance and effectively grow our energy franchise operator. Please open the lineup for our first question.
Thank you we will now begin the question and answer session. We ask that you. Please limit your time to one question and one follow up.
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And from Bernstein, we have Jean Ann Salisbury. Please go ahead.
Hi, I just had a couple of questions about Lake Charles.
Exciting that you're targeting.
Fourth quarter 2022.
Can you just kind of walk us through besides getting contracts. The other things that would need to happen for that I think there was engineering review going on I think you need a FERC extensions getting a partner, but I'll, let Scott Brown's leaching.
Yes. This is Tom Mason.
The charge of our LNG project and we're really excited about where we are today, we've got really strong demand.
From a really high quality customers. So we're really confident about reaching.
The marketing and the offtake agreements is key to getting a deal done.
The other things that you mentioned are under way that the update on the EPC bid process did refresh is underway.
We.
Application for an extension of our construction deadline with the FERC.
We understand that's in process.
We're confident that we will.
We received approval of that in the near future.
So I think things are going well and we're really excited about it.
Okay.
Contracting and sort of the.
The time critical path I guess.
Yes, yes.
The worlds.
Kind of gone upside down with the.
What's going on in Ukraine.
It's kind of accelerated the demand, but yes, the contracts or the.
Getting item that we're really making good progress.
And then Matt.
Let me add one thing if I could just sorry about that I was listening to Tom long and listen Tom Mason and Theyre pretty even keeled late late that.
And I don't think there theyre excited because I don't really show how excited we are and this LNG project has really taken off it said it took a travesty like what's going on in Ukraine to wake up the world. It certainly has woken up Europe , and Asia, and China, hopefully the wake up some of our administrators, but.
Tom has done a fantastic job and we've got an enormous amount of interest as you can imagine and we are shocked if we don't get there by the end of this year and look forward not only to get that project.
Down the road and sign but also look forward to all the upstream.
Pipeline transportation business will come with that project.
Well.
Thanks, a lot.
Got it.
And then just as a follow up to that can you kind of comment on whether you are actually seeing European utilities sign contracts. It seems like theres been a lot of contracting but not really from then.
Do you see that as marketers or just any commentary that you can provide on that would be helpful.
Well, it's an interesting question because.
Utilities are kind of struggling with.
Trying to satisfy their immediate and near term.
Demand for gas.
Could imagine but.
For long term contracts Theyre still interested I think theres been kind of some issues with financial.
Matters based on the high prices paid for natural gas currently and so there could end up being some government guarantees for some of the longer term off take contracts.
So we're certainly in contact with them that you're right there's kind of been.
Lack of real.
Commitments for long term contracts at this point.
Okay, Great I'll leave it there and thanks, a lot for taking my question.
From Jpmorgan, we have Jeremy Tonet. Please go ahead.
Hi, good afternoon.
Hey, Jeremy.
Hey, just wanted to start off with.
The EBITDA guide uplift here I wanted to dive in a little bit up for what's happening in 2022 here. If you could break down the drivers being at better than expected volumes or is it better than expected price thats the driver here.
If I look at the first quarter results and I annualize that granted theres some seasonality in the business. So we can kind of point to over the high end of the new range. So just wondering what some of the puts and takes could be there.
Yes. This is Tom long.
Jeremy I'll kick off with that.
Clearly the first quarter were very very excited that we've got great results out of the optimization team.
When you look at our assets, even as we went through think Youll note the Amtrust state segment.
But as you look out through the rest of the year.
We've been pretty conservative on pricing, which was another obviously a big a big.
A big component of it is we took the guidance up and.
<unk>.
We were very intentional on staying conservative on that so we'll see how the rest of the year really plays out, but I would say that the first quarter.
You can see the amount were up and that's really basically the amount that we took the guidance up overall as there.
The run rate if you were really looking at that first quarter.
From a result standpoint.
Probably in the range of 200, and maybe $25 million or 250, you could put in put into the <unk>.
They call it the one time type bucket, but not nonrecurring type, but at the same time, we do have a fantastic team and a great asset base. So optimization is something that will always play a play a big role in our results.
Got it that's helpful. There, thanks, and as I think about the.
Is it Capex uplift there just wondering is that really just related to the Permian gas project or are there other gas or are there other projects to call out there for the Capex range and just wondering is 23 moving around as well higher or just any kind of thoughts on the cadence of capex here would be helpful.
Yes. This is Mackie again, Jeremy there are we've got a lot of moving parts as you can imagine to our partnership.
As you know, we're doing very well.
Decided we are going to build another plant and trying to figure out exactly where that's going to go we had a lot of gathering opportunities.
Most of our large projects multibillion dollar projects are built out and Thats really.
The earlier question as we go into this year and in future years, we were able to bring a lot of volume and a lot of revenue.
Those assets that we've already completed but for.
For the most part.
It is we do have or you're in there we do have great Wolf.
A portion of all Youre in there do have great Wolf and then.
And then this other plant that we've talked about expanding here in the near future.
Got it that's very helpful I'll leave it there thanks.
From UBS, we have Brian Reynolds. Please go ahead.
Hi, Good afternoon, everyone, maybe just as a follow up the Capex, maybe looking out a little bit further to 2023, we've seen some recent attractive capacity you get out of by peers.
And your comment.
Remarks about reaching record Frac volumes I was just curious about how energy transfer is thinking about frac eight at this point just given that I believe it's half complete at this point.
What are the capex needs left to complete that project.
Yes, Brian that's a great question as we speak we're moving more volumes out of the Permian and more volumes out of the Eagle Ford than we've ever move NGL volumes. So we are going to make that decision sooner than later, we're at our full Max capacity right now run around 960. However, we don't want to move forward until we have secured.
Long term commitments for that next Frac, we do anticipate that happening, possibly in the next quarter or so maybe sooner, but we're going to as we've done we're going to be prudent around our capital and we'll we'll spend that capital when needed, but we do anticipate making that decision in the not too distant future.
So just to clarify that could just be upside if you wanted to capex or is that mostly 23.
It would be mostly in 'twenty three.
Okay I appreciate it and then as my follow up you know lots of progress on the LNG front with the recent flurry of contracts just kind of curious if you could provide some thought process around that.
The ultimate ownership structure and potentially bringing in partners, whether that's a financing partner a strategic partner.
Given the ultimate interest in LNG, and ultimately how that would fit into the ultimate energy transfer portfolio. Thanks.
Yes. This is Tom Mason.
We as we previously announced we plan to do some portion of equity sell down to primarily infrastructure funds. There is lots of money that we're looking for high quality long term cash flow through a project like this so.
So we think thats going to be a really good way of financing it.
Expect that we keep at least 25% of the project.
Good.
Decisions on that yet.
It's going to be they're just a lot of interest in the equity side of this project.
Great I'll leave it there thanks for the time and have a good evening.
Okay.
From Wells Fargo, we have plenty of Citi. Please go ahead.
Thanks, Good afternoon, just sticking on Lake Charles I guess, if you did move ahead with the project can you quantify how much of a gas demand pulled this could have on your existing pipes I guess, it would be trunkline and Gulf run that feeds into it how much spare capacity do you have on trunk line would you have to expand either trunk line or.
Our Gulf run because of Lake Charles.
Yes. This is mackie.
Absolutely, we'll be looking to expand trunk line will be lifted and Gulf run as we've talked about on this call.
We'll continue to pursue the project West, Texas that will also we anticipate feed into this so the beauty about our pipeline net both intra and interstate.
Unlike most of our competitors, we can aggravate large volumes from multiple basins and bring it to points like this to Henry hub into Lake Charles So we mentioned on the <unk>.
When Tom started out.
CT is reading is that we will be probably going out for an open season on Gulf run here sometime latter part of May we think there'll be a significant amount of interest but at the end of the day, we will be.
Anticipate transporting up to two to two seven Bcf a day Lake Charles.
And two additional markets in that area.
Through our pipeline network.
Got it thanks and.
And then I think you noted haynesville production has really started to pick up the last few months are you seeing any interest for long term contracts on your pipes in the region and I guess, specifically I'm asking about Tiger.
Is there a path maybe contract this pipe up or is it more kind of interruptible volumes that are flowing on it right now.
Well.
And earlier, we are almost at full capacity a lot of that is month to month. However, we have even recently contracted up I'll give an example, we contracted up a producer.
We'll ramp up to 550000, a day that will utilize both tiger capacity.
Gulf run capacity and capacity through our intrastate pipeline network and cartage. So we just cater to whatever the producer looks for us.
As far as where theyre trying to get to on the Gulf Coast and we.
Our issue right now is we got to go find the capacity of the Haynesville is growing faster or as fast as any of the basin and we will play an integral part like we already are and finding a way out of that area and Gulfport is one major outlet along with our other intrastate pipelines in frontline.
Got it thank you.
From credit Suisse, we have Spiro Dudas. Please go ahead.
Thanks, operator afternoon guys.
You clean up questions on Lake Charles if we could.
Just a multipart question here, but just curious how you guys are thinking about expected project returns and maybe what sort of Capex. We could think about going forward is its a pretty typical midstream return maybe six to eight multiple or can you do better than that.
Then as you think about getting to FID.
Is there a level of capacity you are trying to contract first what does that look like and then finally it sounds you are talking to several partners here on this ultimately how much of this project are you kind of willing to sell down is there a target number in mind.
Yes.
This is mackie sure Tom May follow up on this but.
We have a lot of projects.
And the capital to pursue those projects, we've got to be prudent about that so there are certain thresholds.
We certainly will make sure that we meet those thresholds.
A lot of the revenue that we anticipate receiving from the LNG project is really from the pipeline infrastructure from bringing in.
Transporting natural gas to this facility so at the end of the day.
I have no problem on as low as 25%.
We will operate it we will bring all the volume in there.
We will.
More than happy with that.
At level.
Far as.
What level to get to.
As we've mentioned, we probably have twice the interest that we have capacity for right now in our 15 million tons. So we're highly optimistic that we will fully contract contract. This out, but we will certainly make that type of business vision as we get closer.
As we get closer to the end of the year and get all these contracts lined up.
When we will move forward, but.
We'll make the right business visit that.
We say, we're highly optimistic that we will have this fully contracted by the end of the year.
Yeah, No that's super helpful. Thanks for that Mackie second one on Capex.
You all used to talk about the sort of long term capex run rate range of 500 700 million for the growth side and haven't seen that referenced in a while and obviously that was before enable and really before this current environment. It sounds like <unk> got a lot in the hopper a lot of exciting things to talk about but just curious how youre thinking about that run rate going forward, especially as youre growing the.
Distribution.
What sort of Capex annually should we think about you guys spending going forward to maintain your sort of capital parameters.
Yes. This is Tom long.
Yes.
Clearly touched upon the fact that we've got a lot of great projects here no doubt.
We haven't got any of them too.
So the five to 700 million that we've put out we're probably not prepared to put out a 2023 at this stage I will tell you as we go through the year and as these projects get approved with probably we'll go ahead and update that but at this time.
This is.
We really don't have another further update other than these projects.
As we move forward to get them.
Got it understood.
I appreciate that awesome, all Anthony guys. Thank you.
Thank you.
From Goldman Sachs, We have Michael Lapidus. Please go ahead.
Hey, guys. Thank you for taking my questions and thanks, operator, I have two theyre kind of unrelated one.
Just in the northeast.
Or are you thinking I know you just got Mariner East online I know it.
Finishing up to and to ask and I know, it's been a lengthy process. How are you thinking though about the potential to expand if there is potential to expand to an <unk> or the broader kind of west to east system.
How do you think about it if there is opportunity to expand Marcus hook.
Okay.
Hey, Matthew this is mackie.
Gosh, we're so happy to be on the road on Mariner after all these years.
We've built an incredible network there are three different pipelines that can move a variety of products.
We have enormous capability, just adding pumps to significantly increase the throughput on that really where additional cost will come in for any storage or chilling tight.
Assets that will have to build that Marcus hook as we alluded to earlier on this call we have sufficient volumes for another ethane expansion at Marcus Hook.
Not sure if that's best suited or if it's better to expand at Nederland next we will be making that decision over these coming weeks, but we certainly expect over the next year or two to be expanding Marcus hook in a big way.
Said, we built quite a franchise with a lot of money a lot of time a lot of effort a lot of stress. We're past all that we've got enormous amount of custom.
Customers around the globe, we're talking to as many as 600000 barrels a day of NGL markets out there. So there's plenty of markets out there and so are our job from a commercial standpoint is to go secure.
Commitments, which we have done and we will.
We will be moving forward on expanding.
Marcus Hook and Neil one over the next several years.
Got it and then one follow up totally unrelated to that can you.
<unk> talked about it on multiple earnings calls and at multiple conferences.
Can you give a little more detail on the potential project in Panama.
Trying to get my arms around size.
Around a little bit around kind of between a route you were thinking about the complexity of construction.
Kind of a multiyear construction process that can be a difficult construction process and I'm trying to think about kind of a ballpark range.
Sure.
And then whether you want to be the polo neurons that type of project.
Yes.
We're really still pretty early in this process, we couldnt be like a lot of this more excited about.
The relationships that we built down there and the opportunity for that it's pretty mature to begin talking about capital or even the exact route for a number of reasons, we're going through a process that is required in that country.
Very excited we think at the end of the day this could be.
A very significant international hub for the world not just for the Caribbean or the Western coast of.
North and South America, but also of course for Asia. So, it's a little bit preliminary to give any major details, but we remain very excited about that project.
Got it. Thank you guys much of Brean capital.
From Wolfe Research, we have Keith Stanley. Please go ahead.
Hi, Thank you.
Start on the distribution. So you've now had two quarters, where you reason it.
Pretty quickly and pretty steadily.
What factors are going to govern the pace of increases going forward and if the balance sheets on track I mean, the business is doing very well is there any reason to think it won't be more of the same of what we've seen in the past two quarters until you get back to that $1 22 goal.
Yeah.
You've probably touched upon one of the most commonly asked questions here right now.
Really don't want to get out in front of the board.
I know that we've been saying that we will evaluate this quarter by quarter clearly.
Great great start to the year with.
With the first quarter results and what we've seen so let's let's just kind of get through each quarter and have the discussion with our board on this as we move forward.
There's other things that are factored in here when we talk about our capital allocation and that's a lot of these great projects that we're talking about here today.
Likewise, just to continue to look at the.
The leverage metrics, but I do want to reiterate what you said, we have made great progress toward moving toward our target of that 4% to four and a half as you know each agency calculates that a little bit differently. So.
Encourage you to reach out to each of them to see kind of where they're at but we're getting getting closer to the two of the four and a half. So let all those let us look at all of those factors quarter by quarter as we move through the year and that will go in go into that that decision each quarter.
Great and sorry, I have I have more on Lake Charles.
First just confirming.
It sounds like three trains I think Maggie you referred to two and a half Bcf a day in the <unk> capacity figures. So youre thinking three trains and then second I'm just thinking if you sold down the projected to only a 25% ownership interest.
Just given the economics around that what in your equity sort of investment need and the export facility then be an extremely small number.
Yes.
Yes. This is Tom yes, it would be.
Obviously, we would expect to have some kind of promoted interests from the on the equity side. So our capital requirements would be relatively small and of course based on growth.
Or four year period yourselves so.
The returns can be.
White goods based on with little capital being deployed.
And this is Tom long I'll chime in a little bit more I'll, just add a little bit more to that.
It's a little bit early to try to try to put a number on that we havent really.
Other than having some inbounds from really haven't started a lot of discussion on the equity it until we move through the contracting phase. So it's it's one of those that over the next couple of quarters as we as we continue to.
Tom Tom and his team continue to make great progress on the contracting that we will be able to put our thumb a little bit more on that number.
Got it and three trains is the right way to think about this at this point.
Yes, correct.
Thank you.
From Tudor Pickering, Holt, we have Colton Bean. Please go ahead.
Good afternoon, so just jumping back to the base business. Tom you mentioned the optimization earnings and interest rate I think when we look at the Oaxaca acuity spread it was actually relatively flat quarter on quarter, but you all still saw a pretty significant step up there. So just wondering if you can update us on what the dynamics were that drove that optimization opportunity.
Yes. This is mackie theres a number of things that we've said it before you had happened during <unk>, we have such an extensive pipeline system throughout Texas, we have incredible mass storage strategically placed well in the Houston area and also in the DFW area, we're connected to the vast majority.
The power plants, either directly or indirectly will connect every major LDC in Texas, and so anytime there is any kind of volatility of price movements were really able to capture that as well as spreads from day to day. There. There was there were times in that quarter, where the spreads were higher from going from.
East, Texas to West, Texas, There was a period of days where.
The basis spread was gosh, I think $1 higher for at least a day or so higher than the one in Katy. So it is just our optimization team.
Optimizing our assets and our pipelines in our storage at every opportunity that we have and with the assets we have those opportunities arise quite often.
Early cold weather times high demand and also high heat days.
Understood I appreciate that and then just on the unable now that you have the majority of operations integrated can you update update us on the level of synergies you were able to realize in Q1 and when you would expect to hit that $100 million run rate.
We have quantified it for the year of 2008 talking about this year of 2008.
<unk> of $75 million is what we've what we've put out there as far as the first quarter.
Don't really have a.
I don't really have a specific number at this point.
Four.
That number of broke out but I think overall, we still expect to hit that 75%. This year, but I will say that we feel very good about that 100 million run rate annually. As we look out I think it's also just worth noting overall that all the results. We have moved very quickly on getting all of this integrated but I will tell you that all.
The results that are.
<unk> come in and even through the first quarters, we've integrated have been above and beyond any of the projections that we had run in the in the merger as we were going through.
Putting those numbers into the S. One so we're very very excited.
Excited about this transaction and it's turning out to be.
A very very good project for us so acquisition.
Got it I appreciate the time.
From Mizuho, we have Gabriel Moreen. Please go ahead.
Hey afternoon, everyone, maybe I can ask on the proposed outcome cracker projects I just was wondering clearly it would exceed your cost of capital I'm, just wondering to what extent.
That project's water I guess integrated with some of your other assets, where their NGL pipelines, whether you're kind of looking for commitments.
Further upstream with pipe with a project or whether it's really just a standalone viewed as a standalone project.
Hello, Gabe this is Matt no absolutely not a stand alone it would be like we do all of our business we look for synergistic.
Benefit in revenues, both upstream and downstream so the.
The project that we're targeting and gaining a little momentum with a lot of very high quality customers would give us access to what we believe will be.
Very inexpensive or less expensive gasoline components eight years from now when when maybe gasoline demand will start kind of leveling out some at some point, we do believe that some of the the feedstocks for this particular cracker that we're designing would be.
Very advantageous.
This in addition to that along with our spin will top asset that we just bought in and our plans to kind of connect the dots between Louisiana and Houston with an ethylene system in a propylene system.
This pet Chem also have access downstream to not only our pipeline network in our storage network, but also have access to our export business for international deliveries. So now we're looking at.
Yes, we're looking for a project very similar to LNG, where we'd probably be a minority interest with <unk>.
Promoted partners in that and it would have it fully contracted with significant both upstream and downstream revenue.
Part of that project.
Thanks, Matthew and maybe if I could just follow up.
Another mid con process or this morning talked about their expectations for growth in 'twenty three I'm just wondering if.
And any of your secondary basins, you'd kind of concur with that expectation and then are you a secondary basins you concur with your expectations for growth in 'twenty three.
And to the extent that that's the case.
Whether you'd be running out of space would need to spend any capex there.
Yes, let me do this quickly go so we've talked about the Permian Basin. We are building a plant there we're going to build another plant will continue to evaluate that.
In accordance Haynesville will continue to evaluate new pipelines out of that area Eagle Ford, we're sitting pretty good at least for the next year or two we've kind of built out, but we will be looking towards the end of this year or whether or not we need to expand that or not so really stepping up in the mid con and in Oklahoma. We are we have seen the rigs move back in we're getting our arms around the naval assets our team.
We're very excited about what's going on up there our commercial team is working very hard on.
Energizing those those plants and how do we more efficiently and profitably operate those of course, ultimately we will be bringing those ngls into our system.
Right now, we don't contemplate, adding any additional project plants up in the mid continent or in Oklahoma will be certainly watch that closely and make sure we stay.
Hey ahead of that once they are needed.
Thanks Mark.
Thank you.
From Bank of America, we have Chase Mulvehill. Please go ahead.
Hey, good afternoon, Thanks for squeezing me in.
I guess, one question I guess related on the pet Kim.
You talked about M&A opportunities in the pet Chem space. So.
So I don't know if you could talk about what part of the pet Chem value chain, you're targeting specifically here on the M&A side, and whether youre kind of looking to build scale in the pet Kim.
Face or you're looking for maybe a minority ownership. So you can work closer with a.
Pet Chem partner.
This is Tom long I'll take off and then Mackie.
Add a little bit more but we have been out.
Evaluating various acquisition opportunities, we still feel like that's a that's a good way to enter at the same time, we've got a very good team and we're quite comfortable with starting with a greenfield type project. So we're going to we're going to continue to look at those and yes. It would it could be.
Partial.
Joint venture if you will we're quite open to that in order to be able to step into the skill set that it takes to move into this or it could be a total acquisition. So we're looking at basically all of the above as we evaluate this including a greenfield build.
Yes, I think the only thing I'd add to that.
With calcium desire to get into pet Cam, we will look at anything we're going to look at everything that comes available.
Any opportunity.
Okay.
What's something looks attractive we'll go after it.
That's the Kelsey disclaimer.
Yes.
So quick follow up.
Quick follow up and sorry, sorry to come back to Lake Charles.
But when we think about that.
Permitting.
Sorry, the contracting with Lake Charles are you looking at these contracts just tolling fees or do they actually have some some commodity upside exposure as well.
They're basically.
Liquefaction charge, but there is a component like most of the contracts on the Gulf coast that are tied to Henry hub plus a percentage.
Of that so.
There is the higher natural gas prices are that there is room for additional cash flows from that.
Yes. This is Matt I'll add one thing to that we intend to.
Contract out about 15 million tons, but as you know thats nameplate and there is a fairly significant volume above that that will be able to take advantage of as time goes on.
When we see blowouts in prices between the U S.
In Europe and Asia.
Okay, perfect I'll turn it back over thinks about it.
Thank you we will now turn the call back over to Tom long for closing remarks, Mr. Long you May proceed.
This is mackie again before Tom does that let me just say one thing we've done this from time to time.
Kind of joke, a little bit earlier, how excited we are and we are we're excited about the assets that we have we're excited about the employees that we have and if you just kind of walk through real quickly just in this quarter. Our intrastate volumes were up 17% our Interstate volumes were up 15%, our midstream volumes were up 14%, our ngls with record volumes.
Alluded to earlier were up 17% kind of make a decision around our necks brack. The next probably six months.
We're really proud about our crude we we've grown over 20% from quarter to quarter in a very tough crude environment, where there's not as many barrels available out there in the Permian.
Our team has done an excellent job there and we've also really gained a lot of traction through our terminals increased debt by 17%. So as I mentioned earlier, what's happened with Ukraine, We hope will wake up our country and wake up our leaders to how important natural gas is a natural gas liquids are not only because of the affordability.
<unk> building all of that but for security.
Only for the U S. But also for the world. So hopefully we wake up because we need our leaders do.
Okay.
Alright, well. Thank all of you for joining us today, and we look forward to any follow up questions you might have.
Okay.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.
Okay.
Okay.
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