Q1 2022 EnLink Midstream LLC Earnings Call
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Good morning, and welcome to the Enlink Midstream first quarter 2022 earnings conference call.
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I would now like to turn the conference over to Brian <unk> Director of Investor Relations. Please go ahead.
Thank you and good morning, everyone welcome to Enlink <unk> first quarter of 2022 earnings call participating on the call today are Barry Davis, Chairman and Chief Executive Officer, Ben Lamb, Executive Vice President and Chief Operating Officer, Pablo Mockado Executive Vice President and Chief Financial Officer.
And Bob Purgason, managing director of carbon solutions.
We issued our earnings release and presentation. After the markets closed yesterday and those materials are on our website. A replay of today's call will also be made available on our website at www Dot 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.
It can be found in our press release presentation, and our SEC filings.
This call also includes discussion pertaining to certain non-GAAP financial measures.
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 will start today's call with a set of brief prepared remarks by Barry Bob 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. Thank.
Thank you, Brian and good morning, everyone. Thank you for joining us today to discuss our strong first quarter 2022 results, which included record quarterly adjusted EBITDA there.
The results of the first quarter are a great example of the step change in the momentum that we're seeing in our business.
The progress we have made over the past several quarters is impressive and the outlook for 2022 and beyond continues to strengthen.
Our business is clearly benefiting from a supportive commodity price environment.
However, the strong execution by our team has amplified the benefit from higher commodity prices.
Our continued focus on executing the Enlink way our discipline in capital light approach and deep customer relationships are what has enabled us to report this record quarter.
A few items I want to specifically highlight as we begin today they are.
In the first quarter Enlink achieved adjusted EBITDA of approximately $304 million, which marks an impressive 22% increase over the prior year.
Our strong cash flow generating platform delivered an impressive $105 million of free cash flow after distributions.
Importantly, these robust results were driven by strength across all of our segments each of which it is firing on all cylinders.
Turning to the outlook for the rest of this year last night, we announced increased 2022 guidance, which implies 16% growth at the midpoint and adjusted EBITDA over 2021.
The turnaround we're seeing in Oklahoma is perhaps the most impressive where are we now expect meaningful volume growth to return in 2023.
I am equally impressed by the execution of our carbon solutions group since its formation less than a year ago.
Last night, we announced our first customer.
The low carbon ventures with the execution of a letter of intent to enter into a transportation services agreement.
Which enables enlink to serve as the provider of C. O two transportation services for Oxy, along the Mississippi River corridor from wagon to Baton Rouge.
In addition, a little over a month ago, we made a big addition to the leadership of our carbon solutions group when Bob Purgason joined Us.
As we thought about the size of the opportunity and the work needed to fulfill its potential we saw the need for an executive level leader, who could bring strategic vision and deep experience building new businesses.
Bob is not entirely new to the Enlink team as he served as CFO of our predecessor Cross tax and was critical to our success in building and setting the stage for where the Louisiana segment is today.
So having worked closely with Bob I am confident in his extensive industry knowledge deep connections within the market and business development experience combined with his leadership abilities.
Which will be extremely complementary to our team.
And lastly, with respect to our own ESG efforts, we recently issued our fourth sustainability report.
As we have said before sustainability as part of our DNA and I'm proud to report significant progress through the first quarter of 2022, we have accomplished approximately 40% of our goal to reduce methane emissions intensity by 30% by 2024.
Before I turn the call over to Bob to hear more about our growing Ccs business I'd like to take a minute to thank our team for their relentless effort.
As we advance our vision of becoming the future of midstream by leading in innovation and creating sustainable value for our stakeholders Bob.
Well, thanks, Barry and good morning, everyone.
First I wanted to say how great. It is to be back at it and like it.
It's been a real pleasure reconnecting with my colleagues, especially in Louisiana and working with this exciting team.
Our carbon solutions team.
Has been busy with both existing and potential industrial customers, along the Mississippi River corridor.
All of whom are looking to improve their C. O two emissions profile Street C. D C S.
I'm pleased to discuss with you our first commercial success with the signing of Oxy low carbon ventures.
Last night, we announced the execution of an LOI to enter into a transportation services agreement.
Which would enable enlink to serve as the provider of C. O two transportation services for Oxy, along the Mississippi River corridor from.
From Wagman to Baton Rouge.
Unlike the relationship that we announced with Tallo slashed quarter. This would be very similar to our standard transportation service agreement.
One that you would see in a traditional midstream operation.
Consistent with our strategy of utilizing assets already in the ground.
We would use both existing and some new build pipelines and related infrastructure to transport <unk> from industrial emitters, along the Mississippi River corridor.
To oxy is planned sequestration site.
Earlier this year oxy secured a poor space leasable over 30000 acres in Livingston parish, Louisiana.
This announcement with oxy, coupled with our alliance with Talose speak to the very real opportunity, we see in Louisiana to build a large scale business, providing solutions to industrial emitters, along the Mississippi River.
We continue to make solid progress on commercial discussions and we look forward to providing more color on these efforts in the near future.
With that I'll turn it to you ban for our operational update.
Thanks, Bob and good morning, everyone. Let me start off by saying how excited I am about the performance across each of our segments.
The execution of our team to support the needs of our customers and to grow alongside them has been impressive.
Just as important though our team has done this safely building on our record safety performance in 2021.
Now, let's walk through our assets start playing with the Permian, where we continued the momentum from last year by generating segment profit of $73 million during the first quarter of 2022.
Segment profit in the quarter included approximately $8 $9 million of operating expenses tied to the relocation of the Phantom plant and $5 $9 million of unrealized derivative losses.
Excluding plant relocation opex and unrealized derivative activity segment profit in the first quarter of 2022 grew an impressive 12% sequentially and over 62% from the prior year quarter.
The first quarter of 2022 also marked the seventh consecutive quarter of positive segment cash flow.
Average natural gas gathering volumes for the first quarter were approximately 12% higher compared to the fourth quarter of 2021, and approximately 46% higher compared to the first quarter of 2021.
Average natural gas processing volumes for the first quarter were approximately 10% higher sequentially and approximately 43% higher compared to the first quarter of 2021.
Producer momentum across our footprint has remained strong setting the stage for solid growth in 2022 and end of 2023.
Importantly, our systems are well established to handle this growth with the additions of the workhorse and Tiger plants, both of which came online in the fourth quarter of 2021.
Additionally, we continue to make solid progress with project Phantom, our second plant relocation, which remains on schedule to be placed into service in the fourth quarter of 2022.
At the midpoint of our increased guidance range. We are forecasting Permian segment profit will increase by nearly 50% to $340 million, which includes its $40 million of operating expenses related to the plant relocation.
We continue to expect the Permian will exit 2022 is our largest segment after adjusting for the Phantom relocation expenses.
Turning now to Louisiana.
Segment profit for the first quarter of 2022 came in at $95 million segment.
Segment profit included unrealized derivative losses of $5 $6 million.
Excluding the impact of unrealized derivative activity segment profit in the first quarter of 2022 increased approximately 4% sequentially and 16% from the prior year quarter.
Louisiana experienced strong volumes on both the gas and NGL sides of the business that's.
With near record NGL fractionation volumes and robust industrial demand the <unk>.
<unk> first quarter results drove segment cash flow of $84 $8 million.
At the midpoint of our increased guidance range. We are forecasting Louisiana segment profit will increase over 15% to $375 million with the second and third quarters being seasonally weaker.
Moving up to Oklahoma, We delivered segment profit of $85 $8 million for the first quarter of 2022.
Segment profit in the quarter included approximately $2 $4 million of operating expenses tied to plant relocations and unrealized derivative losses of approximately $7 $1 million.
Excluding plant relocation opex and unrealized derivative activity segment profit in the first quarter of 2022 increased 4% sequentially.
Segment profit grew nearly 29% from the prior year quarter, which excludes the approximate $15 million adverse impact from winter storm here in the prior year quarter.
The volume story out of Oklahoma continues to brighten as producers have responded to the improved pricing environment.
Oklahoma continues to deliver solid and stable cash flow for us during the first quarter of 2022, we generated $74 million in segment cash flow.
At the midpoint of our increased guidance range. We are forecasting Oklahoma segment profit will increase in the low single digits relative to 2021.
Now due to the timing of wells coming online, we expect a modest decrease in volumes into Q.
That said producer activity within our footprint has consistently remained at a high level this year and producer plans call for increasing activity.
As a result, we now expect Oklahoma to return to meaningful volume growth in 2023.
Alright assets are well positioned for this and can accommodate approximately 25% more processing volume even after the project Phantom plant relocation to the Permian.
Wrapping up with North, Texas segment profit for the quarter was $63 million, which included unrealized derivative gains of $3 $5 million.
Excluding unrealized derivative activity segment profit in the first quarter of 2022 was flat sequentially.
Net profit decreased less than 4% from the prior year quarter, excluding the approximate $15 million positive impact from winter storm here right in the prior year quarter.
Natural gas gathering volumes decreased 2% sequentially, but were slightly higher compared to the prior year quarter.
Like Oklahoma It has been refreshing to see producers start to be more active in the basin with new drilling activity.
BK V. Our largest customer in the basin led the basin with more than 200, Refracts last year and recently spud their first new well in mid March.
At the midpoint of our increased guidance, we are forecasting North Texas segment profit will increase in the low single digits. After adjusting for the winter storm Euro impact a year ago.
Finally, I want to give an update on the enlink way and driving value for our stakeholders and.
An example is the deployment of our mobile operator at improving the way, we inspect our compressors and gather data on their performance.
This mobile App was developed in house and is a great example of our strategy to reduce errors eliminate manual work and gathered data to make better decisions.
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 our first quarter highlights.
As Barry mentioned Enlink delivered a record first quarter, achieving $304 million of adjusted EBITDA, representing an increase of 22% from the first quarter of 2021.
This result reflects continued robust growth out of the Permian solid growth in Louisiana, and a significant improvement in the trajectory of our Oklahoma and North Texas segment.
Enlink also achieved $105 million of free cash flow after distributions for the first quarter of 2022, driven by strong operational results and timing of Capex.
Continuing the trend from prior quarters, all four of our asset segments delivered positive and significant cash contributions.
Capital expenditures net to Enlink and plant relocation expenses were only $66 million in the first quarter as our significant projects were in their early stages.
On the balance sheet side, we find ourselves in a strong position with a leverage ratio of three eight times at the end of the first quarter and a forecast that has both significant EBITDA growth and robust free cash flow.
This has been recognized recently by two of our credit rating agencies Fitch raised our ratings outlook to positive and Moody's upgraded our corporate family rating to be a war.
So enlink is now rated just one notch below investment grade across all three agencies and we have positive credit profile momentum.
Consistent with our capital allocation plans that we laid out last quarter, we continue to be active with our common unit repurchase program.
In the first quarter, we effectively repurchased $23 million of common units, including $6 million for the pro rata units that were subject to a repurchase agreement with CIP and which settled through the end of the quarter.
We plan to continue to return capital to common unit holders and as of the end of the first quarter, we have more than $75 million remaining under our common unit repurchase authorization.
Yeah.
Now, let me turn to our increased 2022 guidance.
Taking into account the record first quarter results, the improving volume outlook and a supportive commodity price environment, we increased our full year 2022 guidance.
We are now for casting a range of 1.19 to 1.25 billion of adjusted EBIT, which places the low end of our updated guidance above the high end of our previous guidance.
The midpoint of the range also implies a 16% growth rate over 2020 one adjusted EBITDA.
Now, while we don't give quarterly guidance. Please keep in mind that the second and third quarters are seasonally weaker due to purity sales from storage in our NGL business during the winter months.
Now as Ben mentioned, we are seeing strong and increasing producer activity, particularly in our Permian and Oklahoma segments.
As a result, we expect a significant increase in volumes in 2023 and in order to accommodate these visible volumes, we now expect to spend $325 million to $365 million on capital expenditures and our Phantom plant relocation this year.
These projects leverage existing infrastructure and have higher expected returns and quick paybacks.
With our cash flow growth expected to exceed our increased investment levels. We now forecast free cash flow after distributions in the range of $320 million to $370 million.
This would mark the third consecutive year of cash flow of over $300 million, even at the low end of our guidance range.
As a result of the improved financial outlook, we plan to increase our planned return of capital to common unit holders.
The free cash flow after distributions this tier by at least 25% through continued common unit repurchases and potential distribution increases.
We are also seeing opportunities and have ample cash flow to put capital to work on projects that would enhance our downstream exposure and carry strong returns.
In summary, Enlink achieved a record first quarter.
And the outlook for our operations in 2022 and beyond continues to improve.
We remain disciplined in our investment approach and have the ability to both grow our business and continue to increase the return of capital to our common unitholders with that I'll turn it back to Barry.
Thank you Pablo.
As I close I want to thank our employees for their relentless efforts and continued focus on safety I'm proud to report that we not only had no recordable injuries in the first quarter, but we also broke another company record by achieving excellent goal zero safety performance, which means we had zero high risk line strikes.
No high severity fires and no inbound our metal reportable quantity releases or skills for the first quarter of 2022.
This is a tremendous effort by the team and I'm proud of their pursuit for excellence.
With that you may now open the call for questions.
We will now begin the question and answer session.
You ask a question you May press Star then one on your telephone keypad.
Youre using a speakerphone please pick up your handset before pressing.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Your first question comes from T J Schultz.
D C.
Go ahead.
Okay.
Great Good morning.
Firstly just on the guidance increase if you can provide a little color on how much is directly linked to <unk>.
The higher commodity prices assumptions versus not.
The higher volumes and then as we think about.
Volumes ramping in particularly in the Permian just any.
<unk> view on on new processing need once we get past fine. Thanks.
Yeah, Hey T J.
Look on guidance.
There are a couple of things going on there first of all you saw great performance in the first quarter.
Really hitting on all cylinders as Barry said both.
The G&P business in our Louisiana business, just shine asset to us in this current commodity price environment and also just taking advantage of opportunities and so that's a portion of the increase in guidance the beat in the first quarter.
Beyond that you know what the commodity price environment, thus for us.
It's really impact activity much more than it does impact us on direct commodity price exposure since we're about 90% fixed fee.
And so we're we're seeing great activity across all of our basins no doubt that we do benefit on that remaining 10% from strong commodity prices.
You see that we've updated our price deck.
And have outlined that two more in the $6 50 gas range, Yeah, just to build on that and touch on your second question T. J, what Pablo said there is absolutely right what the price environment. This year does is it sets the stage for volumetric growth next year and that's going to be not just in the Permian. We're also going to see it show.
Up in a meaningful way in Oklahoma.
In terms of the Permian specifically, we are on schedule to bring the Phantom plant online in the fourth quarter. We are just now beginning to think about what the step will be after the Phantom plant.
Nothing we can get into specifically here today, besides to say that we'll look at all the same options that we looked at when we decided that Phantom was the right step for this tranche of volume all those same options will be on the table for the next step.
Okay, and then I guess kind of similarly in Oklahoma.
Maybe if you could talk a little bit more about producer activity levels, there outside of the Devon Dow JV.
That's driving kind of the outlook for more growth in 2023.
Hum.
I guess post fan there's room for you guys to handle more volumes I think you said, 25% but.
Maybe a little bit more detail on how you're handling that volume growth that you expect there in winter if you take the base and may be more capacity.
Yeah, well so to start with the producers.
And the levels of activity, what you have seen over the past year or so.
Has been a level of activity that has arrested the decline on our assets in the basin. So you've seen several quarters now of essentially flat gathering volumes.
What we expect to see.
Next year later this year and next year is a return to meaningful growth as some of our customers ramp up.
And I don't want to get ahead of any of them talking about their plans, but just suffice to say that this price environment.
Is one that works really well for Oklahoma, because it is a combo play.
So the move that we've seen in gas and Ngls really incentivize us producers to bring activity.
We know of plans that our producers have to add activity later in the year.
In terms of how we'll handle that youre right. We have capacity even after we moved a former Thunderbird plant to the Permian we have capacity in the basin to handle 25, maybe even 30% more processing volume than we have on the ground today. So that's a substantial increment.
Beyond that our perspective is there is excess capacity still in the basin.
Beyond our excess capacity and so at this point, we don't see adding incremental processing capacity on the horizon now if we have multiple years of this price environment and we see a further increase in activity, perhaps that changes, but it's not on the cards today.
Yeah.
Great. Thank you.
Thank you T J.
Next question is from Gabe Moreen with Marin.
Please go ahead.
Hey, good morning, everyone, maybe if I could start out on the Seo two announcements can you just talk about maybe sort of timing for some of these projects were there was talks of your towers.
I don't know if you've framed up any capex around.
Some of these projects potentially and then I'm also just curious as far as permitting goes kind of how that process may go for some of the sequestration wells that may be intended here.
Yeah, Gabe good to talk to you again and thanks. Thanks for the question.
Yes.
Oxy and tallow or pretty much on the same timeframe, we're all working to file our classics EPA permits.
That is a process that will play out here over the rest of this year.
Pair for those filings and.
We're in the phase where were doing permitting and customer engagement.
We can get the commercial contracts in place to be than in a position to start put steel on the ground or converting lines as the case may be.
So we're looking fundamentally to see 25.
2025 injection and movement of <unk> through the system and we are in the preparation phase now.
Got it thanks, Bob so to start off by saying good to hear.
Have you on board again.
Let me also pivot I think Barry you know Enlink had been active a little while they are in sort of these M&A smallish M&A transactions I assume the environment has gone from.
People not wanting to take to depressed prices to maybe now prices for M&A getting very high I'm, just curious whether that's still kind of on the radar screen at all and.
And what Youre seeing out there for sort of bolt on opportunities.
Yes, you bet. Thank you we are seeing.
A step up in activity.
They both organically and from an acquisition standpoint. The good news is we have terrific positions in our four core basins.
And so anything we look at we believe we have an advantage because of the consolidation effect if you will.
So yes, there is more activity with the <unk>.
<unk> is high for US we will continue to be very disciplined about this because the base business is so good we can.
Can be disciplined and when we look at something we're looking for all of the synergies that can really make it an attractive investment and we think there'll be some opportunities to do that you mentioned valuations.
I wouldn't say that we've seen a significant change in valuations at this point, we still see things it could make sense and we'll work really hard on our consolidation synergies to make them, even better for us as a consolidator in the bolt on transactions.
Great. Thanks, Greg.
Yeah.
Thank you.
The next question is from Michael <unk>.
Pickering Holt and company. Please go ahead.
Okay.
Yes.
First one for me just on the incremental $25 million of capital returns that you're expecting given the higher free cash flow outlook can you just walk us through a little bit more a little bit more.
Detail, just kind of how youre thinking about delivering that.
Kind of trying to see how you weigh a potential increase to the base distribution versus potentially just re upping the buyback or even looking at doing a special distribution.
Yeah, Hey, Michael it's Pablo here, so just to kind of take it up a level and capital allocation.
As you heard in the prepared remarks, we feel like the balance sheets in great shape now and there's good momentum to continued improvement given that we're growing both EBITDA and free cash flow.
And so that puts us in a really nice position, where we can continue to invest in the business, but also increase the return of capital to the common unit holders.
We came into the year with $100 million.
Our repurchase authorization and you saw our activity in the first quarter was about $23 million so on track to spend $100 million.
Given that we increased.
The free cash flow guide.
Pretty significantly.
We feel it's appropriate to also increase their return to the common unit holders.
And so youll likely see us continue to focus more weight towards the repurchases, but we're also going to be considering distribution increases with our board.
Whatever we do on the distribution, we want to make sure that we are continuing to generate significant free cash flow after distributions, we liked that flexibility.
And the good news is that with high results and outlook.
We can do a little bit of both.
Got it thanks for that Pablo and I guess, just second one for me kind of piggy backing off of Gibbs earlier question I realize it's early days on the LOI with oxy, but could you just help us frame kind of preliminary expectations around what percentage of the transportation system, we could see b.
Through utilization of existing pipes versus how much Greenfield you could look to add.
Okay.
Yes, Michael This is Barry let me just say that you started your question with the statement that I'll start with which is we are in early days we are scoping.
We're fighting the battle.
The marketplace for the customers.
And as we have said many times and we'll continue to say we are the best positioned.
In terms of being able to offer the services that we're doing there and thats. The reason youre seeing an oxy or a <unk> partner with us and we have other conversations with that are similar to this they could lead to partnerships or relationships for us to capture the market.
Big way, so I still think it's early.
But the pipe that we have today, we will be very advantageous and I would say will be represented the majority of the pipe that will be utilized to move the <unk> into the sequestration. So.
Just stay tuned we've got a lot of work left to do and we'll give you information as we can on that.
Yeah.
Awesome I appreciate the time.
Our next question is from Michael.
Now with Pickering Energy partners.
Please go ahead.
Hi, good morning.
That's on a quarter.
I was I was hoping to get your thoughts on the Louisiana on the.
On the Frac opportunity.
See if you all saw or have seen any increase in rates or or interest in your capacity as we've seen Mont belvieu.
Got to fail or at least push up against potential capacity concerns.
Hey, Michael It's Ben you are right about that your assessment of the market is what we are seeing as well.
After a couple of years.
A fairly loose market and relatively low frac fees. The market is beginning to expect to see a tightening.
In the next few years.
From our perspective, we.
We have a bit of a strategic advantage because we serve the Louisiana market.
It is a different market than the market in Bellevue in a market that in general has premium prices for purity products.
And that is something that allowed us to navigate this period. This past period of low prices very well and it's something that positions us to continue to take advantage of the market as it firms and you saw a bit of that in the first quarter. We were very close to our record fractionation volumes in Louisiana in the first quarter. So we do agree with you.
There's a very bright outlook in the Frac market.
Okay, great. Thank you that's all I have.
Okay.
The next question is from.
Junior Credit Suisse, Sir please.
Please go ahead.
Thanks, operator, good morning team I wanted to start on LNG actually if we could.
Well Guy obviously your relationship with venture global there, but.
But clearly given the events in Europe , a lot of renewed interest in U S. LNG projects going forward since that last update so curious if there's really been any progress on your part if youre getting any strong interest in working down there in Louisiana with some of these newer expanded terminals.
Hey, Spiro it's Ben.
Yeah look we agree with you there is going to be a call on north American natural gas.
That has been driven by the by the geopolitical events in the first quarter.
And it's going to take a number of years.
For our industry to meet that call and it's going to create opportunities.
And that's the great thing about our Louisiana platform is it puts us right in the middle of where those opportunities are going to happen on the Louisiana Gulf Coast.
So no specifics to talk about today, but as you can imagine there is.
A great amount of interest in the market.
And we have every intention of participating to broaden that a bit.
We're always looking for ways to make efficient capital investments and our Louisiana downstream facing businesses and you've seen us do that over history, whether you go back to the Ascension pipeline.
Several years ago, the expansion of capacity on Cajun <unk> to bone two or three years ago and then most recently as you pointed out the relationship with venture Global Theres, Nothing we love more than doing projects like those and so we're very keen to find our next steps in Louisiana.
Let's be honest Barrett.
Sorry, I got very yes.
Like to add.
Okay.
We're deep into the call here and that comes up as.
A question and it really is the headline in the industry and globally in the energy markets.
And so what I would like to highlight is that we are involved in all things that matter are today. When you look at it whether it's the call on natural gas from based on like Oklahoma, North, Texas, and we're seeing that we're right in the middle of it and have a leading position there.
The Louisiana LNG market, the Permian crude oil and natural gas markets significant positions everywhere that matters and then on top of that the energy transition that's happening with the carbon capture business and the leading position we have there so.
We're really excited about the position that we have and the work that's being done by our team to execute on those positions. So thank you for the opportunity to address the LNG as well.
Now of course, and that's helpful color as well.
Perfect and so a second question.
And maybe for you again, Ben but you know it sounds like 2023 shaping up to be a pretty strong year again, Oklahoma a contributing factor. This time around again and so I'm curious you've got a lot of conviction that it sounds like and I don't want to get ahead of your producers here 20.
<unk> III is still kind of a long ways away, but just maybe help us understand that that level of conviction here given that to your point. This is somewhat price driven and.
And so curious if you know if producers just sort of de risked next year through hedging or sort of what's playing into that high level of conviction.
Yeah, well Spiro Youre right I don't want to get too far ahead of the producers, but suffice to say.
The plans are as firm as they can be.
At this point in the year and by that I mean.
Folks who are signing rig contracts they have locations they have permits.
Something that from my perspective is going to happen.
And we're going to see that activity commence later this year.
I should say ramp up later this year and we will see the fruit of it really happen in 2023, I think I mentioned in the prepared remarks, it's going to be a little bit lumpy.
So in <unk> My current expectation is we'll see a little dip in volume in Oklahoma, just because of timing, but that will not be indicative of the strength that we expect to see late in 2022, and especially going into 2023 and is by the time, we get to the next call. My suspicion is our customers will be in a position to talk a little bit more firmly.
About their own plans and then we'll be able to share a little bit more detail with all of you.
Helpful color. Thanks for the time guys.
Thanks, Pierre again, if you bet.
If you have a question. Please press Star then one.
The next question is from so now stable.
Steve.
<unk> Securities. Please go ahead.
Yes, hi, good morning folks and thanks for taking my question I just wanted to revisit the balance sheet question, a little bit I know you have a pretty good ratings momentum.
I was just kind of curious if you had any kind of uptick in Cogs on investment grade, especially as we see.
The credit market environment changing.
For the next few years.
Yeah, Great question, so Neil Thank you for that.
Have some really good momentum in our credit profile and certainly that's being recognized by the rating agencies. You saw Moody's gave us an upgrade and Fitch has us with a positive outlook, indicating a trend towards investment grade.
So good momentum there I think as I mentioned before Youre going to continue to see some natural deleveraging that happens.
The business is growing EBITDA and throwing off so much cash flow.
And so.
That's a positive trend and.
We expect that to continue.
Just to.
Follow up on that so in terms of your discussions with rating agency.
Or did it kind of started markers.
In place in terms of leverage metrics up to draw that could help you you know get to I T.
That's still out there.
No I think.
As I indicated and if you look, particularly at the Fitch report you can see that.
We're already hitting those metrics are expected to be at those metrics later this year.
Okay got it.
And then on a different team I'm just kind of curious.
Ccs initiatives kind of coming more into focus.
Could you remind us.
The investment opportunity, there and what kind of financing structure or if you would look at.
Putting in place.
The opportunities.
Yes, so Neal it's Pablo again.
Look I think initially the capital.
He is going to be pretty modest as Bob described here for the next.
Year.
We're doing a lot of permitting work a lot of hopefully contracting work with customers and so that's going to require just a few million dollars of capital and certainly it's already kind of within our Capex guidance. It may increase next year, a bit but all with them what we can.
Do with our own balance sheet.
If you if you think about what's going on more broadly.
There is a lot of interest in investing in the energy transition in facilitating things like Ccs and so there are a lot of capital dollars flowing that we could benefit from over the long term say, a green bond or something like that to lower our cost of capital as we grow in this area.
Okay got it thanks I'll look at it.
This concludes our.
A question and answer session.
Like to turn the conference back over to Barry Davis.
Any closing remarks.
Thank you Debbie for facilitating our call. This morning, and thank you to 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 second quarter results in August in the meantime, we wish you all well stay healthy and have a great day.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.