Q1 2022 Plains All American Pipeline LP and Plains GP Holdings LP Earnings Call

Speaker 1: Thank you, chino. Good afternoon and welcome the Plains. On Americans' first quarter of 2022 earnings call. Today's slide presentation is posted on the Investor Relations website under the news and events section at plain Com, where an audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are pried on Slide two and an overview of today's call is right on Slide three the consolidated consolidating- our condensed consolidating- balance sheet for P and other reference materials are located in the appendix.

Roy I. Lamoreaux: Good afternoon and welcome to Plains All America's first quarter 2022 earnings call. Today's slide presentation is posted on the Investor Relations website under the news and events section at Plains.com, where an audio replay will also be available following today's call. Important disclosures regarding forward looking statements and non-GAAP financial measures are provided on slide two and an overview of today's call is provided on slide three. The consolidated consolidating- our condensed consolidating- balance sheet for PAGP and other reference materials are located in the appendix.

Speaker 2: Today's call will be hosted by Willie Chang, Chairman and CEO , and alce wants an Executive Vice President and Chief Financial Officer.

Roy I. Lamoreaux: Today's call will be hosted by Willie Chiang, Chairman and CEO, and Al Swanson, Executive Vice President and Chief Financial Officer.

Speaker 3: Other members of our team will also be available for the QA, including Chris Chandler, Executive Vice President and Chief Operating Officer, Jeremy golobal, Executive Vice President and Chief commercial Officer, and Chris herballd, Senior Vice President, finance and Chief counting Officer. With that, I will now turn the call over to Willie. Thank you Roy, good afternoon everyone, and thank you for joining us.

Roy I. Lamoreaux: Other members of our team will also be available for the QA, including Chris Chandler, Executive Vice President and Chief Operating Officer, Jeremy Goebel, Executive Vice President and Chief Commercial Officer and Chris Herbold, Senior Vice President, Finance and Chief Accounting Officer. With that, I will now turn the call over to Willie.

Speaker 4: While our business is off to a strong start to the year, reporting solid first quarter adjusted EBITDA ribute of PAA of 614 million, which is above our previous expectations.

Willie Chiang: Thank you Roy. Good afternoon everyone, and thank you for joining us. While our business is off to a strong start to the year, reporting solid first quarter adjusted EBITDA attributed PAA of $614 million, which is above our previous expectations.

Speaker 4: Given the quarter performance and our outlook for the balance of the year, we are increasing our full year 2022 guidance for adjusted EBITDA by 75 million to plus or minus two point two seven five million, with a bias to the upside.

Willie Chiang: Given the quarter performance and our outlook for the balance of the year, we are increasing our full year 2022 guidance for adjusted EBITDA by $75 million to plus or minus $2.275 billion, with a bias to the upside.

Speaker 4: This is primarily driven by constructive fundamentals and the associated benefits of a higher commodity price environment within both our crude and NGL segments.

Willie Chiang: This is primarily driven by constructive fundamentals and the associated benefits of a higher commodity price environment within both our crude and NGL segments.

Speaker 4: Al will provide more detail on our quarterly results and our full year outlook in his portion of the call.

Willie Chiang: Al will provide more detail on our quarterly results and our full year outlook in his portion of the call.

Speaker 4: Current global events have highlighted and reaffirmed the importance of hydrocarbons in everyday life.

Speaker 4: Spurring a renewed focus on energy security and the need for safe, reliable and responsibly produce energy.

Willie Chiang: Current global events have highlighted and reaffirmed the importance of hydrocarbons in everyday life, spurring a renewed focus on energy security and the need for safe, reliable and responsibly produced energy.

Speaker 3: spurring a renewed focus on energy security and the need for safe, reliable and responsibly produced energy.

Speaker 4: The North American energy industry plays a critical role, with abundance of resources, access to capital, a skilled labor force and innovative technology.

Willie Chiang: The North American energy industry plays a critical role with abundance of resources, access to capital, a skilled labor force and innovative technology.

Speaker 4: We believe the call in North American shale, more specifically the Permian, will remain strong for decades and that our integrated mystery asset Basin business model will play a critical role connecting energy supply with global demand.

Willie Chiang: We believe the call on North American shale, more specifically the Permian, will remain strong for decades and that our integrated mystery asset basin business model will play a critical role connecting energy supply with global demand.

Speaker 4: As shown on Slide 4, we are executing on our levers for maximizing unitholder returns in the Permian. We continue to expect at least six thousand barrels a day of production growth in 2022, of which we anticipate capturing approximately an incremental 28 thousand tariff barrels per day on our Permian gathering systems: year-end of 2: 21 to year end twenty-two.

Willie Chiang: As shown on slide 4, we are executing on our levers for maximizing unit holder returns. In the Permian, we continue to expect at least 600,000 barrels a day of production growth in 2022, of which we anticipate capturing approximately an incremental 280,000 tariff barrels per day on our Permian gathering systems: year-end of 2021 to year end twenty-two.

Speaker 4: As a result of our system flexibility and operating leverage, we have added an incremental 45 thousand barrels a day of contracted short-term volumes to our Permian long-haul pipelines, versus our full year expectations in February .

Willie Chiang: As a result of our system flexibility and operating leverage, we have added an incremental 45,000 barrels a day of contracted short-term volumes to our Permian long-haul pipelines, versus our full year expectations in February.

Speaker 4: As Permian production continues growing beyond 22, we expect meaningful growth on both our gathering and long-haul systems.

Willie Chiang: As Permian production continues growing beyond 2022, we expect meaningful growth on both our gathering and long-haul systems.

Speaker 4: In our NGL segment. We expect continued growth in Western Canada gas production and improving NGL supply and demand fundamentals combined with a higher price environment. This drives our focus on optimizing and debotleneking our existing facilities and operations to allow additional volume capture over the over the next several years.

Willie Chiang: In our NGL segment, we expect continued growth in Western Canada gas production and improving NGL supply and demand fundamentals combined with a higher price environment. This drives our focus on optimizing in debotlenecking our existing facilities and operations to allow additional volume capture over the over the next several years.

Speaker 4: Additionally, we continue pursuing capital-efficient emerging energy opportunities, such as the recently a Mount announced ou with a tour of power, which is a subsidiary of the Ontario government, to conduct a feasibility study which could result in adding hydrogen storage capability at our Windsor. Ontario salt cavern storage facility.

Willie Chiang: Additionally, we continue pursuing capital efficient emerging energy opportunities such as the recently announced MOU with Atura Power, a subsidiary of the Ontario government, to conduct a feasibility study which could result in adding hydrogen storage capability at our Windsor, Ontario salt cavern storage facility. This would directly support Atura Power’s Brighton Beach Generation Station and aligns with a larger hydrogen strategy outlined recently by the Province of Ontario.

Speaker 4: This would directly support a tour of powers brighton Beach generation station and aligns with a larger hydrogen strategy outlined recently by the province o Ontario.

Speaker 3: This would directly support a tour of powers brighton Beach generation station and aligns with a larger hydrogen strategy outlined recently by the province o Ontario.

Speaker 5: Regarding our financial strategy, we expect to continue generating significant multiyear free cash flow and we will allocate this cash in a balanced manner to maximize.

Willie Chiang: Regarding our financial strategy, we expect to continue generating significant multiyear free cash flow and we will allocate this cash in a balanced manner to maximize unitholder returns.

Speaker 4: unitolder returns.

Speaker 4: Our near-term focus will continue to prioritize debt reduction, while also increasing cash return to equity holders and making disciplined capital investments.

Willie Chiang: Our near-term focus will continue to prioritize debt reduction, while also increasing cash return to equity holders and making disciplined capital investments.

Speaker 4: In that regard, we announced a 15% per unit annualized distribution increase last month and we have cumulatively repurchased approximately 25 million of common equity under our repurchase program since in session.

Willie Chiang: In that regard, we announced a 15 cent per unit annualized distribution increase last month and we have cumulatively repurchased approximately $250 million of common equity under our repurchase program since in inception.

Speaker 4: As shown on slides five and 6, demand recovery, contrasted against the multiyear backdrop of reduced upstream investment, is causing a tight supply and demand tied supply and demand balance, resulting in global inventories drawing down and hovering at multiyear lows, all of which underpins a higher commodity price environment.

Willie Chiang: As shown on slides five and six, demand recovery contrasted against the multiyear backdrop of reduced upstream investment, is causing a tight supply and demand- Tight supply and demand balance, resulting in global inventories drawing down and hovering at multiyear lows, all of which underpins a higher commodity price environment.

Speaker 4: The conflict between Russia and Ukraine has further exacerbated market tightness and increased commodity price volatility.

Willie Chiang: The conflict between Russia and Ukraine has further exacerbated market tightness and increased commodity price volatility.

Speaker 6: We expect U's shelf produuction, led by the Permian, will continue to be crucial to supplying and meeting global energy demand, with planes's integrated system in business model, well positioned to benefit and generate significant multiyear to free cash flow.

Willie Chiang: We expect US shelf reduction, led by the Permian, will continue to be crucial to supplying and meeting global energy demand, with Plains' integrated system and business model, well positioned to benefit and generate significant multiyear free cash flow.

Speaker 4: This is supported by our Permian gathering system and four million dedicated acres, with approximately half of the total horizontal Permian rigs currently located on at acreage.

Willie Chiang: This is supported by our Permian gathering system in four million dedicated acres, with approximately half of the total horizontal Permian rigs currently located on that acreage.

Speaker 4: Our highly contracted long-haul pipelines in meaningful Permian operating leverage, as well as our existing critical infrastructure and other key producing North American basins.

Willie Chiang: Our highly contracted long-haul pipelines in meaningful Permian operating leverage, as well as our existing critical infrastructure and other key producing North American basins.

Speaker 4: Furthermore, high levels of cash flow and strong distribution coverage position us to reach our leverage target mid- 2023 with meaningful capacity to further increase cash returns to equity olders and drive strong unitholder returns both near and longer term.

Willie Chiang: Furthermore, high levels of cash flow and strong distribution coverage position us to reach our leverage target mid-2023 with meaningful capacity to further increase cash returns to equity holders and drive strong unit holder returns both near and longer term. With that, I will turn the call over to Al.

Speaker 7: With that, I will turn the call over to HAL. Thanks Willie. We reported first quarter adjusted EBITDA of $614 million.

Speaker 8: Which includes the benefit of NGL seasonality, higher volumes and commodity prices, as the startup of the cap ine and linked to Webster pipelines.

Al Swanson: Thanks, Willie. We reported first-quarter Adjusted EBITDA of $614 million which includes the benefit of NGL seasonality, higher volumes and commodity prices, and the startup of the Capline and Wink to Webster pipelines.

Speaker 9: Slide seven and eight can take quarter-over-quarter and year-over-year segment adjusted EBITDA walks, which provide more detail on our first quarter performance.

Al Swanson: Slides 7 and 8 contain quarter-over-quarter and year-over-year Segment Adjusted EBITDA walks which provide more detail on our first quarter performance. A summary of our 2022 guidance is located on slides 9 through 11. We’ve increased our full-year 2022 adjusted EBITDA guidance by $75 million to plus or minus $2.275 billion. The increase is driven by several factors including the benefit of improved frac spreads and volumes in our NGL business and improvements in our crude oil segment, including increased volumes benefitting our Permian system as well as higher pricing on pipeline loss allowance barrels, partially offset by reduced merchant opportunities. 

Speaker 10: A summary of our 2000 and twent-two guidance is located on slides nine through 11. we've increased our full year 2000 and twenty-two adjusted EBITDA guidance by $75 million to plus or minus $2.275 billion.

Speaker 11: The increase is driven by several factors, including the benefit of improved frac spreads and volumes in our NGL business and improvements in our crude oil segment, including increased volumes benefiting our Permian system, as well as higher pricing on pipeline loss allowance barrels, partially offset by reduced merchant opportunities.

Speaker 11: As detailed in our earnings release.

Speaker 11: We reached agreements in principle to settle two Class action lawsuits regarding line 901 and recorded an $85 million increase in our net expense associated with the line 901 incident, which has been treated as a selected item impacting comparability and excluded from adjusted EBITDA.

Al Swanson: As detailed in our earnings release, we reached agreements in principle to settle two class action lawsuits regarding line 901 and recorded an $85 million increase in our net expense associated with the line 901 incident, which has been treated as a selected item impacting comparability and excluded from adjusted EBITDA.

Speaker 11: The first is a Class action lawsuit pending in federal court in California, which is proposed to be settled for $23 million.

Al Swanson: The first is a class action lawsuit pending in federal court in California, which is proposed to be settled for $230 million.

Speaker 11: We believe this will be substantially reimbursed by insurance.

Speaker 11: The second is a derivative suit pending in Delaware chancery court, and the proposed settlement includes the payment of approximately $2 million in attorney fees.

Al Swanson: We believe this will be substantially reimbursed by insurance. The second is the derivative suit pending in Delaware chancery court, and the proposed settlement includes the payment of approximately $2 million in attorney fees

Speaker 11: Another nine nonfinancial terms.

Speaker 11: More information regarding the settlement of these matters and the changes to our line 9: one accruals are set forth in the July 9: one update included in the earnings press release.

Al Swanson: and other nine- non-financial terms. More information regarding the settlement of these matters and the changes to our line 901 accruals are set forth in the line 901 update included in the earnings press release.

Speaker 11: An overview of our current financial profilees, provided on Slide twelve.

Speaker 5: We remain focused on generating significant free cash flow and allocating it through a allan's approach that reflects a continued focusedcus on debt reduction in the near term.

Al Swanson: An overview of our current financial profiles are provided on slide twelve.

Al Swanson: We remain focused on generating significant free cash flow and allocating it through a balanced approach that reflects a continued focus on debt reduction in the near term.

Speaker 11: For 2022, excluding the anticipated impacts of the line 9: one settlement and our estimate of timing of the insurance reimbursement. Our free cash flow guidance is relatively unchanged.

Al Swanson: For 2022, excluding the anticipated impacts of the line 901 settlement and our estimate of timing of the insurance reimbursement, our free cash flow guidance is relatively unchanged.

Speaker 9: Giving effect of this timing, we have reduced our guidance by $15 million.

Speaker 11: Importantly, the impact is expected to reverse over the next 12 months and our year-end 2022 leverage guidance remained that plus or minus four point two five x.

Al Swanson: Giving effect of this timing, we have reduced our guidance by $150 million.

Speaker 11: Accordingly, we are maintaining the amount of cash available to be allocated to discretionary unit repurchases for 2022 from what we indicated in our February guidance, which was approximately $1 million.

Speaker 12: Our capital program outlook is unchanged from last quarter and has summarized on Slide 13: we remain committed to capital discipline and expect consolidated 2022 investment capital of plus or minus $33 million and maintenance capital of plus or minus $22 million.

Speaker 12: A summary of our capital allocation framework is on Slide 14. in the first quarter we reppaid $75 million of senior notes and repurchased two point four million common units for $25 million, leading up to $75 million available for potential discretion to repurchases over the balance of the year.

Speaker 12: Additionally, in response to feedback, we have included several slides in today's appendix which are designed to provide additional detail and improved visibility into our new crude oil and NGL segment.

Speaker 11: Both from a historical and forward-looking perspective.

Speaker 12: With that, I'll turn the call back over to will.

Speaker 13: Thanks hel.

Speaker 4: Our business is off to a very positive start 2022, supported by constructive fundamentals, a favorable commodity price environment and increasing volumes on our Permian JV and longmul systems.

Speaker 4: As such we remain well positioned to continue executing against our two million and 22 goals as outlined on Slide 15. The.

Speaker 4: Before opening the call with QA, I'd like to share some comments on our longer-term outlook and how we position ourselves for 2023 and beyond.

Speaker 4: As I stated earlier, we believe the Permian will be critical to meeting increased global oil demand. Slide 16 shows our Permian production outlook against current takeawayke pastity out of the basin.

Speaker 4: Our February outlook for production reflected growth of roughly six thousand barrels per day per year over the next several years, increasing the seven million barrels by 2020. -five.

Speaker 4: We currently have a slight positive bias to our production forecast and we will update that, if appropriate, later this year.

Speaker 4: Any meaningful incremental production above the six thousand barreas per day. Growth should benefit our systems.

Speaker 4: Looking at Permian takeaway, the current name play capacity is approximately eight million barrels a day, of which we believe that slightly greater than seven million barrels a day, or roughly 90%, is the efficient operating capacity.

Speaker 4: As production and long-haul utilization continue to increase, spare capacity will begin tightening in. Tariffs of the water should return to a more normalized level.

Speaker 14: In fact we have begun to see the ear early innings of this in forward markets. As indicated by the Middle in the? U's Gulf Coast spreads to the water, doubling in 2023 to approximately 80 cents a barrel and tripling in 2024 to approximately dollar 25 per barrel, from today's prompt month of approximately 40 cents a barrel.

Speaker 4: So my point is: planes has a critical asset base in a key producing Basin and we have pippe the ground with meaningful available capacity across our system with minimal CapEx requirements.

Speaker 13: Our integrated business model and asset base allows us to move energy to K multiple markets safely, reliably and responsibly, and will benefit from any production accelerating beyond our current expectation.

Speaker 5: Whether it's capturing additional growth or improved long-haul margins from current market levels today.

Speaker 4: As illustrated on Slide 17. in recent years we've taken numerous steps to position our business to be successful in any environment.

Speaker 4: We've strived for operating excellence, improving our safety and environmental metrics greater than 50% since 2017. we've continued to optimize our asset base.

Speaker 4: Focused our business by completing over four and a half billion dollars of noncore asset sales and created additional alignment through 15 JV strategic joint ventures and most recently forming the Permian gathering JV, which is a system backed by four million long-term dedicated acres.

Speaker 5: Furthermore, we have continued investing in our key legacy assets, while exercising capital discipline, creating operating leverage throughout the assets, with minimal future capital requirements.

Speaker 4: In our NGL business we continue to further optimize our facilities and operations through commercial alignment. In are evaluating some high return to botlenecking opportunities.

Speaker 5: Financially, we expect to continue generating significant multiyear free cash flow and achieve our targeted leverage by 2023. mid-two thousand andtwenty-three.

Speaker 4: We have positioned ourselves to continue taking a balanced capital allocation approach, including our commitment to maintaining our investment grade rating and increasing overall return. storeour equity holders.

Speaker 4: While we are focused on and expect capital efficient growth in our business, even at current EBITDA levels, we have a strong distribution coverage of approximately 250%, giving us meaningful capacity for growth in equity returns.

Speaker 4: In summary, we believe we are well positioned now and into the future.

Speaker 4: So with. I'll turn the call over to Ryan. Thanks willi in. The summary of the key takeaways from today's call are provided on Slide 18 as we answer the question-answer session. Please limit yourself to one question and one follow-up question and then return to the queue if you have additional questions, this will allow us to address the top question from as many participants as tract when are available time this afternoon. Additionally, our in best relation team plan to be available out the week to have additional questions.

Speaker 1: chino're now ready to open the call for questions.

Speaker 15: alright, So as a reminder.

Speaker 16: If's the question, you need to press for one on your telephone. Please go your question. Please press ban key again. That is far one D ask a question.

Speaker 17: Chris question comes from the line of Jeremy tnette from JP Morgan, you are now ive.

Speaker 18: Good afternoon in Jeremy.

Speaker 19: They just wanted to start off, I guess, with orx a bit more and kind of how the integration is going there and do you Y, I guess the integration leading to new commercial opportunities or just a bit more color, I guess, on progress there would be helpful.

Speaker 4: Jeremy and when you cover thatance. Thanks, Jeremy for the question. This is Jeremy gooble.

Speaker 20: Look So, based on when we form the JV, it's outperforming expectations just from an activity standpoint as well as from a synergy capture standpoint.

Speaker 13: We if we had to approximate today, it's roughly 10% ahead of schedule. We are getting closer to finalizing the integration process but we do see more opportunities. But we're making sure we're operating safely and efficiently in providing customer service. We're actively in engagement with extending contracts with customers. I'd say it's going certainly as well, but I would there to say better than planned and we'd expect to continue to grow that position. The customers are excited about it. It offers more service, as we talked about, more connectivity and optionality. So I think it's borne out to be good for the shareholders of the JV as well as the customers, and we'll look to continue to prove ourselves to the customers and grow business.

Speaker 17: Got it. That's very helpful there. And then kind of pivoting towards, I guess, energy evolution opportunities. You talked about the the hydrogen storage opportunity there and just wondering I guess how, how deep do you see the opportunities set at this point? What's the path forward, I guess, with that to figuring out whether that's something real and I guess could there be other hydrogen or other energy evolution opportunities with converting existing assets?

Speaker 13: Y Jeremy. So this is really. Let me make a couple comments and then I know chriscipalwill talk specifically about the hydrogen opportunity. As we've particularated before, we've got a pretty broad asset base and the focus on emerging technologies is: how do we integrate that in with our existing assets, particularly around our areas, a competency as well as our asset base. So when we think about things that's, how do do connected in with existing systems we have Chris, can you cover the, the hydrogen piece? Yes sure, this is Chris chanler. What's exciting about hydrogen for this particular opportunity is it can be be used as a means to store renewable energy. In the concept there is, when there's excess renewable energy, you can use that to create hydrogen. And obviously you can store hydrogen in our case in underground salt caverns. It's a well proven technologies been done across the industry for decades. In our case, our windor facility sits right next store adjacent the Ontario power station has today- and we could repurpose existing caverns or develop new caverns- very cost efficient, to be able to store hydrogenand then in the mill and I, when the sun is shining or the windown T blowing, that hydrogen can be used to generate power with existing power generation assets like gas turbines or boilers. So we're evaluating that particular opportunity in Ontario, but that technology can be applied everywhere in the Canadian government, certainly interested in it in areas beyond just that particular location and with our storage position across Canada we see multiple opportunities for similar technology adoption.

Speaker 21: Got it. That's very helpful. I'll leave it there, thanks. Thanks, Jeremy.

Speaker 22: Next one on a que is Michael plum from roseforroue. You're no ive.

Speaker 23: Thanks good afterion everyone. So I want to ask first about volumes or production growth. Obviously the public N pses, it seems- are staying on message in terms of capital discipline, but you and many of your midstream peers are talking about seeing higher volumes across your systems now and also into the rest of the year and beyond. So just just wanted to try to reconcile that and see how are you seeing any change in producer activity or messaging?

Speaker 4: jerremy Michael. Good afternoon is Jeremy gble. But what I would say is it's consistent with what we stated in the first quarter. You saw volumes surge in the fourth quarter of last year, then December januwhere there were somewhat sof, somewhat due to whether somewhat ue to sortlow completions. We've seen that cadence increase as you aced the first quarter and into the second and it's largely driven by private operators integrated. But the Independence are talking about total production profile. So there are declining in other areas and growing in the Permian. So perma, the whole is consistent. Other basins are consistent with where we had them, the by and large, based on what we see across the basin. We're seeing it trened in line to slightly above, as Willie said, and in the producer mixes. That consistent with what we thought. And we see roughly half the activity within the basin on dedicated acres that w lie was talking about. So that gives us pretty good insight. So so far it's tracking, I'd say the things we're watching, or labor and manpower, natural gas takeaway seems to be getting solved. So there are some governors on growth. But so far So good and we we, like Willie said, we have a positive bias that some activity probably gets brought from the beginning of next year to the fourth quarter, given the higher prices at this level first, where they were expected when they came into the year.

Speaker 5: And Michael lean thing, I would add, as a Jeremy talked about. You might pull some barrels in that the lag of additional activity is going to be back-end loaded, but the most important piece is momentum into two and thousand and twenty-three.

Speaker 24: Got it. Thanks for that set other question I just want to ask was about the guidance, specifically the ntl segment. Just if you could just talk through the drivers there a little bit So want to make sure understood how much of that is is volume driven versus spreads. So thank you.

Speaker 5: So Michael, we've actually put some additional disclosure in the back as a result of some feedback and the number of feedback we got, I think what I'd like to do is ask Jeremy Google to walk through two slides there, which I think are one or two slides, to kind of give you the perspective of how we look at the business, and that may answer your question.

Speaker 4: My Michael if there can put to Slide 27 it an overview of the assets. Think that the first thing is the see in general. As we move N GL's West to East we gather into Fort SaaS which is near Edmonton on the far West. So we aggregate third party supply, we fractionate, store and transport for them to market at. That's part of the third party business. We actually buy some additional wide grade as well as gather some wide grade from Cochrane and we move that East for further fractionation at arnia.

Speaker 25: At Empress, which is the next dot over, we extract, that's our largest straddle plant. We pull NGLs out in annual keephole contracts and basically take the NG, the Y grave NGLs.

Speaker 26: In exchange for keeping hole on acco gas we'll fractionate some there and sell into local markets on that pbtc pipeline or we'll move further East to Sarnia for further fractionation and sale. So that's how it flows. So when we talk about third party business, a lot of that's around the for gast and windor and st clair. Those would be two of the bigger locations for third party. And then when we talk about Empress and part of that top and straddle, that's where we get the wide grade that on the keypole contract. So if you could then flip to fly thirty.

Speaker 4: If you look at Slide 30, this gives you a sense for the breakdown. So that fee for service business around the storage assets in the East and around the fractionation storage and transport assets in the West, that's that 35%. The remaining 65% is associated with roughly five thousand barrerel a day is straddle and think of that is roughly two thirds that Empress and one are coming off the Cochrane plant. So that's the main drivers. So that 65% associated with the straddle is the keybole construct and then the rest is the fee for-service business.

Speaker 17: My very. Does that help? Yes, it's very helpful. Thank you.

Speaker 5: And there's some additional information there on Slide 31 that will give you kind of the hedge profile that we've had, And so I think it'll allow folks to better understand our business.

Speaker 17: alright. Next one on the queue is genan and Salisbury. And princeston, you re all live.

Speaker 27: Hi I really appreciate the expert slides that you've added. I wanted to ask about Slide 16 with your Permian growth and take away chart. Can you kind of talk about what you mean by efficient operating capacity withinthe 90%? Is that kind of your number with no drag reducing agents or something else?

Speaker 5: Essentially it is as you start getting into the higher flow rates on the pipelines you start to get less efficient. So certainly if you go back when timing, you look at the 2014, in the earlier periods there were times when the arbitrage opportunity was very, very significant and people utilize that capacity. A more normal efficiency point would be roughly 90%.

Speaker 28: Okay So would would you say that it's there, that if people's concern, I guess, is just maintaining the rates that you have now the seven million barrels in in kind of the right target.

Speaker 29: Versus production.

Speaker 5: Well what's shown on that is, we have an updated our guidance on. On production, it's still roughly six thousand barrels a day per year with with, as we pointed out some, our expectation for an upward bias. There are others out there that a higher production profiles than we do and that's what's shown in the upside sensitivity and the way G I would think about this slide is: you know, there was a view that it's hard for us to participate in any of the growth and what this is intended to show is that as growth increases, we clearly will get the benefit of that in our gathering systems as well as other systems. So that definitely allows us to participate in the volume growth. And then and then the other component of that is, as the utilization increases, we would expect that the the arbitrage as the forward market of my comments earlier, it starts to widen back out and get back to what I would call more, a more normalized environment. So and then we would obviously benefit from that as we, as we go forward with spot rates.

Speaker 30: Yes not an exexpense, and I guess, just as a follow-uponthat, are you seeing any interest here and from customers on blending and extending contracts, and I guess similarly aren t. are you interested here, bling and extending?

Speaker 4: jemy, want't you talked about youana? This is jere, me I'd say it. It's a combination of things. We are an active discussions and filling spots space at market rates on shorter term deals. So through next year most of our spot capacities taken to the to the Gulf Coast at current rates are higher and the expectation is to keep it in shorter rates and then enter those dialogues when we get closer to what we view those normalized rates. So we it. Right now it'is not the time to enter into long term deals. We're doing some, but it's their stair step to match what the current market looks. So we're not locking in these 40 cent tariffs for anything other than month to month. It's those.

Speaker 14: 80 plus cents. That you do maybe a year and then you look to sound that they be step to that dollar 25 level. But when we, when you talk about blend, extend on some of our larger contracts, I think patients on both us and the operator they're very comfortable with us on the gathering side. So we continue to extend those agreements to align for the longer term. So we're very comfortable that we'll have the volume on the system and the customers on the system. It's just a matter of timing and, like we said, they're very happy with the arrangements we have today and we look to extend those when we're both aligned on that. But it's probably a next year thing that before it is today. That way they can make sure they get the space and we can make sure we have a constructive dialogue around aligning on longer term rate.

Speaker 31: Great which's really helpful, Thank you.

Speaker 4: Thanks junan.

Speaker 22: Thanks for donakqia's Neil metre from Bank of America. You are no ive.

Speaker 32: allright, Thank you. Just a follow up on five and 16 as well. Very useful it looks like in 2020, five is without that case. You're at that 90% utilization and you hit that normalized rate any color on what that normalized rate is, and you talked about the 2024 rate being about it. Dollar twenty five with the four curve. But when you hit up against that 90% or more, what do you expect that the rate should be?

Speaker 5: yeah Neil, this is well So one one of the purposes of us showing this is: I don't think it's a, it's a binary. It's a binary equation where you hit a certain point in you achieve a, a different tariff freight. What we've typically seen is, as you start ramping up and capacity gets- you know capacity gets tighter- you'll start to see an increase. You don't have to get to the 90% before you start seeing the increase and then ultimately, when you think about what a tariff freight might be, it really is going to be set by what the incremental vol. If you were to build a new pipeline, but that would cost, and we expect that to be higher than perhaps it has been in the path. The last round of pipes were built in 2019 and as you go forward, you have to build a new pipes. Look, could argue that with what? Maybe some supply chain issues and steel costs in permitting issues, it gets more and more challenging, So there might be some upward price adjustment. On what might the tariff, the Jeremy, do anything? That know, I think, whether to correct and that's going to based on term or it's in what other services are offered. So we prefer out to speculate on that. But the Ford market is indicating a, something that's getting more healthy and a more constructive dialogue between the carrier and the operator, and the industry is comfortable. What this overprovide? Further guidance on longer termrates get closer, if that's our of view.

Speaker 33: That's perfect thingss for the color and just as the follow-up kind of close to that nine thousand barrels a day that you control of crude, can you walk through maybe some of the ways we're able to capture the commodity upside right now, whether it's splending or being able to control the barrel through long-haul pipes et cetera, just maybe what the short-term drivers are for right now?

Speaker 34: There we've got a pretty, we've got a very flexible system and what I would tell you is the immediate benefits of a higher priced environment is process loss allowance. We have an increased- it's a higher priced- capture on that, So that would be something that's very easy to quantify. The other pieces between blending arbitrage contango, storage really depends on a lot of market issues. So it's hard to point out specific things that we might be capturing, other than point out that over a long period of time, when the opportunities are there, we are, we have a whole organization that focuses on being able to capture those opportunity.

Speaker 13: ger ING that yeah, I say that the other piece have out of that. It's just from an activity standpoint. With long term dedications, more activity yields more tariffs. So it's additional tariffs, higher P? L a capture on the N GL? L business. Obviously the frac spread exposure is there. We have the long term dedications, also have the tariff escalators. So it's there's a number of functions that that capture that now that's offset to some extent by costs on the operations side. If you have a large capital budget, there's additional cost there. But having a smaller capital budget or some, it insulated. To agree completely with willy. Those are just a couple supplement supplemental waysays that we do benefit from.

Speaker 13: Inflation or higher prices.

Speaker 21: Do it. Thank you appreciate it, Thank you.

Speaker 22: Next long the line is Brian reynoldes from UBS. You're no iveves.

Speaker 17: Good evening everyone. Maybe just the follow-up on a quick guidance question. You know the $75 million guidance raates just kind of curious. The fit really just relates to Permian crewde gathering volumes in the NGL segment with roughly no changeins. The long haul in terms of just EBITDA contribution.

Speaker 5: I'm going to let. I'll talk about that. But there is a is a component in that we we were able to get some additional long haul, shorter term contracts done, that added to our, added to our guidance numbers. So the point I would make there is to reinforce what I just said earlier. You know it's sometimes you CAn't, it's not a formula you can look at if the opportunities are there and it makes sense for the different partners. We've been able to add some short term long haul components in there. But you're right, it's volumes and NGL volumes and crude, as well as pricing impacts both on plla and frac spreads, alancanything. That yes know, you covered it, I think. I think summarize NGL: more castity made.

Speaker 11: Crude had positive plli pricing, positive volumes, partially offset by just lower merchant opportunities, primarily up in Canada.

Speaker 17: Great appreciate the color and then maybe just dive a little bit deeper into the long haul segment received. It appears that you're receiving rlythe 45 thousand barrels per day of deficiency payments in your guidance for 20 and 20- two but it looks like we saw 45 thousand thousand barrels per day upper revision in the long haul volumes of the updated guidance. On the last call you talked about kind of anywhere from a year and a half to two years for the Permian kind of So up those excess, stop barrels and put the win to extrtern ramp et cetera. But was curious, just based off of the guidance update with matching that 45 to fortyfive for the 20 2, 22 guidance, whether that was potentially pulled forward to maybe a one Q2, three benefits where we could get above those mbc levels as it relates to planes.

Speaker 13: Brian , if I understand your question, trying to match the barrels for barrels, I think the key point in theallong all barrels is those are additional volumes we are able to capture. It isn't tied with a shifting of volumes anywhere. If that helps. If that helps answer your question.

Speaker 17: That's we ate the potential earnings. Inflection is kind of cadence, the same as the last call, kind of still middle of next year and thenext year, based off of just the Permian production outlook in terms of getting our MBCs.

Speaker 17: Well if I understand your question it 's.

Speaker 5: What we're trying to show with' 16 is that, regardless of the mbc, there's opportunities to capture additional volumes.

Speaker 13: So clearly on our Permian gathering on the Permian gathering sector we've got an additional we've got additional capture on the slides of.

Speaker 13: Another thir, another three thousand barrels a day, versus what we had in February , which totals 28 thousand barrels a day in the gathering system. Right So's, that's a piece of growth that we are capturing, and then the other opportunities are opportunities that will catch when the opportunities present themselves.

Speaker 4: So the any point I don't want people to to walk away with is that until NBC's fill up, there's no opportunities for planes to capture additional volumes. Right, that's part of our, that's part of our. The guidance and guidance upgrade is additional volumes we have been able to catch. The comment that was made in the fourth quarter call was: if you think about it just mathematically, you've got additional mbc's coming on and if you were to mathematically match an additional production volume, that would be the theoretical number. But there's always opportunities out there to capture additional barrels.

Speaker 17: I think you H that on M ill I. we really appreciate extra color on that. How great you you, everyone.

Speaker 17: Thanks.

Speaker 22: Next oneonaq is Becca followwill from's capital andadvices.

Speaker 15: You're like So open. I mean gu Hi, there's a lot going on this afternoon. If you could just clarify again, on $15 million decreased in free cash flow, how much of that was working capital and how much of that was ly nine one.

Speaker 7: nowprimarily. We assumed and model that as Slide nine and 1, we believe there will be timing between the time we pay and the time we're ultimately reimbursed by insurance. We are assuming some increased working capital roughly offset by the stronger performance that we're modeling in the company.

Speaker 35: Perfect Don the return, the return of the insurance payments that the George does that bleed into 2023. now that that that is worse, assuming some of the collections will straddle in 2023, So in vory that would be a higher.

Speaker 11: Our free cash fvel benefit in 2023. due to the Tim.

Speaker 36: Okay Thank you. It's all I need to. Thank you. Thanks, Becca.

Speaker 37: Expression comes from the lineinup senu fval from cheaper global security. You re all ive.

Speaker 21: Yes aggraphion folks, and thanks for all the clarity. I just wanted to go back to the slide 30 in for a couple of seconds. So bit between the February guidance and your current guidance, between the three components of the pie chart, have you been able to hedge, you know, at greghter rate than then you were hing in February . Or is it just pect you because the unhedg prices are moved up? You know you are getting a significant upside.

Speaker 5: im simulus is Jeremy goble. I would say it's a combination of the two we actively monitored. When we see prices spike we might layer into additional hedges. But coming into this year the hedges- with the most recent hedges- are at higher rates and we've had additional volume as Willie se to the part of the outperformances. Border flows from Western Canada to the Eastern markets have been higher So we extract additional NGLs and that's all at the spotted rates. So those sales will be this year or next year some combinations. So it's volume. It's a combination of incremental volume that unhedged doubles securred, some additional hedges at higher prices and then capturing the, the higher priced on the unhedge component, which is roughly 20% for the remainder of the year.

Speaker 38: In sneil, just to make sure the predominant amount of 2022 fracfits its is hedged.

Speaker 21: Okay and then kind of follow-up to that: is the market deep enough for you to hedge 23 also, or is that mostly on hedged?

Speaker 14: sil this Jeremy again, we actively monitor to think of it as a rolling program. So we have an active 2023 and once again, we're opportunistic around when they do that. We'll provide further guidance as we get into and 23, but we manage it's an operation and manageed earnings associated. We're trying to capture higher levels as well, So we'll continue to update you on that, but there is a deep enough market and it's very thin in 24, but 23 is pretty active.

Speaker 39: Got it. And then lastly, could you remind us on the process loss allowance: how much is typically the bets you get on the volumes that you move as plla?

Speaker 40: Is there other good way to think about margins activity?

Speaker 41: And justthree.

Speaker 42: It's it's, it's substantial. It's two to three million barrels a year of associate with plla, depending upon operating performance and we continue to optimize around that. So it's it a big footprint, predominant- that's predominantly in the U's, where we do collect that, but it's substantial.

Speaker 39: Got it thanks. Thanks for that thanks, sanneil.

Speaker 17: And there are no further question on que, I now turn the call over back to the presenters.

Speaker 4: Yes So this is Willie. I'll disclose what. Thank you for your participation on the call. I know there's a lot going on. We've appreciated feedback, we've had many discussions with folks and, as always, we're trying to further improve our, improve our disclosure and transparency and how to run the business, and I do know that, as we've changed our segments, there's an opportunity to continue to make improvement. So, appreciated the support and feedback and we'll look forward to updating you as we go forward. Thank you very much.

Speaker 17: This conclud today's conference call. Thank you for participating. You may now disconnect.

Speaker 17: How.

Speaker 17: I.