Q2 2022 ONEOK Inc Earnings Call

Good day and welcome to the second quarter 2022 one oak earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Andrew <unk>, Vice President Investor Relations. Please go ahead Sir.

So.

Yeah.

Okay.

Good day and welcome to the second quarter 2021 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Andrew <unk>, Vice President Investor Relations. Please go ahead Sir.

Thank you Ash and welcome to <unk> second quarter 2022 earnings call, we issued our earnings release and presentation. After the markets closed yesterday and those materials are on our website.

After our prepared remarks management will be available to take your questions.

Statements made during this call that might include one ups expectations or predictions should.

It should be considered forward looking statements and are covered by the safe Harbor provision of the securities acts of 1933 in 1934.

Actual results could differ materially from those projected in forward looking statements.

For a discussion of factors that could cause actual results to differ please refer to our SEC filings.

Just a reminder for Q&A, we ask that you limit yourself to one question and one follow up in order to fit in as many of you as we can.

With that I'll turn the call over to Pierce Norton, President and Chief Executive Officer Pearce. Thanks, Andrew Good morning, everyone and thank you for joining us today, where.

We appreciate your interest and investment in our company.

On today's call is Walt Hulse, Chief Financial Officer, and Executive Vice President Investor Relations and corporate development.

And Kevin Burdick, Executive Vice President and Chief Commercial Officer also available to answer your questions are Sheridan swords, our senior Vice president of natural gas liquids, and natural gas gathering and processing and Chuck Kelley, Our senior Vice President of natural gas pipelines, yes.

Yesterday, we announced strong second quarter 2022 earnings provided an update on the Medford incident, and affirmed our 2022 financial guidance expectations as.

As we sit today, we still expect to achieve the midpoint of our 2022 net income and adjusted EBITDA guidance.

Walt will provide additional details shortly.

Our second quarter financials were achieved despite unseasonable weather in the Rocky Mountain region. During the quarter two separate April weather events caused widespread outages and power disrupting midstream and producer operations across the region.

Our employees were well prepared and quickly responded to the challenge they remain focused on the safe operation of our assets and the safety of the communities where we operate.

And they worked with local agencies customers utility providers to resume normal operations as quickly as possible.

Across our operations, we continue to see strength in producer activity with commodity prices and demand supporting a strong second half of the year.

It is still too early to provide our outlook for 2023, we are well positioned across our integrated footprint to help transport and process, the central natural gas and natural gas liquids.

Before I turn the call over I'd like to make and provide an update on the Medford, Oklahoma fractionation facility.

On Saturday July the ninth mid afternoon, there was a fire at the facility first and foremost all of our personnel were safe and accounted for the safety of our employees and communities is always the main concern and initial focus during a situation like this.

I would like to thank the many employees first responders and local agencies, who worked together to quickly respond to the answer that we cannot say enough about the corporation and the coordination efforts of those teams who worked to put it.

<unk> of our personnel and the surrounding community first.

We're incorporating with government agencies as we work to determine the cause of the incident, but expect that facility to remain out of service for an extended period of time.

In Yesterdays earnings release, we provided details of our property and business interruption insurance coverage.

Because of this coverage we do not currently anticipate that the incident will have a material effect on our financial condition results of operations or cash flows.

However, the timing of insurance proceeds may impact financial results in a given quarter or year.

From an operational perspective, we continue utilizing our system of integrated NGL pipeline and fractionation and storage assets.

Also working with industry peers on additional fractionation and storage arrangements.

I want to thank those companies are working with us to keep these essential products flowing since the incident.

Our industry has a long history of stepping up to help each other when disruptions happen.

And this incident has once again proven that relationships incorporation are critical to this industry has long term success and we want to thank them. Once again with that I will turn over the call to Walt for a discussion on our second quarter financial performance.

Thank you Pearce, one second quarter 2022, net income totaled $414 million or <unk> 92 per share a 21% increase compared with the second quarter of 2021, and a 6% increase compared with the prior quarter.

Second quarter, adjusted EBITDA was $886 million, an 11% increase year over year.

Compared with the first quarter of 2022 higher second quarter results were driven by increased NGL volumes across our operations and higher realized commodity prices, primarily benefiting our natural gas gathering and processing segment.

Operating cost operating cost increased in each of our business segments, which is typical for the second quarter as.

As improved weather allows for more routine maintenance projects to take place.

As of June 30.

Net debt to EBITDA on an annualized run rate basis was three eight times and we continue to view three five times or lower as our long term aspirational leverage goal.

In June we redeemed nearly $900 million of senior notes due in October 22.

With cash and short term borrowings.

We currently have no long term debt maturities due until September of 2023.

Yesterday, we reaffirmed our 2022 financial guidance expectations.

And to expand on <unk> comments earlier as we sit today, we still expect to achieve the midpoint of our guidance range ranges.

Remain at $1 $69 billion for net income and $3 six $2 billion for adjusted EBITDA.

We expect total 2022 capital expenditures to trend towards the upper end of the range of our guidance range of 900 million to 1.15 billion driven by higher producer activity levels and expansion opportunities in our natural gas pipeline business.

Positive drilling activity across our operations and expectations for higher natural gas and NGL volumes in the second half of 2020 to support our financial guidance and continue to point to a strong volume exit rate this year.

I will now turn the call over to Kevin for a commercial update.

Thank you all during the second quarter, we saw NGL volume growth across all our operating regions compared with the first quarter 2022.

NGL volume expectations remained strong through the remainder of the year, providing confidence in achieving the midpoint of our raw feed throughput guidance for 2022.

Natural gas processed volumes in well completions during the quarter were significantly impacted by the April weather events, and we now expect processed volumes to be toward the lower end of our 2022 volume guidance range.

Let's take a closer look at our natural gas liquids segment.

Total NGL raw feed throughput volumes increased 5% year over year, and 4% compared with the first quarter 2022.

Rocky Mountain region, NGL volumes increased 10% year over year, and 5% compared with the first quarter 2022.

Activity in the region has rebounded following the April storms as July volumes averaged more than 360000 barrels per day, 9% higher than the second quarter average.

Mid continent, NGL volumes increased 4% compared with the first quarter 2022, driven by increased C. III plus volumes as producers continue to add rigs in the basin with a large majority of the regions Ngls dedicated to one system.

In the Permian Basin.

<unk> volumes increased 10% year over year, and 4% compared with the first quarter 2022.

We recently completed a 25000 barrel per day expansion on a portion of our West, Texas NGL pipeline in the basin to support continued expected volume growth.

We saw increased ethane volumes on our system in the second quarter 2022, and expect continued opportunities for ethane to be recovered through the remainder of the year.

We anticipate high levels of recovery in the Permian Basin.

Periodic recovery in the mid continent, and continued opportunities to incentivize ethane recovery in the Rocky Mountain region as in basin natural gas prices fluctuate.

Our fractionation capacity is fully utilized following the incident at our Medford facility and as Pierce mentioned earlier, we have worked with industry peers to secure additional fractionation and storage capacity.

Metrics capacity was approximately 210000 barrels per day of our total system wide nameplate capacity of more than 980000 barrels per day.

Construction continues on our 125000 barrel per day MB five fractionator in Mont Belvieu, which.

Which we now expect to be complete early in the second quarter of 2023.

Moving on to the natural gas gathering and processing segment.

In the Rocky Mountain region second quarter processed volumes averaged more than $1 2 billion cubic feet per day, a slight decrease compared with the first quarter 2022 due to the April weather.

We've seen recent volumes return to pre storm levels and then July volumes reached approximately one 4 billion cubic feet per day.

Through the first six months of the year, we've connected 157 wells in the region and we continue to expect approximately 375 to 425 well connections in the region. This year.

There are currently approximately 45 rigs and 18 completion crews operating in the basin with 21 rigs and approximately half the completion crews on our dedicated acreage.

Basin wide rigs have more than doubled in the last 12 months from only 20 rigs total in July 2021.

As we've said before approximately 15 rigs on our acreage can maintain natural gas production at current levels, but with more than 20 currently on our acreage we expect to see higher well connections in 2023 compared with 2022, if these activity levels remain.

The basin wide DUC inventory remains at approximately 500 with half of those on our dedicated acreage. This compares with approximately 650 ducks in a basin a year ago.

Recent producer M&A in the Williston Basin continues to show the value and long term viability of the play we.

We see these recent announcements as positive for one oak as we expect increased activity from the acquirers to drive NGL and natural gas volumes to our system.

In the mid continent region, we continue to see increased activity with four rigs now operating on our acreage and 46 rigs basin wide.

We expect steady to increasing activity through the remainder of the year with the majority of rigs basin wide driving additional ngls to our system.

In the natural gas pipeline segment strong second quarter results benefited from the continued increasing demand for natural gas storage and transportation services.

Last quarter, we discussed our recently completed $1 1 billion cubic feet expansion of our Texas storage facilities, which is now fully subscribed through 2032.

Additionally, we are expanding our storage capabilities in Oklahoma, enabling an additional 4 billion cubic feet of storage capacity to be contracted.

This project is expected to be complete in early 2023 and is nearly 90% subscribed through 2029.

We also recently completed two open seasons for additional pipeline capacity to address increased demand.

One on our West, Texas pipeline system in the Permian Basin, and one on our Viking pipeline in the upper Midwest.

Both open seasons were successful and we plan to move forward with low capital expansions on both systems.

The value of our natural gas pipelines and storage assets continue to be highlighted in the outperformance. We've seen from this segment so far this year.

Pierce that concludes my remarks, Thank you Walton Kevin.

As we enter the second half of 2022.

We see producer activity and attractive commodity prices, providing tailwind to our business.

We have affirmed our financial guidance for the year underscoring the resiliency of our operations earnings and employees.

Who are always ready and willing to respond to changing market and operational dynamics.

Challenges happen in our business and weather is unpredictable.

But how we respond to that is the real difference maker.

Operating safely sustainably and environmentally responsibly remains an important focus and is key to our success as a midstream operator.

How we operate is important but also how we engage with our employees communities and other stakeholders is also important.

To learn more about our commitments in these areas I encourage you to review our most recent corporate sustainability report, which was just published to our website last week.

The report details our most recent environmental social and governance related performance and programs and highlights key initiatives underway across the company.

Our ESG efforts are a source of pride for one out and we are committed to continuing to make progress in these important areas.

With that operator, we're now ready for questions.

Thank you Sir for the interest of time, please limit your questions to only one and a follow up question.

I'll ask a question PC number prices, Taiwan on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow us to reach our equipment again price star one to ask a question we will take the first part.

Ken from Jeremy.

From JP Morgan.

Line is open. Please go ahead.

Hi, good morning.

Hey, good morning, Jeremy.

Thanks, I just wanted to dig into Medford, a little bit more if possible and as we think about everything there talked about not being met.

Material, but maybe you could help us to understand better what the threshold is for financial materiality. There and then just as far as kind of the parameters of what's happening with regards to volume uploads, where those volumes going now can you tell US you said about the timeline being extended.

Slipped deeper into 'twenty three with this impact might impact your ability to offload volumes if volumes continue to grow.

So Jeremy I think I'll, let will take the materiality question for US and then we'll flip it over to Kevin and Sheraton on the outflows.

Well, Jeremy I think that we're very comfortable with that comment I'm not going to give you a level of materiality, but I will say that remember that.

<unk> coverage provides for a 45 day period, which.

We have as a standalone and then we have business interruption insurance for that point forward.

So we're very very comfortable with that.

The view of where we've come out from a materiality standpoint.

Yes, Jeremy it's Kevin.

The volumes and where Theyre going right now I mean, clearly a lot of them are going down to belvieu and we talked in our remarks about.

Our industry peers that have been very helpful in securing spots for those barrels we feel good about being able to move the volume, especially as we get to <unk> five and keep in mind, that's going to be another 125000 barrels a day of new capacity that will come online early in the.

Early in the second quarter. So so that's the things we've got lined up there.

And again, we feel good about being able to move the volumes.

One thing I'd add is we've been talking with our peers, we have very much comfortable with our growth plans through 'twenty three depending on how long. This lasts that we'll be able to handle all the volume come in our system.

Got it that's helpful. Thank you for that and.

Just wanted to pivot over towards IRA if he could and realize its hot off the press and it seems like the shape keeps changing a bit here and what the bill looks like but just wondering thoughts you can provide as far as how as it currently stands this might impact your tax profile in 2023 or going forward.

As the Bill is written right now separately with this.

Kris or changed your appetite to pursue Ccs renewables or other items like that.

Well I'll handle the tax portion of that.

Jeremy.

Youre right its still off the presses and we're getting a lot of the details, but I do think the Lai.

Late in the game addition of using tax depreciation versus book depreciation was a positive development for us and.

We don't.

D a real meaningful increase in our tax over the long term.

We may have a little bit higher tax in the earlier years, but.

If we get into that alternative minimum tax at that 15%.

That would be for an extended period of time, where we would have otherwise gone to a statutory rate. So.

While we expect.

Some.

A higher level of taxes.

That addition to the.

Tax depreciation was a big positive.

And so.

So I'll take the question about CCA U S.

I'd like to remind everybody on the call that 36% of the natural gas demand.

This country is devoted to electricity.

You add to that 33% in the industrial sector. So that's a total of almost 70% of the natural gas demand goes to those two.

Forms of consumption.

Anything that is done that would enhance the ability to cart to capture carbon from natural gas being consumed.

Good thing for our industry and so these incentives it's left to be seen exactly how effective they're going to be because we need to know the details.

But it does encourage us as an industry and as a producer.

Natural gas and actually the liquids that are coming off the oil production in the natural gas production in these rich basins that this will help to curb the C. O two emissions in the future and we do think that will open up some opportunities that we will look.

Both at <unk> and hydrogen so I think it's a positive for the industry, what's what's happening.

Got it that's helpful I'll leave it there thanks.

We will take the next question from Brian <unk> from UBS. Your line is open. Please go ahead.

Hi, good morning.

Maybe touch a little bit on the 22 reaffirmed guide as it relates to that base business. One of the curious do you expect to complete roughly 60% of its wells for the year on the back half of 'twenty two.

And mid Con volumes look to be on track to surpass 419 levels by year end. So just kind of curious if you could just talk about given the year to date and impacts from weather on the Bedford Backfire was curious if you could talk about how the base business is performing relative to initial year.

Mr. <unk> your expectations in terms of activity. Thanks.

I mean I'll start Brian This is Kevin I think the base business is performing very well and we should think about where we were going into the storms, we were right on track with everything.

We had kind of outlined and laid out.

Storms up in the Bakken did kind of set the basin back a couple of months not just with the the volumes flowing but also.

It was kind of a couple of months pause on our lower completions that we saw.

So it kind of delayed things and Thats. The reason that we're going to be at the lower end of the guidance from a volumetric perspective, there, but on the flip side. When you look at the NGL business and what they've done both from a earnings perspective as well as the volumes perspective, and then the outperformance of the gas pipeline business I think those two segments are.

Are performing at or better than we anticipated coming into the year. So I think it sets us up nice going into 'twenty three.

Great I appreciate that color and.

A follow up on the met for the Frac I know, while it's probably a little bit too early or has there been any initial thoughts on potential replacement of the metrics back and whether we could see it be built in Mont Belvieu Conway at this time.

Brian you hit it on the head we're still really early in that process and again, not not ready to talk about timing or anything like that.

We've got we've got capacity secured we believe to move our volumes.

And we'll keep working that until we get more information.

Fair enough and Joe the rest of the day everyone. Thank you.

Yes.

Thanks Christian from Michael Blum Wells Fargo. Your line is open. Please go ahead.

Thanks, Good morning, everyone.

So I apologize for maybe a technical question, but.

Just so I understand it are you going to be accruing insurance proceeds in your EBITDA results in Q3 and Q4. So thats how guidance is basically unchanged or is that not the case and you were just able to make it up in other areas.

Michael.

We expect to get timely recovery of our business interruption insurance.

We will actually book that as we receive those proceeds.

But.

And that's why we said that.

We may have from time to time.

A little bit of a timing difference if we get rate at quarter end, but.

We expect timely.

Ongoing payments.

Wood.

Flow through our income statement in the normal way.

Okay, great. Thanks, Thanks for that clarification.

So just wanted to ask you about.

Heiko gas prices, which are trading at a pretty big discount to Henry hub.

Can you just remind us how your ethane recovery economics in the Bakken work will you benefit in any way from the decline in gas prices.

Michael This is Sheridan.

The way, we buy gas at the alternative at the gas plants. So we go and look at what we could sell gas at the gas plant versus what we could sell ethane in Mont Belvieu and so whatever the gas plan is receiving.

That's what we can get so in echo price is at.

Factor and what the gas price, we're receiving at the gas plant.

Got it thank you.

Next question from Colton Bean Tudor Pickering Holt <unk> co. Your line is open. Please go ahead.

Good morning.

<unk> segment had a fairly significant step up in costs.

Three drivers you mentioned I think fuel power and third party services.

We expect an improvement in the back half of the year for any of those or is Q2 level a pretty good run rate moving forward.

Well I think there are a couple of dynamics going on Colton.

The $30 million you reference really got power costs were just higher but we also had a lot more volumes. So you had more power.

Just moving it there and then we also had a turnaround in the in the second quarter, which caused us to go get some outside frac.

Capacity during the quarter and that that's in there as well so.

Some of those costs will just be will float as power the power cost moves around.

But but some of the other costs were more one time.

So thats as we think going forward, we typically do more work like turnarounds and integrity work in.

And other expense project type work, we will do more of that in the summer when the weather.

When the weather's better.

So historically you might see a little stronger in the summer.

From a cost perspective on those types of activities.

Understood and then just following up on the Bakken ethane discussion I mean, it sounds like with the wider gap between <unk> in Mont Belvieu pricing. This quarter would you expect any upside to that bundled rate just due to you.

The incentive rate that you have to offer is now less of a discount than it would have been previously.

There's a lot of factors that go into that.

Sometimes that impact it sometimes it doesn't I think we are we think we have a good opportunity to incentivize more ethane in the second half of the year. So we're very bullish on that but.

Yes.

Regional gas prices, but how it affects the overall.

Average rate got it depends on where it's come volume and.

The escalators that we have on our base business.

Got it appreciate the time.

Next question from Theresa Chen from Barclays. Your line is open. Please go ahead.

Hi.

I just wanted to ask first on the <unk> four.

$4 million increase.

In the NGL segment is related to higher average fee rates can you tell us what that was related to you.

Precisely and is that expected to carry forward.

Yes that was mainly related to inflationary escalators.

For both fuel and flower and inflation and we do.

Have those inflationary escalators coming on throughout the year. So we do anticipate it will increase.

Okay. Thank you and your G&P segment.

<unk> 3 million increase due to the contract settlement during the quarter should we expect some sort of an offset in base earnings and going forward as a result.

No I don't believe Youll see any offset it's just normal course of business.

On our large portfolio of mix, so you won't see any offset.

Thank you.

Our next question from Michael <unk>. Your line is open. Please go ahead from Goldman Sachs.

Hey, guys. Thank you for taking my question and congrats on a really good quarter just curious.

As you think about infrastructure needs going forward, given kind of some of the volume commentary about July volumes.

How are you thinking over the next year or so about the need for either new processing or even six frac at belvieu.

Michael This is Kevin I mean, I think we're in really good shape as we've talked.

For the last several months and when you think about that makes that makes like three coming up that gets us.

Nice headroom of capacity in the Bakken.

We've talked about the available capacity. That's currently exists on Elk Creek, and then we've got low cost expansion opportunities, if we need to expand that pipe.

We just demonstrated we've got some expansion opportunities on west, Texas as our volumes continue to grow out there that we can expand that pipe in tranches.

Plenty of capacity in the mid continent, obviously with with what's going on at Medford, Frac capacity is tight and it's going to remain that way until we.

Until we get.

<unk> on what's going on with Medford.

But other than that we're in we're in excellent shape as we think about our our capacities.

And where we're at.

So then.

If there is not really a need potentially I mean volumes could always surprised to the upside, but if theres not really any need for any material new asset development in 2023.

That implies that the capital budget kind of declines at a time, which not a surprise how are you.

And how are the board has the board kind of thinking about capital allocation and uses of some of that significant free cash flow that you might be generating next year.

So this is here's the way we look at that is that we look at all the levers that's available to us.

Yes.

So we're going to be looking at as we get closer and closer to what Walter had mentioned about the three five times on the debt to EBITDA ratio as.

As we continue to go below a 100% on our payout ratio than <unk>.

That's going to actually open up.

Some of those other elements to us that we've had in the past of course.

Our first focus is going to be on these organic opportunities because they give us the best chance to deploy.

Capital.

That gives us really really good rates of return we are proud of our Ros C that we've been able to achieve and we are predicting that is going to continue to go up. So I think what it's going to do is just give us more flexibility to use whatever levers that we feel like bring the most value to our shareholders.

Got it thanks guys much appreciate it.

Next question from Chase Mulvehill from Bank of America. Your line is open. Please go ahead.

Hey, good morning.

I wanted to come back to the G&P side of the business and I guess, a few questions. I guess, just correct me, if I'm wrong and I think your commodity or pop exposure is 15% to 20% this year.

And then maybe just remind us again, the gas versus NGL exposure on those pops.

And how much you have hedged versus open today, and then just maybe tie into their kind of what's your thinking about realized G&P rates.

In the back half of the year.

Jay This is Kevin.

Yes, Youre right, we provide the hedging information.

It'll come out in our Q and we provided that in the past. So we are pretty well hedged, but prices have run up significantly and we've been able to benefit for that for the the port part of those that those contracts that arent.

That arent hedged. So that's that's what you are seeing that and also the other thing thats driving the price improvement is just what volumes are on what contracts. So.

We've been fortunate to have some volumes come in on higher.

In this case higher.

<unk> type contracts and been able to benefit from that.

Is it fair to assume in <unk>, a lot of your open volumes, where natural gas as opposed to Ngls.

Typically from an open perspective, we've got we hedge most of our commodities.

In a similar way, so youre not going to ever.

Higher percentage.

Higher percentage hedge necessarily of natural gas versus crude versus Ngls.

Okay Alright.

If we.

So the NGL section and look at volume and kind of where they are today. Thank.

Thank you said 260000 barrels a day.

If we go back and look back in April you were doing 385000, a day, so we're not back to Kyle.

April equal levels G&P.

G&P volumes and the Rockies are actually back to peak levels.

Can you help me connect the dots there is that method related or is there something else.

Should we kind of ramped pretty quickly back to that 385.

I think in the first quarter announced that this shared and we came out and said we had reached 385, but we had an average 385 actually.

July at $3 60 will be our highest month monthly average that we've had off the Bakken pipeline.

And we continue to trend higher and as we get into August we are trending even higher than that so from an NGL perspective on the Elk Creek pipeline.

Our back further than we were in the first quarter or even in the fourth quarter of 2021.

Okay. All right last one just to squeeze one more in apologize just wanted to confirm this it sounds like.

Obviously you are seeing.

Looking at method and trying to figure out when you can bring it back online, but I just wanted to confirm that it is not a total loss. So you do not see it as a total loss at this point correct.

Well I mean, the way I would say there Ryan as where we are looking at all the pieces and parts.

That facility right now.

So we'll be assessing that over the coming weeks as to exactly what pieces of equipment.

Our still usable or not so we can't say in <unk> right now that it's either a total loss or not a total loss, where we're doing the assessment of that.

Okay got it thanks, guys I'll turn it back.

Next question from Craig Shere from Tuohy Brothers. Your line is open. Please go ahead.

Good morning.

Congrats.

On the quarter.

One clarification on Medford.

So.

Sure.

As far as.

New expense for third party fractionation or things that were contracted.

You ultimately.

Insurance recoveries, but it doesn't this.

Kind of at least limit optimization margin opportunities until something is resolved.

Yeah, Craig I think that we are we believe that we've got business interruption insurance for our entire business.

Under the coverage in.

I really don't see a meaningful difference from <unk>.

How are earnings would be sorted out in our normal guidance.

Okay.

And.

Maybe this is expressing my on the ground so I apologize.

Yes.

The increased storage and storage pricing.

I'm kind of assuming storage is more of a steady.

Year round.

Product versus gas.

Uh huh.

More seasonality.

Since the store just to fill.

So if that's the case does the improving storage.

<unk> in terms of capacity and pricing.

Reduced your gas pipe seasonality.

Craig This is Chuck.

Now, let's see the way we contract with our customers frankly.

These are.

These are firm fee based contracts.

What the customer tends to do it.

His place seasonal spreads and utilize their transport and combined storage for optionality somewhat from a pipe standpoint.

We've got <unk>.

<unk>.

<unk> earnings throughout the year, so the Optionality actually comes from the customer, but not the pipeline.

For variability from our customer not the pipeline.

Gotcha, so so the increasing.

Contribution of the storage really doesn't impact seasonality.

Could you repeat that.

So the fact that you are increasing the amount of storage.

And the pricing is looking more attractive that that doesn't happen.

Seasonality question.

Correct, we're seeing a step up in our storage revenues based on higher rates and the expansion that came online in April and we will have an additional expansion came online in April of 2023, where you'll see another step up in our storage revenues.

Gregg the only thing I'd add to that this is appears as though.

Post winter storm Yuri.

The value of storage.

<unk> increased.

And so we do have customers that lay that seasonal spread in that benefit goes to them.

But we also have utilities.

That are putting gas into storage.

Every single month during this summer's getting ready for that winter pull that they have during their peak demand from basically December through March.

Gotcha. Thank you.

Next question from Jean Ann Salisbury, Alright.

Alright, Jane answered it will be from Bernstein. Your line is open. Please go ahead.

Hi, good morning, it looks like there's been some movement on the open season for gas takeaway absence added the Bakken, but it seems like you are targeting 2020, just kind of on time from now.

Do you think that that will be enough.

<unk> got good growth out of the Bakken.

Jean Ann This is Kevin Yeah, I think we feel good about the timing of that.

There's some other smaller scale things that are.

That is going on up there that.

They have created a little more capacity. So we think that timing lines up pretty well with the kind of our outlook of where gas volumes go I would remind you there is still we believe.

$3 400 million a day of Canadian gas and can be that can be displaced coming out of the Bakken and so.

There is capacity there that just may not on the surface look like it's there.

In addition.

We can always if you get tight and we're I'd say, we were wrong or were a little bit late you can always recover ethane to reduce the NMB to use that go into the pipe. So we all in all we feel good about where we're at.

That makes sense.

Thank you and there has been a trend NGL integrated midstream companies buying GNP company.

Not really participated in if this trend continues.

Do you see it potentially impacting your rates here.

The Gulf negatively.

Well I think look.

Kevin get into the details of this but.

We believe that the positions that we have in the other basins are the are the right thing for us to pursue.

Based on our our positions with our assets and and <unk>.

The things that we see in the future.

Could it have a.

A downward pressure on some of the volumes, yes, but I would remind everybody that the.

The rates that we get as far as margins.

In the Permian and the mid continent ours, some of our lowest ones so as far as having a really material impact we don't see that in the future.

Kevin you got anything to add to that.

No I'd, just say that with some of those transactions obviously we.

We take a look a lot of things, but they just haven't been a fit for us.

One of the things I would put out there is it maybe the weakness continued to grow volumes on our west, Texas LPG system. Many of those contracts have quite a bit of term left and many of them are with producers who have taken kind right. So regardless of who the processor is we believe those volumes will stay with us.

No.

So that's some of the other dynamics at play.

Great. That's very helpful. That's all for me. Thank you.

Okay.

The next question from Sudan's Ebor from Seaport Global Securities. Your line is open. Please go ahead.

Yes, hi, good morning folks and thanks for all the clarity on the volume trend.

So one question from me on the on the Capex side of things could you talk a little bit about what kind of inflation trends you're seeing.

In terms of.

Building costs versus what you had budgeted at the start of the year.

Yeah from a cost perspective, we've probably seen more pressure on outside services more than anything as we think about our projects.

In many cases for the projects, we were working on especially in <unk>, five and <unk> three that equipment had been purchased years ago.

Before the projects were paused. So we had a lot of that taken care of.

On the on the equipment, the new equipment that we're ordering in the new materials were ordering probably as much impact from a supply chain perspective, just on a timeliness or schedule perspective, then.

<unk> costs. So those are the some of the things, we're obviously watching closely and stay in staying on top of.

Hadn't impacted any of our scheduled dates or our dollar amounts that we've got these projects approved four so we still feel very good.

We're right on top of on budget and on schedule.

Okay. Thanks for that and then one housekeeping question for me it seems like.

A reconciliation you had called out.

$10 million.

Sequential decrease.

In the NGL segment from.

Commodity price differentials.

I talked to the commodity price differentials kind of widened out a little bit in Q2 versus Q1.

And then just looking at that correctly and I'm, just curious about that line item.

Neil This is Kevin Yeah, that's just with our assets and with we've got assets in Conway and Belvieu and storage that's just the delta between.

Sometimes we have an opportunity to make money then.

Different prices.

Per by commodity so how different prices compare.

Of the different commodities.

And how we move barrels around and how we sell barrels and so that $10 million was just lower than sequentially lower than the first than the first quarter.

In that part of our business, but it's all in as part of that kind of.

You know, how we're optimizing our system.

Okay and anything to read into that.

For the second half of this year.

No that that bounces that'll bounce around quarter to quarter just in the sequential comparison.

Got it thanks, Thanks for all the color.

Next question from James Carreker from U S Capital Advisors. Your line is open. Please go ahead.

Hey, Thanks for the question.

Just thinking about the Medford outage.

The more were those.

Ngls fractionated, there largely sold into Conway or they sold down in Mont Belvieu, and just making sure that there is with that outage.

There is sufficient pipe capacity to move incremental.

Barrels down to Mont Belvieu to get Fracked.

James This is Sheridan.

We have designated by Frac, where we sell barrels we can with our integrated system, we can deliver barrels from any of our frac into the Mont Belvieu complex.

And with that Frac being down we can get these barrels into the Mont Belvieu complex, mainly because of our our buckle two asset that we have just brought online that we know had.

Significant extra capacity on it for upside so we're able to deliver through the raw feed system down to Mont Belvieu.

And if we need to we can use the security system to do that as well since we don't have as much purity is coming off that we don't have any earnings coming off the Bedford practice, we have a little bit extra capacity on that so from a pipeline perspective, we feel very good about getting the product into mobility.

Thanks for that and I guess, maybe one follow up.

It's minor, but just noticed on this earnings presentation.

Saying greater than six since bundled rate on your Gulf Coast Permian volumes versus.

Prior approximately six is that maybe a trend that continues or any other color on what's going on there.

Yeah, a lot of it I think we will see our rate tick up a little bit and youre seeing that because of the inflationary escalators that we have on our system.

Okay. Thank you.

Thank you.

There is no further question at this time, Mr. Andrew I'd like to turn the conference back to you for any additional or closing remarks.

Our quiet period for the third quarter starts when we close our books in October and will extend until we release earnings in early November we'll provide details for that conference call at a later date.

You all for joining us and have a good day.

This concludes today's call. Thank you for your participation you may now disconnect.

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