Q2 2022 Energy Transfer LP Earnings Call

August 3, 2022

Welcome to the energy transfer of Q2 2022 earnings Conference call. My name is Daryl and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press zero then one on your.

<unk> phone as a reminder, this conference is being recorded I will now turn the call over to Tom Long Energy Transfer's co CEO . Mr. Long you may begin.

Thank you operator, good afternoon, everyone and welcome to the energy transfer second quarter 2022 earnings call.

I'm also joined today by Mackie Mccrea and other members of the senior management team who are here.

Here to help answer your questions. After our prepared remarks, hopefully you saw the press release, we issued earlier this afternoon as well as the slides posted to our website. As a reminder, we will be making forward looking statements within the meaning of section 20 <unk> of the Securities Exchange Act of $19 34.

These statements are based upon our current beliefs as well as certain assumptions and information currently available to us.

Are discussed in more detail in our quarterly report on Form 10-Q for the quarter ended June 32022, which we expect to be filed Tomorrow August 4th.

I'll also refer to adjusted EBITDA, and distributable cash flow or DCF, both of which are non-GAAP financial measures.

You will find a reconciliation of our non-GAAP measures on our website.

I'd like to start today by looking at some of our second quarter highlights. We were pleased to report another strong quarter during which we generated adjusted EBITDA of $3 3 billion and DCF attributable to the partners of energy transfer as adjusted was $1 $88 billion.

This resulted in excess cash flow after distributions of approximately $1 $1 7 billion.

On an incurred basis, we had excess DCF of approximately $730 million after distributions of $710 million and growth capital of approximately $440 million.

On July 26, we announced a quarterly distribution of <unk> 23 for.

Per common unit or <unk> 92 on an annualized basis.

Which represents a more than 50% increase over the second quarter of 2021.

As a reminder, future increases to distribution level will be evaluated quarterly with the ultimate goal of returning distributions to the previous level of $30.05 per quarter or $1 22 on an annualized basis, while balancing our leverage target growth opportunities and unit buybacks.

Operationally, our diverse asset base saw throughput increases across all of our segments as rig counts continue to improve across the U S.

And we saw record midstream volumes as well as record throughput on our NGL transportation pipelines.

Belvieu fractionator and terminals.

In addition, construction continues to progress in several of our growth projects, which I will provide more details on shortly.

I'll start with a brief update on the sale of energy transfer Canada.

In March of this year, we announced a definitive agreement to sell our 51% interest in energy transfer Canada for cash proceeds of approximately $270 million. In addition, the sale is expected to reduce our consolidated debt by approximately $550 million.

This sale allows us to divest of these noncore assets and an attractive valuation and utilize the cash proceeds to further deleverage our balance sheet and redeploy capital within our U S footprint.

The transaction remains on track and we continue to expect it to close this month.

This week energy transfer signed an agreement to acquire Woodford Express LLC, a mid continent gas gathering and processing system for approximately $485 million.

Bolt on opportunity will provide a roughly 450 million cubic foot per day.

Janet gas processing and treating capacity.

In Grady County, Oklahoma, as well as more than 200 miles of low and mid pressure gathering lines in the heart of the Scoop play.

The assets are already connected to our inter and intrastate systems as well as our gas gathering system.

The system is supported by dedicated acreage with long term predominantly fixed fee contracts with active proven producers. We're excited to add these strong assets quality customer contracts and established operations to our footprint in the mid continent.

All at an attractive valuation that will be immediately accretive to energy transfer unit holders.

Transaction is expected to close by the end of the third quarter of this year subject to regulatory review and other customary closing conditions.

Now I'll walk through recent developments and other growth projects year to date Lake Charles LNG has executed five LNG offtake agreements for an aggregate of $5 8 million tons per annum.

The purchase price in all of these agreements is indexed to the Henry hub benchmark, let's say fixed liquefaction charge and the LNG will be delivered onto customer vessel on an fob basis.

The agreements will become fully effective upon the satisfaction of the conditions precedent by energy transfer LNG, including reaching FID.

We're also in active negotiations with a number of other high quality customers as we expect to make announcements of additional off take agreements weeks ahead.

As we've previously stated we expect to finance a significant portion of the capital cost of this project by means of the sale of equity in the project to infrastructure funds and possibly to one or more industry participants in conjunction with LNG offtake agreements. We continue to work toward achieving FID date for this project by the.

The end of this year and we expect that our anticipated announcements of additional long term LNG offtake agreements over the next several weeks, we will keep us on track for meeting this objective.

Upon completion of the LNG project, we expect to realize significant incremental cash flows from transportation of natural gas.

On our trunkline pipeline system and other energy transfer pipelines upstream from Lake Charles <unk>.

Recent events in Europe highlight the importance of LNG from the United States, a country with abundant natural gas supply and government support for LNG exports.

These events have caused companies around the world to place increase importance long term security of natural gas supply.

We believe our Lake Charles LNG project will be a significant factor in the long term solutions for global energy needs.

Looking at the Mariner East pipeline system, which is fully commissioned and capable of transporting more than 365000 barrels per day, including ethane.

For the second quarter of 2022, NGL volumes through both the Mariner East pipeline system and Marcus Hook terminal reached New records and in July we set a monthly throughput record for the combined Mariner East pipes, and we continued to see strong utilization of these sites.

In addition, we recently completed work at the terminal to allow us to increase the ethane exports out of Marcus Hook, and we continue to evaluate all options to achieve incremental ethane and LPG exports out of Marcus Hook until we complete an expansion of the terminal.

At our expanded Nederland terminal NGL export volumes were very strong during the second quarter, including export volumes under our ethane export joint venture.

We hit a record in the second quarter for ethane exports and year to date, we have loaded nearly 18 million barrels of ethane out of the facility the.

The second tranche of satellites contract went into effect on July one, which doubles the volume commitments from the initial term and we loaded the first vessel under this demand base agreement in July .

For full year 2022, we continue to expect to load more than 40 million barrels of ethane with that increasing to as high as 60 million barrels for 2023.

Total we continue to export more ngls than any other company or country and our percentage of worldwide NGL exports remains at approximately 20% of the world market. We continue to see increase in NGL demand both in the U S as well as from overseas customers seeking additional supply from the U S.

And we have sufficient commitments to move forward on an ethane export expansion.

Even though we expect to expand our ethane export capabilities at both our Marcus Hook and needle in terminals. These commitments provide us with the Optionality of initially expanding at either terminal.

In addition, due to the significant tightening in fractionation capacity, we recently resumed construction on <unk>, which was more than half funded when construction was paused in 2020.

<unk> is expected to be in service in the third quarter of 2023 and will bring our total Mont Belvieu fractionation capacity to over one 1 million barrels per day and.

In the second quarter, our Permian Basin plant inlet processing volumes.

We're approximately two two bcf per day, which is a new record and due to significant producer demand and continued growth around Permian basin gathering and processing assets, we are adding additional capacity to meet increasing production from the basin.

Construction of our new 200 million cubic foot per day, right Wolf processing plant in the Delaware Basin is underway.

Plan is supported by new commitments and growth from existing customer contracts and remains on schedule to be in service by the end of this year.

We are also moving forward with a second $200 million.

Per day processing plant in the Permian Basin, a portion of the growth capital associated with the bare plant was included in our previous forecast.

Accelerated some spend into 2022 to expedite the completion of this plant in order to meet growing demand.

This plan is expected to be service in the second quarter of 2023.

In addition, given the significant amount of demand. We're seeing we are evaluating the necessity and potential timing of adding another processing plant in the region.

Once in service the volumes from the tailgate of these plants will utilize our gas and NGL pipelines for takeaway, providing revenue streams for our intrastate and NGL segments on top of the incremental revenue.

For our midstream segment.

In the meantime, we continue to heavily utilized the Permian which project.

That operational flexibility between our processing facilities in the Delaware and the Midland Basin.

Crude terminal throughput increased nearly 20% over the second quarter of last year, driven by increased upstream pipeline throughput the strategic petroleum reserve drawdown and additional market connectivity the Ted Collins link.

At our Nederland terminal, we have recently seen record crude volumes destined for the refinery and export markets overall.

Overall, we expect to see exports continue to stay strong largely due to the Ted Collins link, which provides our systems with more market connectivity and access to deeper water as well as a quality management program, which ensures a higher quality Midland WTS barrel is desired by our customer.

We continue to make progress on the construction of the Gulf run pipeline, which is a 42 inch Interstate natural gas pipeline with 165 Bcf per day of capacity upfront.

Ill front is backed by a 20 year commitment for one one Bcf per day from Golden pass LNG, and we will provide natural gas transportation between the Haynesville shale and the Gulf coast connecting some of the most prolific natural gas producing regions in the U S with the LNG export market.

<unk> remains on schedule to be complete by the end of this year.

We recently completed a non binding open season on Gulf run due to growing producer demand.

We were pleased with the results of the open season and customer discussions are ongoing which will likely necessitate additional facilities beyond the initial design of 165 Bcf per day.

Turning to the Warrior pipeline project, which is the most optimal solution for customers to transport gas out of the Permian in regard to timing cost flexibility and access to premium markets. We are still evaluating the construction of this new Interstate pipeline from the Midland Basin.

Extensive pipeline network south of the DFW area and remain optimistic that we can bring this project to <unk>.

<unk>.

In the meantime.

Modernization and Debottlenecking work on our <unk> pipeline continues which will add an incremental 60 million cubic foot per day of much needed capacity out of the Permian basin. This capacity is expected to be available by the end of this year.

We also continue to evaluate opportunities in the petrochemical space, which would include developing a project along the Gulf coast as well as potential M&A opportunities.

We are in discussions with a number of high quality customers as we work to secure long term totaling type commitments prior to reaching FID.

We also intend to have a significant partnership with Warner more industry participants, if we are able to reach.

On this project the ethylene and propylene production units would be synchronized into a world class facility, providing unique feedstock and product flexibility.

This would allow our customers to capitalize on access to the lowest cost feedstock through our comprehensive pipeline system as well as unparallel access to downstream domestic and international markets through our pipelines are underground storage facilities and our export terminals.

Now for an update on our alternative energy activities, we are continuing to focus on efforts on reducing emissions across our pipelines and we have established an internal task force to coordinate these efforts in conjunction with third party consultants. We recently entered into a letter of intent with capture point solutions to pursue.

The joint development of a carbon capture and sequestration hub in Louisiana. This project would involve the installation of carbon capture equipment several natural gas treating plants in the Haynesville area and the transport by pipeline of Sidoti two a sequestration site.

That capture point is developing.

<unk> cost estimates as well as projections of cash flow and tax credits.

Indicate that this project will generate an attractive financial return.

We continue to pursue a number of projects related to carbon capture including sequestration enhanced oil recovery and utilization projects.

We are in active discussions with several developers of seal to sequestration sites in close proximity to our existing facilities and other regions as well as our proposed Lake Charles LNG liquefaction facility.

That would be good candidates for carbon capture and sequestration.

Let's take a closer look at our second quarter results consolidated adjusted EBITDA was $3 3 billion compared.

Compared to $262 billion for the second quarter 2021, DCF attributable to the partners as adjusted was $188 billion for the second quarter of 2022 compared to $1 39 billion.

For the second quarter of 2021.

Results for the second quarter included higher transportation volumes across all of our segments as well as a full quarter contribution from the enable assets that were acquired in December of 2021.

On July 26th we announced a quarterly cash distribution of <unk> 23 per common unit or <unk> 92 on an annualized basis.

Distribution will be paid on August 19.

Unit holders of record as of the close of business on August eight this.

This distribution represents a more than 50% increase over the second quarter 2021.

Turning to our results by segment, starting with NGL and refined products.

The EBITDA was $763 million.

Compared to $736 million for the same period last year. This was primarily due to higher fractionation margin higher transportation margin as well as higher terminal service margin related to increased throughput at our Nederland and Marcus hook terminals in the second quarter of 2022.

NGL transportation volumes on our wholly owned and joint venture pipelines increased to a record $1 9 million barrels per day compared to $1 7 million barrels per day for the same period last year.

The increase was primarily due to a ramp up in volumes through our propane and ethane export pipelines into our Nederland terminal and higher volumes from the Permian and Eagle Ford regions as well as record volumes on our Mariner East pipeline.

And our average fractionated volumes were also a record at 938000 barrels per day compared to 833000 barrels per day for the second quarter 2021.

For our crude oil segment, adjusted EBITDA was $562 million compared to $484 million for the same period last year. This was primarily due to improved performance on our Bakken pipeline, despite significant weather impacts during the quarter.

Increased throughput at our Gulf Coast terminals as well as the addition of the enabled assets in December of 2021 crude.

Crude oil transportation volumes increased $4 3 million barrels per day compared to 4 million barrels per day for the same period last year, driven by higher crude oil prices and strong refinery demand.

For midstream adjusted EBITDA was $903 million compared.

Compared to $477 million for the second quarter of 2021.

This was primarily due to the acquisition of enable assets in December of 2021, and an increase related to favorable NGL and natural gas prices as well as significant increases throughout the majority of our operating regions.

Gathered gas volumes were $18 3 million <unk> per day compared to $13 1 million.

<unk> per day for the same period last year due to the addition of the enable assets.

<unk> production in South, Texas and in the northeast as well as additional gathering capacity from the Permian Bridge pipeline in West Texas.

Permian Basin volumes continue to be strong and Permian basin inlet volumes remain at or near record highs were utilized in the Permian bridge daily to optimize our available processing capacity as well as increasing our processing capacity in the area to accommodate incremental demand we are seeing.

In our Interstate segment, adjusted EBITDA was $397 million compared to $331 million for the second quarter of 2021 during the quarter. We benefited from the addition of the enable assets as well as the increased rates and higher utilization on the France, Western Tiger Rover and frontline CIS.

<unk> due to more favorable market conditions and volume growth, we continue to see heavy utilization on many of our interstate pipelines, including Tiger FCT SESH and Rover.

And towards the end of the second quarter basis spreads on our Interstate pipelines began to widen creating stronger demand for capacity across our Interstate network and we expect that to continue throughout the rest of this year.

And for our interest rate segment, adjusted EBITDA was $218 million compared to $224 million in the second quarter of last year.

<unk> benefits from winter storm year in both quarters.

This segment would have been up approximately $30 million due to an increase in retained feels related to higher natural gas prices. This was partially offset by lower storage optimization opportunities utilization.

Utilization of our <unk> system remains strong due to increased demand from gas takeaway and a rich pipeline system continues to flow at or near capacity due to increased activity in the haynesville.

Now turning to our 2022 adjusted EBITDA guidance, given our strong performance second quarter as well as continued demand for our products as we move through the rest of the year. We now expect our adjusted EBITDA to be between $12 6 billion to $12 8 billion.

This is up compared to our previous guidance of $12 2 billion to $12 6 billion.

And moving to a growth capital for the six months ended June 32022 energy transfer spent approximately $825 million organic growth projects, primarily in the midstream Interstate and NGL and refined products segment, excluding sun and USA compression capex for full year 2020.

Two we continue to expect growth capital expenditures to be between one eight to $2 1 billion and we will likely be near the high end of that range. As we have added new projects related to incremental demand that we are now seeing these.

These projects include the addition of capital related to Frac eight accelerated spend on new processing facilities in the Permian and a new connection for Gulf run, which are all offset by deferral of some spend in 2023 based upon project timing.

Now looking briefly at our liquidity position as of June 32022, total available liquidity under our revolving credit facility was approximately $2 $4 4 billion.

We continue to expect to generate a significant amount of cash flow.

This year, which will be strategically allocated in a manner that best positions us to continue to improve our leverage invest in high returning growth projects.

<unk> value to our unit holders and we expect to continue to pay down debt throughout this year and beyond with excess cash flow from operations.

We also expect to reach our leverage target range by the end of this year and going forward expect our strong coverage and balance sheet strength to allow us to prioritize growth within our capital allocation strategy.

Our strong second quarter and performance was driven by significant volume growth across all of our segments. As a result of improved production and increased demand, which we expect to continue throughout 2022. In addition, the enable assets acquired at the end of 2021 continue to outperform our internal budget during the second.

Quarter, we expect production improvements market conditions, and strong domestic and international demand for our products to positively impact all of our segments for the remainder of this year.

We are pleased with the progress we have made toward reaching our leverage target range and we remain focused on improving our financial flexibility and paying down debt in order to further strengthen our balance sheet. In addition, we will continue to evaluate returning additional capital through our equity unit holders through distribution growth on a quarterly basis.

We remain bullish about the future of our industry and the growing worldwide demand for natural gas and natural gas liquids.

As we look for additional ways to address the existing and new demand for our products. We will continue to evaluate and pursue strategic growth projects that enhance our existing asset base and generate attractive returns as part of the capital allocation strategy.

Operator, please open the lineup for our first question.

And once again, if anyone has a question and answer the zero one on your Touchtone phone. If you wish you were removed from the queue. It's zero, two and I am standing by for questions.

Our first question comes from Jeremy Tonet from Jpmorgan go ahead Jeremy.

Hi, good afternoon.

Good afternoon.

Just wanted to start off touching base on the guidance real quick here.

Do you have a quick peruse at the first half of the year, if I annualize that goes over the high end of the guide range. If I take the second quarter, our annualized that goes over the high end of the guidance range are there any headwinds that youre expecting in the back half of the year that would indicate that EBITDA run rate would decline from here or just trying to figure out gives and takes.

No no headwinds Jeremy let me start off with that this is Tom long, we we remain conservative on the price deck and that is the primary driver in other words when you look at the first half of the year and the prices that we're able to realize in the first two quarters. We continue to look at the second half of the year and we.

Remain conservative on the price deck I wouldn't give you any other headwinds that we see.

Got it. Thank you for that and then the Woodford Express just wondering if you could talk a bit about the background there and what drove you to this acquisition and what type of multiple you paid or all the thoughts on the economics there.

Yes. This is mackie Jeremy.

Really that value driven acquisition.

It's situated in a great area in Oklahoma.

We mentioned that has connectivity already with our gathering asset asset and also with the residue takeaway pipelines and it just was one heck of a buy if you look at the the acreage and the producers that are committed under long term contracts and the fees that are associated with that.

Very pleased with the price that we pay for those assets.

Got it. Thanks, So real quick last one if I could with regards to IRR and a potential 45 Q increase there just wondering how this might impact your thoughts on pursuing carbon capture initiatives do you need that to go after these projects or these economics, even without that.

Yes, this is mackie and Tom who leads our.

ESG team cannot elaborate but.

As we mentioned we're chasing the project right now.

In North Louisiana that we're extremely excited about one of those projects, we may or may not exercise and we certainly will allow <unk> captured but what the new credits and this new bill.

Would provide for significant higher rates of return.

With a tax credit go on trauma up to the $85. So depending on how that plays out in this bill that certainly would be a very positive.

Jack.

On creating very significant returns.

Got it thanks for that.

But.

Our next question comes from Chase Mulvehill from Bank of America Chase.

Hey, good afternoon, I guess, maybe I'll start with Lake Charles.

It looks like there wasn't really anything new on the Opex front, but it sounded like youre still pretty positive optimistic about signing more SBA as the rest of the year.

So could you maybe just kind of talk a little bit further about the opportunities that you see.

Starting more I'll take the rest of the year and then also about selling down some interest just kind of the conversations that you're having there and the potential to do that and would you need to do the project before you actually sell down some interest.

Great question obviously.

Obviously, we've been busy with the.

Negotiating offtake contracts over the last since our last earnings call.

We wished we had maybe a couple of extra weeks here before this call.

We are optimistic we are close to an announcement on it.

Pretty important contract and.

But some of these things just take time their 20 year contracts.

Yes, they get significant dollars involved so.

We're working on a lot of different.

Update contracts still seeing very strong demand.

Worldwide, both in Europe and in Asia. So.

Things are going great.

I think they are.

People are.

Security of supply is becoming even more.

Recognized around the world than it was even three or four months ago. So.

Highly optimistic we will.

Get to the goal line on our uptake.

Morris.

The equity sell down.

Likely to start that process.

Couple of months.

I want to kind of get to a critical mass of offtake contracts before going down that path, obviously the <unk>.

Equity participants.

Kind of what our portfolio update contracts looks like.

But that's.

You're just destroying the quarter for us.

And I think what was the last question Tommy.

With that.

Yes, we're still targeting by the end of the year.

Obviously.

The Big project lots of things have to come together, but things are looking looking really good.

Alright perfect.

Related follow up is really well.

Fractionation side.

The fire with Bedford over in Conway.

I'm guessing that's probably job at a little bit more rich gas down to Mont Belvieu.

Obviously, it didn't impact <unk>, but when we think about <unk> could you talk about whether youre seeing.

Well rich gas kind of make its way down to belvieu.

And the impact that this could have on kind of the fractionation market in the third quarter.

You bet, Jason This is Mackie again.

With without that we're seeing significant volume growth or NGL know NGL barrels, reaching a Mont belvieu, both from Permian basin and other areas of Texas in the Fort Worth Basin.

Ironically some of the barrels that were affected by that we are now tracking at Mont Belvieu and so.

We are seeing is a very tightening the frac capacity, we think thats an increase over the next six to nine months before some of these other fracs come on including the hires so we see the value of any available capacity.

Values.

Belvieu.

<unk> better so we're pretty excited about that and we're also excited that we kicked off the <unk> eight and we will push hard to get that done by the third quarter.

Earlier.

Yes, do you know if youre seeing any of the NGL barrels, making their way down.

Okay.

Or is there enough capacity there.

Can't speak to what others are doing but we are receiving barrels.

From Oklahoma delivered to our Frac as a result of that bar.

Okay Awesome alrighty ill turn it back over.

And our next question comes from Colton Bean from Tudor Pickering, Holt and company go ahead Colton.

Starting off on Gulf run, you mentioned incremental demand and the potential to upsize the pipe.

In terms of upsize capacity are you looking at something in the range of two Bcf a day or potentially beyond that and then would you add compression ahead of in service or just at a later date tied to commitments.

Yeah, I'd tell you when we look at the acquisition.

We just keep turning over gifts.

Incredible is in this time when the fastest growing area in the nation and the Haynesville. There was already a 42 inch approved being constructed as we have said it should be.

The ground by the end of the year, we did just complete an open season, it went exceptionally well the demand to.

Volumes not only at <unk>, but other areas of the U S down the Gulf Coast is enormous.

Going through discussions and negotiations with the law.

A large amount of.

Producers and shippers that we're interested in that and we'll be making those decisions.

We can add compression and add about a bcf, but we also are looking at having to Luke.

<unk> potential.

Essentially all of them to Lake Charles So still a lot. We are working on there, but we are in negotiations and certainly expect to talk more before our next earnings call.

Okay Mackie just to confirm that you. It sounds like you can get up to north of two and a half just with compression.

Yes, we can go from $1 65 to $2 65, just with compression.

Great and then maybe sticking on pipeline development can you expand on what Youre seeing in terms of commercial interest on warrior and is there any reduced urgency from E&ps I think we've seen.

Since widened, but then some of the other brownfields had been a little bit slower than expected. So just a bit tough to reconcile that at present.

And you said you are right.

Yes.

Thinking Permian just.

Like me, yes, certainly the slow but yes.

Yes, certainly with the announcement of another pipeline some of the bigger producers that were worried about capacity. They sign those up however, we are talking to some of those already in addition to that we have.

A bunch of producers horse upstream and then some very strong markets downstream, we have a pretty balanced customer base from both and we are seeing a tremendous amount of interest.

And we do expect hopefully.

Make some headway certainly before our next earnings call in.

We'll remain very optimistic that we'll get that.

Great I appreciate the color.

You bet.

And our next question comes from Brian Reynolds from UBS go ahead, Brian .

Hi, everyone.

Just curious if you can just talk about.

NGL takeaway capacity out of the Permian and potential expansion there just given the recent processing plant announcements. Additionally, the frac.

Next year. Thanks.

Okay. This is mackie again.

Yeah, we've already announced that we're building to more alright.

Things like everybody can say the word probably does.

Announcing projects out there Fortunately, we kind of we're looking ahead years ago. We built 24 oriented that we built other 24 inch so we've got capacity to not only handle the liquids from our plant that we're building plus additional plants. We also are a big takeaway from a lot of the other plants out in that area I believe.

Theres about $2 2 million barrels moving out of Fort worth basin, I'm, sorry out of the Permian basin and about 35% to 36% of that is us and we do.

See that increase in for the remainder of this year and beyond.

And then just as a quick follow up do you see any need for expansion on your existing pipes or are you. Good for I guess the interim.

We don't see that over the next year to two but who knows.

Still enormous opportunities to grow from the best rock in the world multiple pay zones out of the Permian basin, So, but we're sitting pretty good for next year or two.

And of course, we have the 30 inch from the basin down and have plenty of capacity in that.

Pipeline, great appreciate the color and as a quick up you talked about <unk> and some of the earlier questions.

Just curious if you can just.

Pursuing projects in Louisiana, and North Eastern Texas is there kind of a preference to pursue first or any incremental color around there. Thanks.

Around capturing CLSA.

Correct, yes.

Okay, Yes.

Others have been asked that question, but the bottom line on that is where's the cotwo, where is the closest location to to sequester it and <unk>.

Louisiana is such an excellent.

The state because they're one of the only state that we're aware of that have asked for privacy. So that you could actually get a.

Permitted plastics permit approved by the state instead of going through the EPA that hasnt been approved yet, but anyway, Louisiana is a little ahead of the game. There is a lot more trading lot more cotwo north Louisiana.

More of a need some western <unk>, there and that's why we've kind of focused our efforts on a really attractive projects that Tom and his team have worked very closely on that we're pretty excited about.

Great appreciate the color I have a good rest of your evening.

Okay.

Our next question comes from Michael Blum from Wells Fargo Go ahead Michael.

Thanks.

One quick follow up on one of your pipeline can you just remind us whether there is any capex in the budget this year tied to warrior.

Michael This is mackie there is some.

We're not rushing that we certainly are way out in front of me as far as.

Surveying and laying out the route but no there is no.

<unk> dollar in 2022.

Okay, Great and then on Lake Charles.

Percentage of the capacity that you want to you want a contract before you move forward just trying to look at kind of the.

Signs ratio, we should be looking for to know that youre going to get there by year end.

Well the bottom rung of that answer is.

At what point are we going to go to our board and our executive chairman to ask for approval.

I think we've said publicly that we can get to that 12% to 14.

Depending on the customer mix and of course, the infrastructure funds that will.

There will be a part.

Part of this but thats, probably a pretty good range 12 to 14 million tonnes, but certainly we'll make that decision at the right time here toward the end of the year.

Okay, Great and then just last one for me.

If I heard right it sounds like you're either expanded or in the process of expanding your ethane export capacity at Marcus Hook. So just.

Curious, if I heard that right and where the capacity will be when the expansion is.

Please.

Yes, Michael it's not that material.

As you know we have built an extensive pipeline network that we have tremendous ability to grow.

We were close to maxing out what we can do both from an ethane standpoint and from a LPG standpoint, but we're looking at everything we weren't able to eke out a little bit more or little less than 10000 barrels.

We were able to expand and we will continue to look at those.

Opportunities until we make decision too.

Difficultly it spanned at Marcus Hook.

Okay got it thanks. Thank you.

Okay.

Our next question comes from Keith Stanley from Wolfe Research go ahead Keith.

Hi, good afternoon.

Wanted to start on capital allocation to make sure I got the message right. So.

The distribution, you've been very consistent and growing that every quarter.

You said you'd be at the leverage target by year end. So how does the capital priority shift if at all into next year in terms of distribution growth buybacks and growth capital expectations. Tom It sounded in your comments like a little more focus on growth once the balance sheet and distribution growth does.

Probation goals are met is that is that right.

Yes, I don't know that I would.

Sum it up is as I shift, we're going to continue to focus on the balance sheet, but I think it's very important to note with all of the projects. We're talking about right now that are very good high returning projects, we're going to continue to look at that.

It's also worth noting that the portion about returning capital to the unitholders. So we'll continue to evaluate that as from a from a distribution. We will also continue to evaluate it.

Even a unit buyback so there's been various components here that are that are moving around and we will have good healthy discussion internally here with the.

With our executive chairman as well as with our board as we continue to focus on that so anyway. This is a good question to be answering here right now it's great to be at this place on the leverage we're very very excited about this and it's.

Let's just call it it's a kind of a high class.

Valuations that have to be doing we're very pleased to be here at this stage and as quick as we got here.

Great. Thanks, Thanks for that and separate one I just wanted to follow up on Lake Charles.

So it sound very optimistic on contracts any color you can give plus or minus on where pricing has been you kind of you have tons of demand obviously from Europe and Asia. We also have a lot of competing.

Projects, and then Relatedly any update on how discussions are going on the on the cost side and the EPC contract. If that is kind of in line with what you were thinking so far thank you.

Yes.

Yeah.

It's been a very competitive market in spite of the increased demand worldwide and so we.

We can't ignore competition towards that.

Pricing however.

I think the.

The number of companies and customers around the world.

They are stepping up in that non.

Non traditional players for LNG and traditional.

<unk> increased significantly so we're pricing, we're moving adjusting our prices up to.

To reflect kind of anticipated a little bit higher cost on the EPC side.

We're going through a bid refresh process now we will get that number.

It's literally towards the end of this year and so.

Obviously, you're trying to balance the anticipated.

Somewhat higher cost.

So we saw a very very competitive EPC price compared to our peers because of our brownfield.

Assets, we have on the ground today, but I think that's it.

It's a balancing between the.

Competitive market getting.

Trying to get a good return for the project.

Thank you.

And our next question comes from Jean Ann Salisbury from Bernstein Go ahead, Jean Ann Hi.

Hi, just following up on that last question, obviously, I think it's fair to say that all LNG projects kind of on the same EPC.

Would you consider just doing the 10 MTA instead of 15.

Can you walk in the EPC and Youre not quite at the 12, MTA 14, MTA contracts level that you wanted to be up for the 15th.

Yes, certainly we would consider that.

Yes, I think we are.

We think that overall, it's going to be kind of work.

Cost competitive to do three trains versus two.

But where we think we're going to be in the next few weeks with the.

Signed up contracts.

Certainly in a position to do it to trade deal.

If we want to go down that path so.

So we will evaluate that during the course of the fall, but that's an option we could do.

But I will just add to that we're extremely optimistic talent team are working with.

Many companies in many countries and we are highly confident that we'll get.

This fully sold out to the 15 million tons.

Okay.

And then could you give more color on energy Transfer's pet Ken strategy, especially around diversity.

Sure. This is mackie again.

When kelcey kind of gave us the directive that we need to step in the pack and we certainly are doing that two perspectives one.

From an M&A perspective anything that's for sale, we'll take a look at pretty much like anything in the industry and then on the organic side we're excited.

The project that we're working on we truly believe we're not just saying it is most unique world class facility anywhere around.

Around the world and we say that because of where its located.

We're going to be able to move forward.

Pain, butane ethane and natural gasoline through or existing pipelines, all four of which we have significant capability of expanding in addition of that upstream of the cracker will have access to refine products like butane components and gasoline components, who knows where the gasoline demand.

Go to the next five to 10 to 15 years, some believe that that is going to get.

Very depressed pricing and we think that will be a very cheap feedstock for our customers. It's also with the K cotton metathesis technology as part of our plan, we'll be able to correct things like methanol or ethanol.

And mixed alcohols, and even plastics into ethylene so just.

Incredible amount of flexibility and we think.

Very advantageous to any other cracker in the world as far as the cost and value of the upstream feedstocks and then you look at downstream. We we have every intention to connect it to our new spin will pop ethylene storage facility that has a header system connected to multiple ethylene pipelines.

We have every intention to connect all of this too.

Bellevue as well as to some of the pipes going into Louisiana, and then of course at Nederland, We will have the capability of exporting both ethylene and propylene. So once again, we're in the early stages, we have no intention of moving forward without a very big customer.

Alright, very good partner on that and we're in.

Structuring disagreement and we will move forward with tolling agreement. So this isn't going to be a pet him or we're going to be speculating or roll the dice on.

Cyclical nature of profit.

We're going to do this like we do all of our deals were going to have a tolling arrangement with guaranteed revenues on a guaranteed rate of return over a period of time. So we're not there yet, but we have a great team working on it and we really are excited about that project, we get great.

Thank you if I can sneak in one quick yes or no.

The girlfriend and be able to run at full capacity before Golden pass alright.

Friends starts up later this year.

Yes.

Great. Thank you.

And our next question comes from Michael Cusimano from Pickering Energy Partners go ahead Michael.

Hi, good afternoon.

On the Woodford acquisition can you talk about your existing Oklahoma utilization in the Woodford utilization I'm trying to understand if theres any operational synergies part of the deal that maybe you can rationalize capacity like we've seen others in the industry do through relocation or what have you have processing capacity.

Yeah, as we mentioned we have our gathering system already connected.

In turn intrastate residue pipelines connected to it is very early on this acquisition moved pretty quickly. So we will continue to evaluate and certainly do like we do with any of our acquisitions are even of our newbuild cryo well integrated in and figure out a way to bet.

Most properly and efficiently operate that system.

Fortunately or unfortunately, everyone to look at it is it's going to be pretty darn full just with the long term dedications from a handful of producers today.

But certainly as we integrate and bring into our system.

Create as much value as we can but that new asset with our existing assets.

Got it okay. That's helpful.

And then I wanted to shift quickly to Capex.

I think I heard you said that some capital costs, where may be deferred into 2003.

Whereas some projects maybe move forward into 2000 <unk> budget can you maybe.

Help us wrap our head around what 23 could look like as we stand today.

Other additional projects in the backlog coming into the budget.

Yes.

As you know our normal practices with our fourth quarter announcement to put out to 'twenty three capex guidance, but it's fair. It's a fair question in the sense that we're talking up.

About a lot of very very good projects. We're here right now so.

As we move forward with those and get those to <unk>.

We will be transparent as as those get approved and move forward, which will clearly move into 2023.

Capex guidance at the time, but at this point don't really have a number that we can give you but very excited about some of these projects were referring to.

We will we will update update everyone as those get the.

Got it thanks for the details.

And our final question comes from Michael <unk> from Goldman Sachs Go ahead Michael.

Got it thank you for taking my question.

Just curious.

M&A environment right now I mean, if I think about your history over time youll spend tons of M&A over the years, just curious what type of assets do you think the M&A environment is very ripe for where theres lots of attractive things to do and maybe on the other flip side of that what type of assets do you think are either.

Price too high for your blood.

Or simply not on the market, even even if they're things you'd love to have in the portfolio I'm not looking for specific names I'm, just looking for amp that tight.

Okay.

Well, thank you Michael that almost specific named part.

We do we.

We do feel very very strong debt consolidation makes a lot of sense in the midstream space. So starting with the midstream space. We would you would see us look around the assets. We have right now those items those that assets that would be great bolt ons for us and we're going to stay focused on those we do you've seen a lot of them come to market.

Rest assured we have looked at we have looked at these and we're going to continue to evaluate them I think the second part of your question is what kind of makes sense from the standpoint of <unk>.

Valuations when we look at these things.

Evaluate them based upon where our we're currently trading and when you. When you look at the commercial synergies the cost synergies were very very careful in how we evaluate each one of these and we remain disciplined on what we're doing but just like the smaller one today we announced.

It's an.

On an all cash transaction, but even if you were to do that one on a 50 50. It was accretive it was accretive.

Relatively small just because of the sheer size I think that's a good example of what we'll continue to look at and how we evaluate these but let me let me go back to the first part again as far as the assets go you've seen US talk you've heard us talk about the pet Chem side of it and we continue to evaluate moving downstream and we.

To look at on the International front too we talked about the Panama project. So there are other projects that we continue to look at.

That.

Kind of moving downstream taking advantage of all the Capex that we've spent over the last several years around our export facilities et cetera, So it's going to be a natural fit with us.

As Mackie was highlighting on the pet Chem side of it there is no doubt that.

Natural fit for us and those are the things we will continue to look at here on that front I don't know Mark if you want to chime in if theres anything else, but that's.

That kind of sums up.

Where we're spending most of our time and evaluations.

Got it thank you guys much appreciated.

You bet.

And we have no further questions at this time I would like to turn the call back to Tom long for closing comments. Mr. Long you May proceed.

Once again, thank all of you for joining US today, we really are excited to have the opportunity to talk to you about another great quarter and clearly a great year that we're saying thank you for your support and we look forward to talking to you in the near future.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

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Thank you.

Welcome to the energy transfer Q2, 2022 earnings Conference call. My name is Daryl and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press zero then one on your Touchtone.

<unk> phone as a reminder, this conference is being recorded I will now turn the call over to Tom Long Energy Transfer's co CEO . Mr. Long you may begin.

Thank you operator, good afternoon, everyone and welcome to the energy transfer second quarter 2022 earnings call.

I'm also joined today by Mackie Mccrea and other members of the senior management team who are here to help answer your questions. After our prepared remarks, hopefully you saw the press release, we issued earlier this afternoon as well as the slides posted to our website. As a reminder, we will be making forward looking statements within the meaning of section 21.

<unk> of the Securities Exchange Act of $19 34.

These statements are based upon our current beliefs as well as certain assumptions and information currently available to US and are discussed in more detail in our quarterly report on Form 10-Q for the quarter ended June 32022, which we expect to be filed Tomorrow August 4th.

I'll also refer to adjusted EBITDA, and distributable cash flow or DCF, both of which are non-GAAP financial measures.

You will find a reconciliation of our non-GAAP measures on our website.

I'd like to start today by looking at some of our second quarter highlights. We were pleased to report another strong quarter during which we generated adjusted EBITDA of $3 $2 3 billion and DCF attributable to the partners of energy transfer as adjusted was $1 88 billion.

This resulted in excess cash flow after distributions of approximately $1 $1 7 billion.

On an incurred basis, we had excess DCF of approximately $730 million after distributions of $710 million and growth capital of approximately $440 million.

On July 26, we announced a quarterly distribution of <unk> 23 for.

Per common unit or <unk> 92 on an annualized basis.

Which represents a more than 50% increase over the second quarter of 2021.

Operationally, our diverse asset base saw throughput increases across all of our segments as rig counts continue to improve across the U S.

And we saw record midstream volumes as well as record throughput on our NGL transportation pipelines.

Belvieu fractionator and terminals.

In addition, construction continues to progress on several of our growth projects, which I will provide more details on shortly.

I'll start with a brief update on the sale of energy transfer Canada.

In March of this year, we announced a definitive agreement to sell our 51% interest in energy transfer Canada for cash proceeds of approximately $270 million in.

<unk> the sale is expected to reduce our consolidated debt by approximately $550 million.

This sale allows us to divest of these noncore assets and an attractive valuation and utilize the cash proceeds to further deleverage our balance sheet and redeploy capital within our U S footprint.

<unk> transaction remains on track and we continue to expect it to close this month.

This week energy transfer signed an agreement to acquire Woodford Express LLC, a mid continent gas gathering and processing system for approximately $485 million.

This bolt on opportunity will provide a roughly 450 million cubic foot per day project gas processing and treating capacity.

In Grady County, Oklahoma, as well as more than 200 miles of low and mid pressure gathering lines in the heart of the Scoop play.

The assets are already connected to our inter and intrastate systems as well as our gas gathering system.

All at an attractive valuation that will be immediately accretive to energy transfer unit holders.

This transaction is expected to close by the end of the third quarter of this year subject to regulatory review and other customary closing conditions.

Now I'll walk through recent developments and other growth projects year to date Lake Charles LNG has executed five LNG offtake agreements for an aggregate of $5 8 million tons per annum.

<unk> price in all of these agreements is indexed to the Henry hub benchmark, plus a fixed liquefaction charge and the LNG will be delivered onto customer vessel on an fob basis.

The agreements will become fully effective upon the satisfaction of the conditions precedent by energy transfer LNG, including reaching FID.

We're also in active negotiations with a number of other high quality customers as we expect to make announcements of additional offtake agreements.

<unk> ahead.

We continue to work toward achieving FID date for this project by the end of this year and we expect that our anticipated announcements of additional long term LNG offtake agreements over the next several weeks, we will keep us on track for meeting this objective.

Upon completion of the LNG project, we expect to realize significant incremental cash flows from transportation of natural gas.

Our trunk line pipeline system and other energy transfer pipelines upstream from Lake Charles.

Recent events in Europe highlight the importance of LNG from the United States, a country with abundant natural gas supply and government support for LNG exports.

These events have caused companies around the world to place increased importance long term security of natural gas supply. We believe our lake Charles LNG project will be a significant factor in the long term solutions for global energy needs.

Looking at the Mariner East pipeline system, which is fully commissioned and capable of transporting more than 365000 barrels per day, including ethane for the second quarter of 2022 NGL volumes through both the Mariner East pipeline system and Marcus Hook terminal reached New records and in July .

We set a monthly throughput record for the combined Mariner east pipes, and we continued to see strong utilization of these sites.

At our expanded Nederland terminal NGL export volumes were very strong during the second quarter, including export volumes under our ethane export joint venture.

We hit a record in the second quarter for ethane exports and year to date, we have loaded nearly 18 million barrels of ethane out of the facility.

For full year 2022, we continue to expect to load more than 40 million barrels of ethane with that increasing to as high as 60 million barrels for 2023.

Total we continue to export more ngls than any other company or country and our percentage of worldwide NGL exports remain at approximately 20% of the world market. We continue to see increase in NGL demand both in the U S as well as from overseas customers seeking additional supply from the U S.

And we have sufficient commitments to move forward on an ethane export expansion.

Even though we expect to expand our ethane export capabilities at both our Marcus Hook and Nederland terminals. These commitments provide us with the Optionality of initially expanding at either terminal.

In addition, due to the significant tightening in fractionation capacity. We recently resumed construction on Frac, eight which was more than half funded when construction was paused in 2020 bracket.

<unk> is expected to be in service in the third quarter of 2023 and will bring our total Mont belvieu fractionation capacity to over $1 1 million barrels per day.

In the second quarter, our Permian Basin plant inlet processing volumes.

Construction of our new 200 million cubic foot per day Grey Wolf processing plant in the Delaware Basin is underway.

This plan is supported by new commitments and growth from existing customer contracts and remains on schedule to be in service by the end of this year.

We're also moving forward with a second 200 million cubic foot per day processing plant in the Permian Basin, a portion of the growth capital associated with the <unk> plant was included in our previous forecast we have accelerated some spend into 2022 to expedite the completion of this plant in order to meet growing demand.

<unk>.

This plan is expected be service in the second quarter of 2023.

In addition, given the significant amount of demand. We're seeing we are evaluating the necessity and potential timing of adding another processing plant in the region.

For our midstream segment in the meantime, we continue to heavily utilize the Permian, which project to provide operational flexibility between our processing facilities in the Delaware and the Midland Basin.

At our Nederland terminal, we have recently seen record crude volumes destined for the refinery and export markets overall.

We continue to make progress on the construction of the Gulf run pipeline, which is a 42 inch Interstate natural gas pipeline with 165 Bcf per day of capacity Gulf front is backed by a 20 year commitment for one one Bcf per day from Golden pass LNG and we will provide.

Natural gas transportation between the Haynesville shale and the Gulf coast connecting some of the most prolific natural gas producing regions in the U S with the LNG export market.

<unk> remains on schedule to be complete by the end of this year. We recently completed a non binding open season on Gulf run due to growing producer demand.

We were pleased with the results of the open season and customer discussions are ongoing with <unk>.

Likely necessitate additional facilities beyond the initial design of 165 Bcf per day.

Turning to the Warrior pipeline project.

As the most optimal solution for customers to transport gas out of the Permian in regard to timing cost flexibility and access to premium markets. We are still evaluating the construction of this new Interstate pipeline from the Midland Basin.

Extensive pipeline network south of the DFW area and remain optimistic that we can bring this project to <unk>.

In the meantime.

We also continue to evaluate opportunities in the petrochemical space, which would include developing a project along the Gulf coast as well as potential M&A opportunities.

We're in discussions with a number of high quality customers as we work to secure long term totaling type commitments prior to reaching FID.

We also intend to have a significant partnership with Warner more industry participants, if we are able to reach.

On this project the ethylene and propylene production units would be synchronized into a world class facility, providing unique feedstock and product flexibility.

The joint development of a carbon capture and sequestration hub in Louisiana. This project would involve the installation of carbon capture equipment and several natural gas treating plants in the Haynesville area and the transport by pipeline of Sidoti <unk> to a sequestration site.

That capture point is developing preliminary cost estimates as well as projections of cash flow and tax credits.

Indicate that this project will generate an attractive financial return we continue to pursue a number of projects related to carbon capture including sequestration enhanced oil recovery and utilization projects.

We are in active discussions with several developers of Sidoti sequestration sites in close proximity to our existing facilities and other regions as well as our proposed Lake Charles LNG liquefaction facility.

That would be good candidates for carbon capture and sequestration.

Let's take a closer look at our second quarter results consolidated adjusted EBITDA was $3 3 billion compared.

Compared to $262 billion for the second quarter 2021, DCF attributable to the partners as adjusted was $188 billion for the second quarter of 2022 compared to $1 $39 billion.

For the second quarter of 2021.

Results for the second quarter included higher transportation volumes across all of our segments as well as a full quarter contribution from the enable assets that were acquired in December of 2021.

On July 26th we announced a quarterly cash distribution of <unk> 23 per common unit or <unk> 92 on an annualized basis.

Distribution will be paid on August 19th to you.

Unit holders of record as of the close of business on August eight this.

This distribution represents a more than 50% increase over the second quarter 2021.

Turning to our results by segment, starting with NGL and refined products.

<unk> EBITDA was $763 million.

NGL transportation volumes on our wholly owned and joint venture pipelines increased to a record $1 9 million barrels per day compared to $1 7 million barrels per day for the same period last year.

And our average fractionated volumes were also a record at 938000 barrels per day compared to 833000 barrels per day for the <unk>.

<unk> quarter of 2021.

For our crude oil segment, adjusted EBITDA was $562 million compared to $484 million for the same period last year. This was primarily due to improved performance on our Bakken pipeline. Despite significant weather impacts during the quarter increased throughput at our Gulf coast terminals as well as the addition of the <unk>.

<unk> assets in December of 2021 crude.

For midstream adjusted EBITDA was $903 million compared.

Compared to $477 million for the second quarter of 2021.

Gathered gas volumes were $18 3 million <unk> per day compared to $13 1 million.

<unk> per day for the same period last year due to the addition of the enable assets increased production in South, Texas and in the northeast as well as additional gathering capacity from the Permian Bridge pipeline in West Texas.

Systems due to more favorable market conditions and volume growth, we continue to see heavy utilization on many of our interstate pipelines, including Tiger FCT SESH and Rover.

And for our interest rate segment, adjusted EBITDA was $218 million compared to $224 million in the second quarter of last year.

Absent benefits from winter storm year in both quarters.

Utilization.

Our <unk> system remains strong due to increased demand from gas takeaway and a rich pipeline system continues to flow at or near capacity due to increased activity in the haynesville.

This is up compared to our previous guidance of $12 2 billion to $12 6 billion.

And moving to a growth capital for the six months ended June 32022 energy transfer spent approximately $825 million on organic growth projects, primarily in the midstream Interstate and NGL and refined products segment, excluding sun and USA compression capex for full year 2020.

Now looking briefly at our liquidity position as of June 32022, total available liquidity under our revolving credit facility was approximately $2 $4 4 billion.

We continue to expect to generate a significant amount of cash flow.

This year, which will be strategically allocated in a manner that best positions us to continue to improve our leverage invest in high returning growth projects.

<unk> value to our unit holders and we expect to continue to pay down debt throughout this year and beyond with excess cash flow from operations.

We also expect to reach our leverage target range by the end of this year and going forward expect our strong coverage and balance sheet strength to allow us to further prioritize growth within our capital allocation strategy.

Quarter.

We expect production improvements market conditions, and strong domestic and international demand for our products to positively impact all of our segments for the remainder of this year.

We remain bullish about the future of our industry and the growing worldwide demand for natural gas and natural gas liquids.

As we look for additional ways to address existing and new demand for our products. We will continue to evaluate and pursue strategic growth projects that enhance our existing asset base and generate attractive returns as part of the capital allocation strategy.

Greater please open the lineup for our first question.

And once again, if anyone has a question and answer zero one on your Touchtone phone. If you wish you were removed from the queue. It's zero, two and I am standing by for questions.

Our first question comes from Jeremy Tonet from Jpmorgan go ahead Jeremy.

Hi, good afternoon.

Good afternoon.

Just wanted to start off touching base on the guidance real quick here.

Do you have a quick peru's of the first half of the year, if I annualize that goes over the high end of the guide range. If I take the second quarter, our annualized that goes over the high end of the guidance range are there any headwinds that youre expecting in the back half of the year that would indicate that EBITDA run rate would decline from here or just trying to figure out what gives and takes.

No no headwinds Jeremy let me start off with that this is Tom long.

We remain conservative on the price deck and that is the primary driver in other words when you look at the first half of the year and the prices that we're able to realize in the first two quarters. We continue to look at the second half of the year and we remain conservative on the price deck I wouldn't give you any other headwinds that we see.

Yes. This is mackie Jeremy.

Really that value driven acquisition.

It's situated in a great area in Oklahoma as.

As we mentioned it has connectivity already with our gathering asset asset and also with the residue takeaway pipelines and it just was one heck of a buy if you look at the <unk>.

Acreage and the producers that are committed under long term contracts and the fees that are associated with that.

We're very pleased with the price that we could pay for those assets.

Got it. Thanks, So real quick last one if I could with regards to IRA and a potential 45 Q increase there just wondering how this might impact your thoughts on pursuing carbon capture initiatives do you need that to go after these projects or these economics, even without that.

Yes, this is mackie and Tom who leads our.

ESG team cannot elaborate but.

As we mentioned we're chasing the project right now.

In North Louisiana that we're extremely excited about it as one of those projects, we may or may not exercise and we certainly will allow our cotwo captured but what the new credit and this new bill.

Would provide for a significant higher rates of return.

With the tax credit going from up.

Up to the $85 so.

Depending on how that plays out in this bill that certainly would be a very positive for that.

Project on it.

Creating very significant returns.

Got it thanks for that.

But.

Our next question comes from Chase Mulvehill from Bank of America Chase.

Hey, good afternoon, I guess, maybe I'll start with Lake Charles.

It looks like there wasn't really anything new on the Opex front.

But it sounds like you're still pretty positive optimistic about signing more SBA as the rest of the year.

So could you maybe just kind of talk a little bit further about the opportunities that you see signing.

Signing more I'll take the rest of the year.

Also about selling down some interest just kind of the conversations that you're having there and the potential to do that and would you need to <unk>. The project before you actually sell down some interest.

Great question obviously.

Obviously, we've been busy with the.

Negotiating offtake contracts over the last since our last earnings call.

We wished we had maybe a couple of extra weeks here before this call.

We are optimistic we are close to an announcement on it.

Pretty important contract and.

But some of these things just take time their 20 year contracts.

Yes, it gets significant dollars involved so.

We're working on a lot of different.

Update contracts still seeing very strong demand.

Worldwide, both in Europe and in Asia. So.

Things are going great.

I think they are.

People are.

Security of supply is becoming even more.

Recognized around the world It was even three or four months ago. So.

Highly optimistic we will.

Get to the goal line on our uptake.

Morris.

The equity sell down.

Likely to start that process.

In the next couple of months.

I want to kind of get to a critical mass of offtake contracts before going down that path obviously the.

Equity participants.

Kind of what our portfolio update contracts looks like.

But that's the.

Just around the quarter for us.

And I think what was the last question.

With that.

Yes, we're still targeting by the end of the year.

Obviously.

The Big project lots of things have to come together, but things are looking looking really good.

Alright perfect.

Related follow up is really.

Fractionation side.

The fire with Medford ovarian Conway.

I'm guessing that's probably job at a little bit more rich gas down to Mont Belvieu.

Obviously, it didn't impact <unk>, but when we think about <unk> could you talk about whether youre seeing.

Well rich gas kind of make its way down to belvieu.

And the impact that this could have on kind of the fractionation market in the third quarter.

You bet, Jason This is Mackie again.

With without that we're seeing significant volume growth for NGL, though NGL barrels, reaching a Mont belvieu, both from Permian basin and other areas of Texas in the Fort Worth Basin.

Ironically some of the barrels that were affected by that we are now breaking at Mont Belvieu and so well.

We are seeing is a very tightening the frac capacity, we think thats an increase over the next six to nine months before some of these other fracs command, including ours. So we see the value of any available capacity at Mont Belvieu.

Belvieu.

Kris singly better so we're pretty excited about that and we're also excited that we kicked off the <unk>.

<unk> eight and we will push hard to get that done by the third quarter.

Earlier.

Do you know if youre seeing any of the NGL barrels.

They're way down.

Hawaii.

Or is there enough capacity there.

Can't speak to what others are doing but we are receiving barrels.

From Oklahoma delivered to our Frac as a result of that bar.

Okay Awesome alrighty ill turn it back over.

And our next question comes from Colton Bean from Tudor Pickering, Holt and company go ahead Colton.

Starting off on Gulf run, you mentioned incremental demand and the potential to upsize the pipe.

In terms of upside capacity are you looking at something in the range of two Bcf a day or potentially beyond that and then would you add compression of in service or just at a later date tied to commitments.

I would tell you when we look at the acquisition, we just keep turning over gifts.

How incredible this time when the fastest growing area in the nation. The Haynesville there was already a 42 inch approved being constructed and as we have said it should be.

The ground by the end of the year. We did just complete an open season. It went exceptionally well the demand to get volumes not only out of north, Louisiana, but other areas of the U S down on the Gulf Coast is enormous we're going through discussions and negotiations with the law.

A large amount of Av.

Producers and shippers that we're interested in that and we'll be making those decisions.

We can add compression and add about a bcf, but we also are looking at having to Luke.

<unk> potential.

Essentially all of them to Lake Charles So still a lot. We are working on there, but we are in negotiations and certainly expect to talk more before our next earnings call.

Okay Mackie just to confirm that you. It sounds like you can get up to north of two and a half just with compression.

Yes, we can go from $1 65 to $2 65, just with compression.

Great and then maybe sticking on pipeline development can you expand on what Youre seeing in terms of commercial interest on warrior and is there any reduced urgency from E&ps I think we've seen.

This widened but then some of the other brownfields had been a little bit slower than expected. So just a bit tough to reconcile that at present.

And you said war you're right.

Yes.

Thinking Permian just.

Like me, yes, certainly the slow but yes.

A bunch of producers for upstream and then some very strong markets downstream, we have a pretty balanced customer base from both ends.

<unk> seen a tremendous amount of interest.

And we do expect hopefully.

Make some headway certainly before our next earnings call.

He'll remain very optimistic that we will get that.

Great I appreciate the color.

You bet.

And our next question comes from Brian Reynolds from UBS go ahead, Brian .

Hi.

One.

Just curious if you can just talk about.

NGL takeaway capacity out of the Permian and potential expansion there just given the recent processing plant announcements addition.

It's the fracking the.

For next year. Thanks.

Okay. This is mackie again.

Yeah, we've already announced that we're building two more things.

Seems like everybody.

Say that word pile is announcing projects out there. Fortunately, we kind of we're looking ahead years ago, we built a 'twenty oriented that we built other 24 inch so we've got capacity to not only handle the liquids from our plant that we're building plus additional plants. We also are a big takeaway from a lot of the other plants.

Out of that area I believe theres about $2 2 million barrels moving out based on I'm, sorry out of the Permian basin and about 35% to 36% of that is us and we do it.

See that increase in for the remainder of this year and beyond.

And then just as a quick follow up do you see any need for expansion on your existing pipes or are you. Good for I guess the interim.

We don't see that over the next year to two but who knows there is still enormous opportunities to grow from the best rock in the world multiple pay zones out of the Permian basin, So, but we're sitting pretty good for next year or two.

And of course, we have the 30% from the basin down and had plenty of capacity in that.

Pipeline, great appreciate the color and as a quick up you talked about <unk> and some of the earlier questions.

Just curious if you can just.

Pursuing projects in Louisiana, and North Eastern Texas is there kind of a preference to pursue first or any incremental color around there. Thanks.

Around capturing sales.

Correct, yes.

Okay, Yes.

I think others have been asked that question, but the bottom line on that is where's the cotwo Where's the closest location to to sequester it and <unk>.

Louisiana is such an excellent.

State because they're one of the only state that we're aware of that have asked for promising so that you could actually get a.

Permitted plastics permit approved by the state instead of going to the EPA that hasn't been approved yet, but anyway, Louisiana is a little ahead of the game. There is a lot more trading lot more cotwo north Louisiana.

More of a need sequester <unk>, there and that's why we've kind of focused our efforts on a really attractive project and his team have worked very closely on that we're pretty excited about.

Great appreciate the color and have a good rest of your evening.

Sure.

Our next question comes from Michael Blum from Wells Fargo Go ahead Michael.

Thanks, just one quick follow up on on what are your pipeline can you just remind us whether there is any capex in the budget this year tied to warrior.

Michael This is mackie there is some.

We're not rushing to that but we certainly are way out in front of it as far as.

Surveying and laying out the route but no theres no.

<unk> dollars in 2022.

Okay, Great and then on Lake Charles is there a certain percentage of the capacity that you want to do you want a contract before you move forward just trying to look at kind of the the.

Signs ratio, we should be looking for to know that youre going to get there by year end.

Well the bottom rung of that answer is.

At what point are we going to go to our board and our executive chairman to ask for approval.

I think we've said publicly that we can get to that 12% to 14.

Depending on the customer mix and of course, the infrastructure funds that will.

It will be a part of this but that's probably a pretty good range.

<unk> million tonnes, but certainly we'll make that decision at the right time here towards end of the year.

Okay, Great and then just last one for me.

If I heard right it sounds like you're hearing, though did expanded or in the process of expanding your ethane export capacity at Marcus Hook. So just curious.

Curious, if I heard that right and where the capacity will be when the expansion is.

Please.

Yeah, Michael it's not that material.

As you know we have built an extensive pipeline network.

Tremendous ability to grow.

We were close to maxing out what we can do both from an ethane standpoint and from a LPG standpoint, but we're looking at everything we weren't able to eke out a little bit more a little less than 10000 barrels.

We were able to expand and we will continue to look at those.

Opportunities until we make decisions to <unk>.

Significantly expand at Marcus Hook.

Okay got it thanks. Thank you.

Okay.

Our next question comes from Keith Stanley from Wolfe Research go ahead Keith.

Hi, good afternoon.

Wanted to start on capital allocation to make sure I got the message right. So the.

The distribution, you've been very consistent and growing that every quarter.

You said you'd be at the leverage target by year end. So how does the capital priority shift if at all into next year in terms of distribution growth buybacks and gross capital expectations. Tom It sounded in your comments like a little more focus on growth once the balance sheet and distribution growth does.

Probation goals are met is that is that right.

Yes, I don't know that I would.

Sum it up as a shift we're going to continue to focus on the balance sheet, but I think it's very important to note with all the projects. We're talking about right now that are very good high returning projects, we're going to continue to look at that.

It's also worth noting that the portion about returning capital to the unitholders. So we'll continue to evaluate that as from a from a distribution. We will also continue to evaluate it.

When a unit buyback so theres going to be various components here that are that are moving around and we will have good healthy discussion internally here with the.

Our executive chairman as well as with our board as we continue to focus on that so anyway. This is a good question to be answering here right now it's great to be at this place on the leverage we're very very excited about this.

<unk>.

Let's just call it it's a kind of a high class.

Valuations that have to be doing where we're very pleased to be here at <unk>.

This stage and as quick as we got here.

Great. Thanks for that and separate one I just wanted to follow up on Lake Charles.

So sound very optimistic on contracts any color you can give plus or minus on where pricing has been kind of tons of demand obviously from Europe and Asia. We also have a lot of competing.

Projects, and then Relatedly any update on how discussions are going on the on the cost side and the EPC contract. If that is kind of in line with what you were thinking so far thank you.

Yeah.

It's been a very competitive market in spite of the increased demand worldwide and so.

We can't ignore competition towards that.

Pricing however.

I think the.

The number of companies and customers around the world that have that are stepping up in that non traditional players for LNG and traditional demand has increased significantly. So we're pricing, we're moving adjusting our prices up to.

To reflect kind of anticipated a little bit higher costs on the EPC side.

We're going through a bid refresh process now we will get that number.

Towards literally towards the end of this year and so we're.

Obviously, you're trying to balance the anticipated.

Somewhat higher cost.

So they are very very competitive EPC price compared to our peers because of our brownfield.

Assets, we have on the ground today, but yes.

It's a balancing between.

Repetitive market getting trying.

Trying to get a good return for the project.

Thank you.

And our next question comes from Jean Ann Salisbury from Bernstein Go ahead, Jean Ann Hi.

Hi, just following up on that last question, obviously, I think it's fair to say that all LNG projects kind of on the same EPC.

Would you consider just doing the 10 MTA instead of the 15 year.

Can you walk in the EPC and Youre not quite at the 12, MTA 14, MTA contracts level that you wanted to be up for the 15th.

Yes, certainly we would consider that.

Yes, I think we are.

We think that overall, it's going to be kind of work.

Cost competitive to do three trades versus two.

But where we think we're going to be in the next few weeks with the.

Signed up contracts.

Certainly in a position to do it to trade deal.

If we want to go down that path so.

So we'll evaluate that during the course of the fall, but that's an option we could do.

But I'll just add to that we're extremely optimistic talent team are working with.

Many companies in many countries and we're highly confident that we'll get this fully sold out to the 15 million tons.

Okay.

And then could you give more color on energy Transfer's pet Ken strategy, especially around diversity.

Sure. This is mackie again.

When kelcey kind of gave us the directive that we need to step in the pet care and we certainly are doing that two perspectives one.

From an M&A perspective anything that's for sale, we will take a look at pretty much like anything in the industry and then on the organic side we're excited.

The project that we're working on we truly believe we're not just saying it is most unique world class facility anywhere.

<unk>.

Around the world and we say that because of where its located.

We're going to be able to move propane butane ethane and natural gasoline through for existing pipelines, all four of which we have significant capability of expanding in addition of that upstream of the cracker will have access to refined products like butane components and <unk>.

Gasoline components, who knows where the gasoline demand is going to go to the next five to 10 to 15 years. Some believe that that's going to get.

Incredible amount of flexibility and we think.

We have every intention to connect all of this to Mont Belvieu as well as to some of the pipes going into Louisiana, and then of course at need one will have the capability of exporting both ethylene and propylene. So once again, we're in the early stages, we have no intention of moving forward without a very big customer.

Alright, very big partner on that and we're in.

Structuring disagreement and we will move forward with tolling agreements. So this isn't going to be a pet him, where we're going to be speculating of rolling the dice on the cyclical nature of profit.

We're going to do this like we do all of our deals were going to have a tolling arrangement with guaranteed revenues in a guaranteed rate of return over a period of time. So we're not there yet, but we have a great team working on it and we really are excited about that project, we get deadlines.

Great. Thank you if I can sneak in one quick yes or no.

The girlfriend and be able to run at full capacity before Golden pass alright.

Gulf rent starts up later this year.

Yes.

Great. Thank you.

And our next question comes from Michael Cusimano from Pickering Energy Partners go ahead Michael.

Hi, good afternoon.

On the Woodford acquisition can you talk about your existing Oklahoma utilization in the Woodford utilization I'm trying to understand if there is any operational synergies part of the deal that maybe you can rationalize capacity like we've seen others in the industry.

Through relocation or what have you have processing capacity.

Yeah, as we mentioned we have our gathering system RT connected.

Inter and intrastate residue pipelines connected to it it's very early on this acquisition moved pretty quickly. So we'll continue to evaluate and certainly do like we do with any of our acquisitions are in of our Newbuild cryo well integrated in and figure out a way to best.

Most properly and efficiently operate that system.

Fortunately or unfortunately, everyone to look at it is it's going to be pretty darn cool just with the long term dedications from a handful of producers today.

But certainly as we integrate and bring into our system.

Create as much value as we can but that new asset with our existing assets.

Got it okay. That's helpful.

And then I wanted to shift quickly to Capex.

I think I heard you said that some capital costs were maybe deferred into 'twenty three.

Whereas some projects maybe move forward I just wanted to as budget can you maybe.

Help us wrap our head around what 23 could look like as we stand today.

Are there additional projects in the backlog coming into the budget.

Yes.

As you know our normal practices with our fourth quarter announcements put out to 'twenty three capex guidance, but it's fair. It's a fair question in the sense that we're talking up.

A lot about a lot of very very good projects. We're here right now so.

As we move forward with those and get those to <unk>.

We will be transparent as as those get approved and move forward, which will clearly move into 2023.

Capex guidance at the time, but at this point don't really have a number that we can give you but very excited about some of these projects were referring to and we will we will update update everyone as those get that.

Got it thanks for the details.

And our final question.

<unk> comes from Michael <unk> from Goldman Sachs Go ahead Michael.

Got it thank you for taking my question.

Just curious.

M&A environment right now I mean, if I think about your history over time youll spend tons of M&A over the years, just curious what type of assets do you think the.

The M&A environment is very ripe for meeting where theres lots of attractive things to do and maybe on the other flip side of that what type of assets do you think are either.

Just too high for your blood or simply not on the market, even even if there are things you'd love to have in the portfolio I'm not looking for specific names I'm, just looking for amp that tight.

Well thank you Michael.

Specific name part.

We do feel we do feel very very strong debt consolidation makes a lot of sense in the midstream space. So starting with the midstream space. We would you would see us look around the assets. We have right now those out of those assets that would be great bolt ons for us and we're going to stay focused on those we do you've seen a lot of.

Come to market rest assured we have looked at we have looked at these and we're going to continue to evaluate them I think the second part of your question is what kind of makes sense from the standpoint of.

<unk> when we look at these things we evaluate them based upon where our we're currently trading and when you. When you look at the commercial synergies the cost synergies were very very careful in how we evaluate each one of these and we remain disciplined on what we're doing but just like the smaller one today we.

No.

An all cash transaction, but even if you were to do that one on a 50 50. It was accretive it was accretive.

You've seen us talk you've heard us talk about the pet Chem side of it and we continue to evaluate moving downstream and we continue to look at on the international front too we've talked about the Panama project. So there are other projects that we continue to look at.

That are really kind of moving downstream taking advantage of all the capex that we've spent over the last several years around our export facilities et cetera, So it's going to be a natural fit with us.

As Mackie was highlighting on the pet Chem side of it. It's there is no doubt that that is.

That natural fit for us and those are the things we'll continue to look at here on that front I don't know, Matt if you want to chime in if theres anything else, but that's.

That kind of sums up.

Did that where we're spending most of our time and evaluations.

Got it. Thank you guys much appreciate the time.

You bet.

And we have no further questions at this time I would like to turn the call back to Tom long for closing comments. Mr. Long you May proceed.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Q2 2022 Energy Transfer LP Earnings Call

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