Q2 2022 Plains GP Holdings LP and Plains All American Pipeline LP Earnings Call

August 3, 2022

Good day and welcome to the Plains, All American pipeline second quarter earnings call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone please.

Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker Mr. Roy Lamoreaux. Please go ahead Sir.

Thank you Sri good afternoon, and welcome to Plains, All American second quarter 2022 earnings call. Today's slide presentation is posted on the Investor Relations website.

Under the news <unk> events section of planes Dot com.

The audio replay will also be available following today's call important disclosures regarding forward looking statements and non-GAAP financial measures are provided on slide two and overview of today's call. It is provided on slide three.

A condensed.

Consolidated balance sheet for PAGP and other reference materials are located in the appendix today's call will be hosted by Willie Chiang Chairman and CEO and Al Swanson Executive Vice President and.

And CFO other members of our team will be available for the Q&A, including Harry <unk>, President, Chris Chandler Executive Vice President and Chief Operating Officer, Jeremy Goebel, Executive Vice President and Chief Commercial Officer, and Chris Hurdle Senior Vice President Finance, and Chief Accounting Officer with that I will now turn the call over to William.

Thank you Roy and good afternoon, and thank you all for joining us.

Today, we announced second quarter results above our expectations, reflecting continued execution of our long term goals and initiatives as well as strength in both of our crude and NGL segments in summary, second quarter adjusted EBITDA attributable to PAA was $615 million, we increased our full year <unk>.

22, adjusted EBITDA guidance by $100 million to plus or minus $2 $3 75 billion, which is a $175 million above our initial February guidance.

This was driven by outperformance in both of our NGL and crude oil segments due to higher volumes and higher commodity prices.

As a result, we now expect to achieve the midpoint of our leverage target range of four point out times by year end 2022.

In regards to buybacks, we repurchased approximately $50 million of common units during the quarter, bringing our year to date repurchases to approximately $75 million and total repurchases of 300 million since the program inception.

Additionally, we are increasing our 2022 asset sales target by 100 million.

As a result of greater clarity on asset sales that we anticipate to complete during the balance of the year al will provide more detail on our quarterly results and our full year outlook in his portion of the call.

As highlighted on slide four and five the overall fundamentals of our business remain constructive as North American shale remains keyed in meeting global energy demand.

Current activity levels in the Permian are running roughly 10% ahead of our forecasts and we expect to see between 650000 and 700000 barrels a day of production growth exit to exit during 2022.

Our operating leverage and integrated business model with large scale supply aggregation quality segregation flow assurance and access to multiple markets has positioned us well to support increasing producer activity levels.

Both our crude and NGL systems have meaningful capacity to grow alongside of the needs of our customers for the next number of years and we are well positioned to capture incremental volume capture incremental volumes with minimal capital investment.

At the beginning of July are firming Permian gathering JV closed on a bolt on acquisition for the remaining 50% ownership interest of the advantage pipeline for approximately $65 million or $42 million net to plains interest plus customary closing costs then.

Negotiated transaction provides the JV additional operational.

Commercial and capital synergies and an attractive multiple.

The acquisition costs associated with this bolt on opportunity or more than offset by the incremental proceeds expected from the previously mentioned increase in 2022 asset sales.

In our NGL segment, we continue to advance capital efficient optimization, and debottlenecking opportunities or existing at our existing facilities.

Furthermore, we expect growing western Canadian gas production to drive incremental gas border flow volumes towards our strategically located Empress facility.

With regard to our financial strategy, we expect to continue to generate significant free cash flow over the next number of years and we intend to allocate this cash in a manner that takes into account the progress that we've made to date on our leverage while increasing cash return to equity holders through distribution growth and opportunistic buyback.

<unk> as well as continuing to make disciplined capital investments.

As I noted in my opening remarks, we've made significant progress in strengthening our balance sheet, we entered the year with leverage at four five times.

And with the expectation of finishing 2022 at the high end of our target or four to five times, we now expect to exit the year at the midpoint of our target, which is 4.0 times.

The improved trajectory allows us to further accelerate our goal of increasing return of capital to our unit holders over the coming years before turning the call over to al I would like to mention that we published our 2021 sustainability report last week.

As reflected on slide 25 of the appendix, we've made continuous improvements in our emissions.

And advanced sustainability in many areas of the company. We're proud of these achievements and we look forward to continuing the dialogue with many of you on our sustainability performance with that I'll turn the call over to UL Thankfully, we reported second quarter adjusted EBITDA of $615 million, which includes the benefit of higher straddle plant.

Volumes at Empress due to increased gas order flows elevated commodity prices benefiting our pipeline loss allowance revenue.

And higher volumes on our Permian basin long haul pipeline, primarily flows on based on the pipeline to Cushing slide.

Slide 16, and 17 in today's appendix contain quarter over quarter and year over year segment, adjusted EBITDA walks, which provide more detail on our second quarter performance. A summary of our 2022 guidance is located on slide six through nine.

We've increased our full year 2022, adjusted EBITDA guidance by $100 million two.

Two plus or minus $2 $3 $75 billion.

Our updated guidance is a $175 million.

Above our initial February estimates largely as a result of higher commodity prices and frac spreads benefiting our <unk> plus spec product sales and volumes in our NGL segment as well as increased prices on pipeline loss allowance barrels 10 incremental Permian volumes in the crude oil segment.

We remain focused on disciplined investments in our outlook are summarized on slide 10. This is consistent with our may guidance, and we do not anticipate any meaningful changes.

Capital program for the balance of the year.

I also want to share a few comments at how inflation impacts our business generally speaking our inflation impacts are more moderate than some of the other energy sectors. Our capital program is modest and we are proactively manage some costs through earlier purchases of materials.

As expected fuel and energy prices are higher as a result of the higher commodity prices and we are seeing increased pricing on equipment materials and services, which we are mitigating through strategic sourcing utilizing bulk orders and rebidding.

All of that being said, we continue to expect annual escalators to offset expenses and provide a modest net benefit.

On capital allocation framework remains consistent we are generating meaningful free cash flow and increasing the allocation to equity holders, while reinforcing balance sheet strength and flexibility year to date, we have repurchased approximately $75 million of common units out of the up 200 million.

Or so we earmarked for 2020 too.

Longer term, we will continue to be opportunistic with repurchases, we monitor our business outlook leverage equity valuation and yield as well as disciplined future capital investment opportunity a.

A summary of our current financial profile is located on slide 11 with that I will turn the call back over to Willie.

Thank you al today's results reflect another solid quarter of performance and execution.

Fundamentals remain constructive and our asset base and business continued to perform well and the higher commodity price environment, capturing incremental growth via the operating leverage within our system.

Looking forward, we continue to build momentum into 2023, and plains is very well positioned to generate meaningful cash flow to the benefit of our investors.

Over the last few years, we've made solid progress on optimizing our assets completing our multiyear capital build out forming numerous strategic jv's, including the planes or Permian JV and continuing to improve our safety environmental and sustainability performance.

Additionally, as we've detailed in our remarks, we've continued to improve our balance sheet and have increased capital return to unit holders given.

Given the acceleration of our deleveraging and improved financial flexibility, we plan on having discussions regarding our capital allocation framework with our board of directors and I look forward to sharing additional thoughts with you in the coming quarters.

In summary, we've accomplished numerous initiatives over the last few years and we believe our business is very well positioned today and going forward.

Summary of our execution and positioning as well as key takeaways from today's call are provided on slides 12 and 13.

That I will turn the call back over to Roy to lead us into Q&A. Thanks.

Thanks, Willie as we enter the Q&A session. Please limit yourself to one question and one follow up question and then return to the queue. If you have additional follow ups. This will allow us to address the top questions from as many participants as practical in our available time this evening.

Additionally, our Investor relations team plans the available throughout the week to address additional questions.

<unk>, we're now ready to open the call for questions. Thank you as a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.

Our first question will come from Jean Ann Salisbury with Bernstein. Please go ahead.

High utilization on crude pipe to corpus has been very high year to date higher than Houston, and Cushing do you forecast the staying for the foreseeable future.

What could change that.

Jean Ann this is Willie.

We've articulated our system is being very flexible so as we think about our our system, we've got capacity down to the coast through cactus, one cactus II in basin and.

The point I wanted to make is whether or not volumes are flowing directly down to corpus doesn't necessarily reflect the power of the business because volumes can be going up to Cushing Jeremy do you want to cover some more details on our specific question, yes, G&A and with regard to corpus the marginal demand right now.

International given the disruption to the supply chain for crude oil. So we would expect to see utilization to the most efficient export markets.

Corpus is pricing at a premium to Houston to other export markets. So naturally the highest prices going to attract barrel plus the quality of the barrel. So I think we'll see more of that but that those lines fill it starts to lead to higher utilization in other markets. So as we get through this year, you'll see corpus remained high and then youll see additions to other market.

Youll see some additional ramps at other pipes next year. So this is step one because it's the highest price.

Youll see that but as it fills the hole, but we'll start to fill so but to answer. Your question. Yes, we would expect corpus it's pricing at a premium from a quality and not all logistics standpoint.

And G&A and willing again.

As production continues to grow in the Permian as we expect it to by definition, we expect more volumes to to go into a long haul lines and as you probably saw in one of the slides we do have increases in our outlook for volumes that are flowing both in long haul intra basin and some of the other systems.

Yes.

Is it fair to say, though.

You would prefer a barrel okay.

Back to you versus apparel getting into Cushing declarative Martin alright dependent.

Based on ownership work tied to.

EBIT margins to corpus have been better, but the margins at Cushing continue to balance.

Are getting higher and there is more demand for that over the longer term as well, but I'd say on an absolute margin standpoint, just because of ownership of based on relative to the others. We're somewhat indifferent between the two.

Even if it's a slightly lower tariff to Cushing, because we own 100% of.

Our base capacity versus what effectively with the Eagle Ford JV is 75% and 65% on cactus too. So when you think of the economics were somewhat different but.

Barrels moving customers happy full pipelines are.

And again.

Back on the flexibility just to reinforce the point.

Currently as utilization increases on the pipelines the.

The tariffs will increase as well as we shared last time the forward market still has some pretty constructive.

Spreads in there that we've been able to utilize so what we say today and May change as we go forward if you've got a much higher tariff to Cushing obviously the barrel go into Cushing may make more sense, but again think of our system is a very flexible system that allows us to go to multiple markets.

Great I'll leave it there. Thank you thanks.

Thanks, Jean Ann.

Thank you one moment for our next question.

That will come from the line of Keith Stanley with Wolfe Research. Please go ahead.

Hi, good evening.

First on the NGL segment.

Can you just say how much of the guidance uplift in EBITDA for the year is volume driven versus margin.

And then I'm curious you've seen higher volumes through Empress I know youre working on another commercial and Debottleneck necking activities.

Could there be a lot more movement in terms of volumes and building out that that business over time.

Yes.

Either Jeremy or out give you a view on the difference between price and volume I can tell you. It was both we had some unique events in the second quarter as far as weather problems in the Bakken that allowed more flows going that way, but the fundamental volumes are also higher and you are correct Keith as we think about Empress.

We've got some.

Low cost to bottleneck necking opportunities there and as we've shared with you before we clearly are trying to optimize the entire complex commercially so that we can optimize more of that.

Jeremy or al do you want to talk about dollars.

Yes sure. So your direct question is based on where we had forecasted our weighted average frac spread between hedging and market pricing I think that's going to end up around 40% price 60% volume.

For this year, that's a proxy.

Not necessarily exactly on hand, but I think thats going to be fairly close.

As far as order flow capacity.

<unk>.

US and Pembina has the vast majority of the capacity in the <unk> complex.

Essentially all of it.

<unk>.

We have some room for expansion through the systems, some optimizations that we've recently announced and so incremental.

An incremental border flows from west to East will largely go to claims of capacity from here on out so as incremental production comes on net of what gets exported to the west coast those movements as long as the Arps continue and as you create more demand out of the Marcellus.

Market, you would expect more barrel more gas to go from the eco markets that are lower priced in U S markets. So effectively that's the mechanism. It does compete some with Bakken production. So you've seen some of the uplift in the second quarter was due to weakness in Bakken production, but.

By and large the.

Anything thats moving west to east on the Transcanada system to fill voids across that arm would go through that emphasis complex and we have substantial capacity to.

To meet that existing debt to extract additional ngls.

Chris Chandler you May talk about just generally speaking we havent, we havent finalized the investment decisions on this but we've got a number of things that we're trying to advance as far as Debottlenecking Empress I just want to add about that sure. Keith. This is Chris what we really liked about <unk> capacity on the gas system to move more gas there as Jeremy stated there is capacity.

In the extraction plants themselves to straddle plants to extract the Ngls today, so that provide some operating leverage and upside and then from a debottlenecking standpoint, it's really about where we fractionate. The ngls. So today, we fractionate a portion at <unk> and we shipped the rest over to our Sarnia, Ontario fractionator.

That gives us access to both of those markets, but we are evaluating projects to do additional fractionation at empress to be able to distribute the purity products directly out of the <unk> or the regional area instead of having to ship them and the associated cost over to the east into Ontario to further fraction.

Right. There so so a lot of opportunity around both capacity and efficiency and debottlenecking for that entire complex.

And Keith the value of the dollar value of this is measured in tens of millions not hundreds of millions. So theyre very low cost high return opportunities. If we proceed with them.

Thanks, Thats very thorough and helpful.

Second unrelated question on the inflation reduction Act.

You, obviously have the unique structure with PAGP, what's your initial read on.

Who knows if the bill will pass and the minimum tax component as it is written right now what's your initial read on what it could mean for PAGP and if it would apply.

So that security or not.

Keith This is al.

Read would be it would not apply.

I believe that.

As contemplated.

If you have income net income over $1 billion Pag doesn't is much smaller than that so we do not believe.

It would apply.

If you stand back ultimately we think our structure.

If corporate if corporate tax rates go up the MLP.

Honestly is an issue there.

Ultimately PAGP.

A very large tax asset.

There that if the entity won't be paying corporate taxes for a while but we think this issue with its minimum tax does not apply to PAGP.

Great. Thank you.

Thank you one moment for our next question.

That will come from the line of Colton Bean with Tudor Pickering Holt. Please go ahead.

Good afternoon. So you mentioned the chemical the increased equity returns a number of times.

I know, it's still early in the decision making process, but at a high level would you expect to see the equity allocation of excess free cash flow move toward 100%. If you dropped towards the lower bound of your leverage range or is there also potential to see the leverage range shift lower altogether.

Colton I would I'd, rather give you a more detailed update after we have some discussions with our board when we think about capital allocation a couple of things.

We actually have an annual process that.

That we have with our board it happens early in the year, usually and we announced.

In April with the distribution increase in May.

With the progress that we've made on deleveraging.

And our momentum that we're building into 2023.

It gives us an opportunity to look at this a little closer and I think what Youll see is as we go forward, it's going to be a lot of things you mentioned were going to evaluate where do we want our leverage ultimately we expect to be at our target that we migrate down a little further.

And then also.

You can expect us to be to continue our discipline as far as Capex and investments and then the real question on capital allocation is the split between distribution increase and buybacks and I think you'll you'll see that we will continue to support distribution increases I won't give you specifics on that because again, we have to have some <unk>.

<unk> with our board, but I would expect that the buybacks will continue to be opportunistic.

Understood and then following up on the NGL discussion are you also seeing any benefit from wider basis spreads, particularly that eastbound movement to sarnia.

Is it primarily the frac spread that's driving the upside.

The answer is all of the above so we do manage our sales similar to our hedging so theres some will be locked in at fixed differentials, but theres always an opportunistic component, we can accelerate sales and to.

<unk> sales so we do sell forward at <unk>.

Fixed basis differentials, but when markets are shortly certainly we have the ability to sell at Edmonton, we have the ability to.

Rail out of the facility, we have the ability to rail out of the emphasis sorry that sarnia facility or sell locally there. So there's a ton of flexibility in where we market and how so for instance, if the Sarnia is a better market you can sell locally there if con way like certain instances now we see that opportunity we can wheel.

Charles to that location, so they're very flexible system butane, we have similar capabilities across it if california short or other markets.

So youll see it absolutely optimized sale in basis, but by and large.

The frac spread is the biggest component but basis can be at times.

It has real market structure changes that would incentivize us to move additional barrels.

And I appreciate the detail.

Thank you one moment for our next question.

That will come from the line of Chase Mulvehill with Bank of America. Please go ahead.

Hi, This is neel Mitra filling in for Chase.

I wanted to understand.

Contracting opportunities for for base, and so on and cactus too.

Just recently given the high year to date volumes.

Are you seeing any attractive blend and extend opportunities.

Or is the timelines to short lived with.

Low Cushing inventories at basin and.

The strong international demand, given the Russian and Ukraine conflict.

People need to see.

Wider basis for longer for you too.

Extend.

And what's the appetite for that.

Thanks, Neil this is Jeremy.

What I would say is we are constantly in the market.

With our gathering customers within our long haul customers and in those dialogues.

While spreads were 40 60.

<unk> 60, moving to $81 20, we've been watching that along the way we didn't want to do any long term deals at those periods of time for blend and extend is one of the producers are short cast out there plus cash so they really don't look at blend and extend its more bookings secure takeaway at an appropriate price and so we're in that dance with what's the appropriate.

What price are very active there has been a lot of demand in.

Extending some deals into cushing or getting long haul tour in discussions around some some cushing contracts securing supply we are in discussions around corpus contracts. When there is something to update we absolutely will have worked hard simply managing the duration of our contracts in but we want to maximize the value.

We're confident in the production profile, we have this year and the momentum next year.

There is a better time when the prompt to 60.

Negotiate longer term deals, but the but as we've talked about in our last call 2024 still staying around that $1 25 range with a premium for corporate markets and so we'll continue to look to optimize that space and have discussions with our existing separate than other shippers as well.

Great.

Go ahead sorry.

I just wanted to.

Ask a follow up to that Jeremy So a lot of your peers have talked about.

One to Houston pipes.

<unk>, not utilizing them and actually paying deficiency fees.

Move to alternative locations, which youre presumably.

Corpus and my quick pushing as well.

Given that you have interest in almost all of the long haul pipes out of Midland.

Can you just describe.

And the current market, what's going on and maybe.

How would that impact.

Planes as volumes are going.

What I would say is there's a lot of volatility in flat price and location differentials between Brent Ti MGH, Midland, which creates a lot of difficulty in pricing barrel. So a lot of the election had not moved to the end market is to sell at Midland people see opportunities.

It's better than it is clear at Midland that do that especially with backwardation and long haul shipments and exports.

<unk> for the long winded way to answer it is a very complicated process to price cargos. So that's why you see a lot of volatility and people pricing because they can't find markets and with the backwardation that haven't hit the exact window in haynesville moving substantial volumes. So some are more equipped to have different markets. So they sell at Midland another person.

On a pattern, but as I said in the beginning corpus for the <unk>.

Market for exports is proving to be more efficient and it has a better price or better quality and youre seeing a lot of barrels move in that direction. Houston is moving substantial volume Theres just a lot of capacity to thereafter wink to Webster, So youre seeing some more slack there, but pricing. These things is complex and youll see a lot of cargos move in a few days in a month.

And then you won't see any move for a period when the prices get out of whack. So it's a constantly fluid situation, but price usually wins in right now corporate the best price with low inventories and high crack spreads Cushing has to move barrels <unk> seen some more demand on the basin system instances not inventories to pull from and then the Houston.

Mining in the base export business Youre seeing pretty consistent volumes Youre, just seeing a displacement of volume from one place to the other.

And Neil the key takeaway on this that Jeremy has been been talking about is remember we've got strong nbc's on these lines, so whether or not a volume flows theyre not we still get paid and it gives us the opportunity to further optimize it.

Right.

Great all the color. Thanks.

Thank you for.

Our next question.

Our next question will come from the line of Brian Reynolds with UBS. Please go ahead.

Hi, Good evening, everyone you talked about in your prepared remarks, running 10% above expectations that can kind of volumetric perspective.

Kind of curious if you can just talk about how youre expecting volumes to the system and if you could help bifurcate, what youre seeing from organic growth and perhaps attracting new volumes and customers to the system.

From competitors. Thanks.

I'm going to let Jeremy answer this but I wanted to preface it with it's a very complicated complicated system.

And because we've got the gathering JV, we've got intra basin and we've got a long haul there's a lot of moving parts on this so Jeremy take a shot at it sure.

Brian first answer you to clarify what really was saying, it's a 10% increase in activity across the system activity translates to volumes later in the year. So for instance.

We think the production growth is backend weighted connections or 40% in the first half roughly 60% in the second half so that activity is going to yield some momentum in the second half of the year going into 2023. So I just wanted to first clarify that but how are we doing competing for volumes, we have over 4 million dedicated acres between the ports and playing.

The pop JV that we have we continue to have happy customers are extending deals, we're actually adding substantial acreage to the position core acreage for significant term. So I think we're competing very well and we're not pricing to the lowest common denominator due to the flexibility of quality control and the market access.

We have on the system, so what I would say is.

We're competing very well for incremental organic volume, but when you have term acreage dedication you have contracts that bring a substantial amount of activity to the system. So not everything has to be organically develop when you have the contract tenor that we have this is just additive to the base business that we put together when we merged the two businesses.

I think Brian if you look at slide seven it would probably give you a little more insight in the volumes and how we're getting it across the system in the Permian between gathering information on long haul.

Okay.

Great I appreciate all that clarification and extra color. That's my one follow up could.

Could you just talk about what youre seeing in terms of the Eagle Ford volumes saw small quick down during the quarter, but.

Seems like the Eagle Ford is attracting more rig count and activity.

Curious if you can talk about further expectations there thanks Jeremy.

Jeremy sure, Brian you've seen a lot of turnover from public operators to private operators in the Eagle Ford and that generally leads to more activity because those activities were starved for.

Capital given that there was more allocation to the Permian or somewhere else and so you've seen tests HSA, it's noncore, but I would say is we have seen more activity the newer buyers come in and they're accelerating activity, we've seen that in the western Eagle Ford with the chalk as well as.

The lower Eagle Ford So I'd say, we are seeing an increase in activity in the Eagle Ford and it seems to be.

As they prove up the chalk in the Western Eagle Ford, We would expect to see continued growth in volume there.

Great I appreciate all the color I am good.

Everyone. Thanks.

Brian .

Thank you one moment for our next question.

That will come from Jeremy Tonet with JP Morgan. Please go ahead.

Hi, good afternoon.

Yes.

Thanks.

Just wanted to quick refresh or if I could I think you had talked about in the past points, where volume growth on the system with movie pass Nbc's in and it would turn into more fall to the bottom line growth at that point.

What's the current timeline, there or has that moved forward at all with this or just a refresh there would be great.

I think the refresh would be Jeremy look at our numbers for the for the quarter and the additional volumes, we've been able to bring in.

The system is flexible the gathering system grows.

With the basin. So those volumes continue to grow and then on the long haul you'll see that the long haul volumes, we've been able to get some more volumes on that and the difference between last quarter's estimate in this quarter's estimate which is on slide <unk>.

Shows the increase in the system, Jeremy anything that no Jeremy I think willie's right as you accelerate production momentum you bring that time period forward because as we've said every time you add six or 700000 barrels a day of production youre filling the pipe.

Do you think about that.

Still consistent with the 18 to 24 months that we talked about but it's accelerating as we accelerate our forecast and we feel good about the momentum going into next year and that's proving out as you look at the differentials to the coast Theyre getting outside of tariffs beginning in 2024. So it's very consistent with what we said is continuing to progress.

Along and.

We're looking forward to that period.

Got it so someone together maybe that's a mid 'twenty three time frame, if it's slightly quicker than before from kind of a ballpark it.

Sure I mean, that's a very reasonable estimate I'd say you can get into that period and you start to see a better.

Utilizations and hence it's a.

The strike a better balance between the carriers and the producers for a reasonable rate of return on it.

And I'd say, you can get into that period, and you start to see a better.

Utilizations and theirs.

It strikes a better balance between the carriers and the producers for a reasonable rate of return on the site.

But Jeremy just to make sure.

We're saying the same thing I agree with what Jeremy Goebel set but.

Our system because of the flex allows us to capture some of them. We don't have to wait for that period of time to be able to capture volumes hope that's clear.

Got it thanks, and just one last one if I could if I'm looking at the guidance increase now versus May.

Whats the breakdown between fee versus commodity there.

Okay.

It's a tough.

Al can you give the numbers.

They're all tied to higher higher higher commodity prices, but there is definitely some volume components of it yes.

One slide that we did a walk for the year from the beginning of the year, but but most of the driver as commodity whether it's the NGL frac up in Canada as Jeremy mentioned earlier, we are seeing some some volume.

Benefit there as well and then in the crude oil side, which has actually been a smaller part of the increase.

It's driven by the PLO pricing.

But also this Permian volume growth that we're seeing is embedded in so I would say over half of it is more commodity based and the rest I would say would be more fee based.

Got it I'll leave it there thank you.

Thanks, Jeremy thank.

Thank you one moment for our next question.

That will come from the line of Sunil Sibal with Seaport Global. Please go ahead.

Yes, hi, good afternoon folks and thanks for all the clarity on the call a couple of questions for me starting out on your asset sales program.

Number $200 million.

Is that entirely a function.

Bringing more assets into the program are different from the market.

So.

It's really.

Developing better clarity on what what assets, we've been visiting with folks about different assets and it's just more clarity on being able to bring that across the line this year chenille.

Okay got it and then I think.

Folks mentioned about some impact.

Outages in Bakken.

In terms of your NGL assets in Canada.

Kind of curious have you seen that a bit.

Something.

Kind of still expecting a benefit from the remainder of the year.

Jeremy.

Hi, This is Jeremy so as the Williston production went down gas crude oil and gas production went down.

Normally feeds to the Midwest, so more gaps with needed from a co storage. So that was temporal in April and May, but we're still seeing high water flows and high production Canadian productions approaching 14 Bcf a day, you've got eco prices hovering between four and $5 wishes and sending additional.

Drilling so those are all positive for incremental order flow so that portion of sustained but just some portion of the April may of the second quarter outperformance was driven by that a substantial portion was driven by better activity in the gas plays within Canada.

Okay got it thanks for that.

Thanks Sunil.

Thank you one moment our next question.

That will come from the line of Neal Dingmann with choice. Please go ahead.

Thanks, guys.

Good evening guys. Thanks for the time, but first question is on M&A and specifically I was curious as how do you view today's market of existing potential available asset versus I know, you've got a lot of room for potential expansion or other what I consider sort of organic pipe Buildout wonder how you sort of view these two things.

Well, we look at a lot of assets that are that are out there and we're going to stay very disciplined on it but the bid ask spread I would say is coming in a bit Jeremy sure.

On the crude side the markets out of the thesis on the liquids or the gas side, but we're going to remain disciplined.

We will see opportunities the footprint, we have affords us an ability to extract more synergies than most from a capital standpoint from a rating expense standpoint, and from a commercial standpoint, so what we did and we'll look for opportunities we're constantly engaged in dialogue, but.

We're only going to do things that there are near term cash flow accretive in longer term beneficial for the for the overall system.

Great to hear and then just.

Just a quick second one was just trying to get a broad sense of how much of the.

Total interest basin.

Permian growth I know you mentioned there.

Good bit of this is likely to be coming from that recent advantaged JV I'm just trying to get a sense in broad terms is it more for housekeeping is that a large percentage of our just trying to get an idea of how much that advantage will be incredibly good.

To give you a sense.

Vantage 60, 50% that we acquired was roughly 30% to 35000 barrels a day that'll give you a sense from a gross basis, but it will come back to us, but we have the ability to move barrels from other directions and put them on that pipe.

Eliminate future capital expenditure moving from west to east by displacing those volumes. So I think we have the ability to put additional volume and eliminate or defer significant capital expenditures. So I think that's part of the law is to have that type of idle capacity that we can use more.

A more efficiently operate our system.

Great detail.

Thanks, guys.

Thanks Neil.

Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to management for any closing remarks.

Thanks, Sri well listen thanks to everyone for joining US today, we look forward to visiting with you going forward and thanks for your continued interest and support for Plains, All American have a nice evening.

This concludes today's conference call. Thank you for participating you may now disconnect disconnect.

The conference will begin shortly.

So raise your hand during Q&A you can dial one one.

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The conference will begin shortly.

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Good day and welcome to the Plains, All American pipeline second quarter earnings call. At this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.

Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker Mr. Roy Lamoreaux. Please go ahead Sir.

Thank you Sheri good afternoon, and welcome to Plains, All American second quarter 2022 earnings call. Today's slide presentation is posted on the Investor Relations website.

Under the news and events section of <unk> Dot com.

Consolidated balance sheet for PAGP and other reference materials are located in the appendix today's call will be hosted by Willie Chiang Chairman and CEO and Al Swanson Executive Vice President.

And CFO other members of our team will be available for the Q&A, including Harry <unk>, President, Chris Chandler Executive Vice President and Chief Operating Officer, Jeremy Goebel, Executive Vice President and Chief Commercial Officer, and Chris <unk> Senior Vice President Finance, and Chief Accounting Officer with that I will now turn the call over to William.

Thank you Roy and good afternoon, and thank you all for joining us today.

22, adjusted EBITDA guidance by $100 million to plus or minus $2 $3 75 billion, which is a $175 million above our initial February guidance.

This was driven by outperformance in both of our NGL and crude oil segments due to higher volumes and higher commodity prices.

As a result, we now expect to achieve the midpoint of our leverage target range of four point out times by year end 2022.

Additionally, we are increasing our 2022 asset sales target by 100 million.

As highlighted on slide four and five the overall fundamentals of our business remain constructive as North American shale remains keen in meeting global energy demand.

Current activity levels in the Permian are running roughly 10% ahead of our forecasts and we expect to see between 650000 and 700000 barrels a day of production growth exit to exit during 2022.

Both our crude and NGL systems have meaningful capacity to grow alongside of the needs of our customers for the next number of years and we are well positioned to capture mental incremental volume capture incremental volumes with minimal capital investment.

At the beginning of July our Permian Permian gathering JV closed on a bolt on acquisition for the remaining 50% ownership interest of the advantage pipeline for approximately $65 million or $42 million net to plains interest plus customary closing costs.

The negotiated transaction provides the JV additional operational commercial and capital synergies and an attractive multiple.

The acquisition costs associated with this bolt on opportunity or more than offset by the incremental proceeds expected from the previously mentioned increase in 2022 asset sales.

In our NGL segment, we continue to advance capital efficient optimization, and debottlenecking opportunities or existing at our existing facilities.

Tomorrow, we expect growing western Canadian gas production to drive incremental gas order flow volumes towards our strategically located Empress facility.

As well as continuing to make disciplined capital investments.

As I noted in my opening remarks, we've made significant progress in strengthening our balance sheet, we entered the year with leverage at four five times.

And with the expectation of finishing 2022 at the high end of our target of four to five times, we now expect to exit the year at the midpoint of our target, which is 4.0 times.

In our emissions.

And advance sustainability in many areas of the company. We're proud of these achievements and we look forward to continuing the dialogue with many of you on our sustainability performance.

That I will turn the call over to UL Thankfully, we reported second quarter adjusted EBITDA of $615 million, which includes the benefit of higher straddle plant volumes at Empress due to increased gas order flows elevated commodity prices benefiting our pipeline loss allowance revenue and higher volumes on our Permian.

<unk> based in long haul pipeline, primarily flows on basin pipeline to Cushing <unk>.

Mid 16, and 17 in today's appendix contain quarter over quarter and year over year segment, adjusted EBITDA walks, which provide more detail on our second quarter performance.

A summary of our 2022 guidance is located on slide six through nine we've increased our full year 2022, adjusted EBITDA guidance by $100 million.

Two plus or minus $2 $3 75 billion.

Our updated guidance is a $175 million.

Above our initial February estimate largely as a result of higher commodity prices and frac spreads benefiting our <unk> plus spec product sales and volumes in our NGL segment as well as increased prices on pipeline loss allowance barrels and incremental Permian volumes in the crude oil segment.

We remain focused on disciplined investments in our outlook are summarized on slide 10. This is consistent with our may guidance and we do not anticipate any meaningful changes in our capital program for the balance of the year.

I also want to share a few comments on how inflation impacts our business generally speaking our inflation impacts are more moderate than some of the other energy sectors. Our capital program is modest and we are proactively manage some costs through earlier purchases of materials as expected fuel and energy prices are higher.

As a result of the higher commodity prices and we are seeing increased pricing on equipment materials and services, which we are mitigating through strategic sourcing utilizing bulk orders and re bidding.

All of that being said, we continue to expect annual escalators to offset expenses and provide a modest net benefit.

On capital allocation, our framework remains consistent we are generating meaningful free cash flow and increasing the allocation to equity holders, while reinforcing balance sheet strength and flexibility year to date, we have repurchased approximately $75 million of common units out of the up to 100 million.

Or so we earmarked for 2022.

Longer term, we will continue to be opportunistic with repurchases, we monitor our business outlook leverage equity valuation and yield as well as disciplined future capital investment opportunity a.

A summary of our current financial profile is located on slide 11 with that I will turn the call back over to Willie.

Thank you al today's results reflect another solid quarter of performance and execution.

Looking forward, we continue to build momentum into 2023, and plains is very well positioned to generate meaningful cash flow to the benefit of our investors.

Over the last few years, we've made solid progress on optimizing our assets completing our multiyear capital build out forming numerous strategic jv's, including the planes or its Permian JV and continuing to improve our safety environmental and sustainability performance.

Additionally, as we've detailed in our remarks, we've continued to improve our balance sheet and have increased capital return to unit holders given.

In summary, we've accomplished numerous initiatives over the last few years and we believe our business is very well positioned today and going forward.

Summary of our execution and positioning as well as key takeaways from today's call are provided on slides 12, and 13 with that I'll turn the call back over to Roy to lead us into Q&A. Thanks.

Additionally, our Investor Relations team is available throughout the week to address additional questions.

<unk>, we're now ready to open the call for questions. Thank you as a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.

Our first question will come from Jean Ann Salisbury with Bernstein. Please go ahead.

High utilization on crude pipe to corpus has been very high year to date higher than Houston, and Cushing do you forecast the staying for the foreseeable future.

Could change that.

Jean Ann this is Willie.

We've articulated our system is being very flexible so as we think about our our system. We've got capacity down to the coast through cactus, one cactus II in basin and the point I wanted to make is whether or not volumes are flowing directly down to corpus doesn't necessarily reflect the power of the business because volumes can be going up.

Up to Cushing, Jeremy do you want to cover some more details on our specific question, yes, G&A and with regard to corpus Mark haul demand right now.

The international given the disruption to the supply chain for crude oil. So we would expect to see utilization to the most efficient export markets.

Corpus is pricing at a premium to Houston to other export markets. So naturally the highest prices and attractive barrel plus the quality of the barrel. So I think we'll see more of that but that those lines fill it starts to lead to higher utilization in other markets. So as we get through this year, you'll see corpus remained high and then youll see additions to other mark.

Youll see some additional ramps at other pipes next year. So this is step one because it is the highest price.

So youll see that but as it fills the hole, but we'll start to fill so but to answer. Your question. Yes, we would expect corpus it's pricing at a premium from a quality and then ill logistics standpoint.

And G&A and willing again.

Production continues to grow in the Permian as we expect it to by definition, we expect more volumes to to go into our long haul lines and as you probably saw on one of the slides we do have increases in our outlook for volumes that are flowing both in long haul intra basin and some of the other systems.

Yes, no I'd add to that.

Is it fair to say that.

You would prefer a barrel on cabinets.

Yes.

Apparel getting the question in terms of margin alright.

Yes.

On ownership work tied to.

EBIT margins to corporates have been better, but the margins at Cushing continues to balance.

Are getting higher and there is more demand for that over the longer term as well, but I'd say on an absolute margin standpoint, just because of ownership of base and relative to the other four somewhat indifferent between the two.

Even if it's a slightly lower tariff than Cushing, because we own 100% of.

Our base capacity versus what effectively with the Eagle Ford <unk> at 75% and 65% on cactus too. So when you think of the economics, we're somewhat indifferent but.

Barrels moving customers happening full pipelines are.

And again.

Back on the flexibility just to reinforce the point.

Currently as utilization increases on the pipelines the.

The tariffs will increase as well as we shared last time. The forward market is still has some pretty constructive.

Spreads in there that we've been able to utilize so what we say today may change as we go forward if you've got a much higher tariff to Cushing, obviously, the barrel going to Cushing may make more sense, but again think of our system is a very flexible system that allows us to go to multiple markets.

Great I'll leave it there. Thank you thanks.

Thanks, Jean Ann.

Thank you one moment for our next question.

That will come from the line of Keith Stanley with Wolfe Research. Please go ahead.

Hi, good evening.

First on the NGL segment.

Can you say how much of the guidance uplift in EBITDA for the year is volume driven versus margin.

And then I'm curious you've seen higher volumes through Empress I know youre working on other commercial and Debottleneck necking activities.

Could there be a lot more movement in terms of volumes and building out that that business over time.

Yes.

Either Jeremy or Al give you a view on the difference between price and volume I can tell you. It was both we had some unique events in the second quarter as far as weather problems in the Bakken that allowed more flows going that way, but the fundamental volumes are also higher and you are correct Keith as we think about Empress.

We've got some.

Low cost Debottleneck necking opportunities there and as we've shared with you before we clearly are trying to optimize the entire complex commercially so that we can optimize more of that.

Jeremy or al do you want to talk about dollars.

Yes sure. So your direct question is based on where we forecasted our weighted average frac spread between hedging and market pricing I think that's going to end up around 40% price 60% volume.

For this year, that's a proxy.

Not necessarily have to be exactly on hand, but I think thats going to be fairly close.

As far as order flow capacity.

<unk>.

Hudson Pembina has the vast majority of the capacity in the <unk> complex.

Essentially all of it and.

We have some room for expansion through the systems, some optimizations that we've recently announced and so.

And incremental border flows from west to East will largely go to claims of capacity from here on out so as incremental production comes on that on what gets exported to the west coast those movements as long as the Arps continue and as you create more demand out of the Marcellus to move to other markets you would expect more barrel more gas.

To go from the eco markets that are lower priced in U S markets so effectively.

Second is if it does compete with Bakken production. So you've seen some of the uplift in the second quarter was due to weakness in Bakken production, but by and large the.

Anything thats moving west to east on the Transcanada system to fill voids across that arm would go through that complex and we have substantial capacity to.

To meet that existing debt to extract additional Ngls Chris.

Chris Chandler you May talk about just generally speaking we havent.

We haven't finalized investment decisions on this but we've got a number of things that we're trying to advance as far as Debottlenecking Empress I just want to add about that sure. Keith. This is Chris what we really liked about <unk> capacity on the gas system to move more gas there as Jeremy stated there is capacity in the extraction plants themselves to straddle plants to.

Extract ngls today, so that provide some operating leverage and upside and then from a debottlenecking standpoint, it's really about where we fractionate. The ngls. So today, we fractionate a portion at <unk> and we shipped the rest over to our Sarnia, Ontario, Fractionator that gives us access to both of those markets, but we are.

Evaluating projects to do additional fractionation at Empress to be able to distribute the purity products directly out of the <unk> or the regional area instead of having to ship them and the associated cost over to the east into Ontario to further fractionate. There. So so a lot of opportunity around both capacity.

Efficiency and Debottlenecking for that entire complex.

And Keith the value of the dollar value of this is measured in tens of millions not hundreds of millions. So theyre very low cost high return opportunities. If we proceed with them.

Thanks, Thats very thorough and helpful.

Second unrelated question on the inflation reduction Act.

You, obviously have the unique structure with PAGP, what's your initial read on.

Who knows if the bill will pass and the minimum tax component as it is written right now what's your initial read on what it could mean for PAGP and if it would apply.

So that security or not.

Keith This is al.

Read would be it would not apply.

I believe that.

As contemplated.

If you have income net income over a $1 billion pag doesn't is much smaller than that so we do not believe.

It would apply.

If you stand back ultimately we think our structure.

If corporate if corporate tax rates go up the MLP.

Obviously is an issue there.

Ultimately PAGP.

A very large tax asset.

They're at the entity won't be paying corporate taxes for a while but we think this issue with its minimum tax does not apply to PAGP.

Great. Thank you.

Thank you one moment for our next question.

That will come from the line of Colton Bean with Tudor Pickering Holt. Please go ahead.

Good afternoon. So you mentioned the potential to increase equity returns a number of times.

I know, it's still early in the decision making process, but at a high level would you expect to see the equity allocation of excess free cash flow move toward 100%. If you drop towards the lower bound of your leverage range or is there also potential to see the leverage range shift lower altogether.

Colton I would I'd, rather give you a more detailed update after we have some discussions with our board when we think about capital allocation a couple of things.

We actually have an annual process that.

That we have with our board that happens early in the year, usually we announce.

In April with the distribution increase in May.

With the progress that we've made on deleveraging.

And our momentum that we're building into 2023.

It gives us an opportunity to look at this a little closer.

And I think what Youll see is as we go forward, it's going to be a lot of things you mentioned were going to evaluate where do we want our leverage ultimately we expect to be at our target that we migrate down a little further.

And then also.

You can expect us to be and to continue our disciplined as far as Capex and investments and then the real question on capital allocation is the split between distribution increase in buybacks in <unk>.

And I think you'll you'll see that we will continue to support distribution increases I won't give you specifics on that because again, we have to have some conversation with our board, but I would expect that the buybacks will continue to be opportunistic.

Understood and then following up on the NGL discussion are you also seeing any benefit from wider basis spreads, particularly that eastbound movement to sarnia.

Or is it primarily the frac spread that's driving the upside.

<unk> sales so we do sell forward at.

Fixed basis differentials, but when markets are shortly certainly we have the ability to sell at Edmonton, we have the ability to.

Rail out of the infra specific facility, we have the ability to rail out of the emphasis sorry, the sarnia facility or sell locally there. So there's a ton of flexibility in where we market and how so for instance, if the Sarnia is a better market you can sell locally there if con way like certain instances now we see that opportunity we can wheel.

Barrels to that location, so they're very flexible system butane, we have similar capabilities across set of California short or other markets.

So youll see it absolutely optimized sale in basis, but by and large.

The frac spread is the biggest component but basis can be at times.

Have real market structure changes that would incentivize us to move additional barrels.

And I appreciate the detail.

Thank you one moment for our next question.

That will come from the line of Chase Mulvehill with Bank of America. Please go ahead.

Hi, This is neel Mitra filling in for Chase.

I wanted to understand.

The contracting opportunities for for base, and so on and cactus too.

Just recently given the high year to date volumes.

Are you seeing any attractive blend and extend opportunities.

Or is the timeline to short lived with.

Low Cushing inventories at basin and.

Sure.

<unk> strong international demand, given the Russian and Ukraine conflict.

People need to see.

Wider basis for longer.

Extend.

And what's the appetite for that.

Thanks, Neil this is Jeremy.

What I would say is we are constantly in the market.

With our gathering customers for their long haul customers and in those dialogues.

While spreads were 40 60.

<unk> 60, moving to $81 20, we've been watching that along the way we didn't want to do any long term deals at those periods. The time for blend and extend is one of the producers are shorter cast out of their flush cash they really don't look it blend and extend its more bookings and your takeaway at an appropriate price and so we're in that dance with what's the appropriate.

What price are very active there has been a lot of demand in.

And the production profile, we have this year and the momentum next year.

There is a better time when the prompt to 60 sensitive to.

Longer term deals but.

But as we talked about in the last call 2024 still staying around that $1 25 range with a premium for corporate markets and so we will continue to look to optimize that space and have discussions with our existing simpler than other shippers as well.

Great.

<unk>.

Go ahead, Nick sorry.

Yes, I just wanted to.

Ask a follow up to that Jeremy So a lot of your peers have talked about.

Midland to Houston pipe.

Easter is not utilizing them and actually paying deficiency fees.

Move to alternative locations, which youre presumably.

Corpus and likely pushing as well.

Given that you have interest in almost all of the long haul pipes out of Midland.

Can you just describe.

And the current market, what's going on and maybe.

How that impacts.

Planes as volumes are going.

It's better than it is clear at Midland that do that especially with backwardation in long haul shipments and exports.

<unk> for the long winded way to answer it is a very complicated process to price cargos. So that's why you see a lot of volatility and people pricing because they can't find markets and with the backwardation that have hit the exact window in heme blood, leaving substantial volumes. So some are more equipped to have different markets. So they sell at Midland another person.

On a pattern, but as I said in the beginning corpus for the <unk>.

Market for exports is proving to be more efficient and it has a better price or better quality and youre seeing a lot of barrels move in that direction. Houston is moving substantial volume Theres just a lot of capacity to thereafter, wink to Webster that youre seeing some more slack there, but pricing. These things is complex and youll see a lot of cargos move in a few days in a month.

And then you won't see any move for a period when the prices get out of whack.

Constantly fluid situation, but price usually wins in right now corporate this the best price, but low inventories and high crack spreads Cushing has to move barrels <unk> seen some more demand on the basin system. Since there is no not inventories to pull from and then the Houston refining and the base export business Youre seeing pretty.

System volumes Youre, just seeing a displacement of volume from one place to the other.

And Neil the key takeaway on this is Jeremy has been been talking about is remember we've got strong nbc's on these lines, so whether or not a volume flows theyre not we still get paid and it gives us the opportunity to further optimize it.

Right I appreciate all the color. Thanks.

Thank you thanks, Steve moment for our next question.

Our next question will come from the line of Brian Reynolds with UBS. Please go ahead.

Hi, good evening everyone.

<unk> talked about in your prepared remarks, running 10% above expectations, I think kind of volumetric perspective.

Kind of curious if you can just talk about how youre attracting volumes to system and if you could help bifurcate, what youre seeing from organic growth and perhaps attracting new volumes and customers to the system.

From competitors. Thanks.

I'm going to let Jeremy answer this but I wanted to preface it with it's a very complicated complicated system.

And because we've got the gathering JV, we've got intra basin and we've got a long haul there's a lot of moving parts on this so Jeremy take a shot at it sure.

Brian first answer.

Clarify what really was saying, it's a 10% increase in activity across the system activity translates to volumes later in the year. So for instance, we think the production growth is backend weighted connections or 40% in the first half roughly 60% in the second half so that activity is going to yield some momentum in the second half of the year going into 2023.

I just wanted to first clarify that but how are we doing competing for volumes. We have over 4 million dedicated acres between the ports and playing systems pop JV that we have we continue to have happy customers are extending deals, we're actually adding substantial acreage to the position core acreage for significant term so I think.

We are competing very well and we're not pricing to the lowest common denominator due to the flexibility of quality control and the market access that we have on the system.

I would say is.

I think Brian if you look at slide seven it would probably give you a little more insight in the volumes and how we're getting it across the system in the Permian between gathering intra basin on long haul.

Great I appreciate all that clarification extra color as my one follow up could.

Could you just talk about what youre seeing in terms of the Eagle Ford volumes saw a small tick down during the quarter, but.

Seems like the Eagle Ford is attracting more rig count and activity consistent kind of curious if you can talk about further expectations. There. Thanks Jeremy.

Jeremy sure, Brian you've seen a lot of turnover from public operators to private operators in the Eagle Ford and that generally leads to more activity because those activities were starved for.

Capital given that there was more allocation to the Permian or somewhere else and so you've seen tests HSA, it's noncore, but I would say is we have seen more activity. The newer buyers come in and they are accelerating activity, we've seen that in the western Eagle Ford with the chalk as well.

The lower Eagle Ford So I'd say, we are seeing an increase in activity in the Eagle Ford and it seems to be.

As they prove up the chalk in the Western Eagle Ford, We would expect to see continued growth in volume there.

Great I appreciate all the color I am good.

And everyone. Thank.

Brian .

Thank you one moment for our next question.

That will come from Jeremy Tonet with JP Morgan. Please go ahead.

Hi, good afternoon.

Yes.

Thanks.

Just wanted to quick refresh or if I could I think you had talked about in the past points, where volume growth on the system with movie pass Nbc's in it would turn into more fall to the bottom line growth at that point.

What's the current timeline, there or has that moved forward at all with this or just a refresh there would be great.

I think the refresh would be Jeremy look at our numbers for the for the quarter and the additional volumes, we've been able to bring in.

The system is flexible the gathering system grows.

It really shows the increase in the system, Jeremy anything that no Jeremy I think we will drive it as you accelerate production and momentum you bring that time period forward because as we've said every time you add six or 700000 barrels a day of production youre filling the pipe.

So if you think about that it's still consistent with the 18 to 24 months that we've talked about but it's accelerating as we accelerate our forecast and we feel good about the momentum going into next year and that's proving out as you look at the differentials to the coast Theyre getting outside of tariffs beginning in 2024, so it's very consistent with what we said.

And it's continuing to progress along in.

We're looking forward to that period.

Got it so some of them together, maybe that's a mid 'twenty three time frame, if it's slightly quicker than before from kind of a ballpark it.

Sure I mean, that's a very reasonable estimate say you can get into that period and you start to see a better.

Utilizations and there is a.

Striking a better balance between the carriers and the producers for a reasonable rate of return.

I'd say you can get into that period, and you start to see a better.

Utilization.

That strike a better balance between the carriers and the <unk>.

Research for a reasonable rate of return on the pipe.

But Jeremy just to make sure.

We're saying the same thing I agree with what Jeremy Goebel said, but.

Our system because of the flex allows us to capture some of them. We don't have to wait for that period of time to be able to capture volumes hope that's clear.

Got it thanks, and just one last one if I could if I am looking at the guidance increase now versus May.

Whats the breakdown between fee versus commodity there.

It's a tough.

Al can you give the numbers.

All tied to higher higher higher commodity prices, but there is definitely some volume components of it yes. There's one slide that we did a walk for the year from the beginning of the year, but but most of the driver as commodity whether it's the NGL frac up in Canada as Jeremy mentioned earlier, we are seeing some.

Some volume.

Benefit there as well and then in the crude oil side, which has actually been a smaller part of the increase.

It's driven by the PLO pricing.

But also this Permian volume growth that we're seeing and is embedded in so I would say over half of it is more commodity based and the rest I would say would be more fee based.

Got it I'll leave it there thank you.

Thanks, Jeremy thank.

Thank you one moment for our next question.

That will come from the line of Sunil Sibal with Seaport Global. Please go ahead.

Yes, hi, good afternoon folks.

Thanks for all the clarity on the call a couple of questions for me starting.

Starting out on your asset sales program.

Objective number $200 million.

Right.

Totally a function of bringing more assets into the program.

Coming to the market.

Also.

It's really.

Developing better clarity on what assets, we've been visiting with folks about different assets and it's just more clarity on being able to bring that across the line this year chenille.

Okay got it.

And then I think.

<unk> mentioned about some impact of the outages in Bakken.

It comes up in any of your NGL assets in Canada.

Curious have you seen that abate, that's something you kind of still expecting a benefit from the remainder of the year.

Jeremy.

Hi, This is Jeremy so as the Williston production went down gas and crude oil production gas production went down that normally feeds to the Midwest. So more gas is needed from those storage. So that was a temporal in April and May.

Still seeing high water flows and high production Canadian productions approaching 14 Bcf a day, you've got April prices hovering between four and $5 wishes and sending additional drilling. So those are all positive for incremental order flow. So that portion of sustained but just some portion of the April may of the second quarter outperformance was driven by that.

A substantial portion was driven by better activity in the gas plays within Canada.

Okay. Thanks for that.

Thanks Sunil.

Thank you one moment our next question.

That will come from the line of Neal Dingmann with choice. Please go ahead.

Hey, guys good.

Good evening guys. Thanks for the time My first question is on M&A and specifically I was curious as how do you view today's market of existing potential available assets versus I know, you've got a lot of room for potential expansion or other what I consider sort of organic type Buildout wonder how you sort of view these two things.

Well, we look at a lot of assets that are out there and we're going to stay very disciplined on it but the bid ask spread I would say is coming in a bit Jeremy sure.

On the crude side the markets out of the thesis on the liquids or the gas side, but we're going to remain disciplined.

Well the opportunities that the footprint, we have affords us an ability to extract more synergies than most from a capital standpoint from an operating expense standpoint, and from a commercial standpoint, so we'll be disciplined and we'll look for opportunities we're constantly engaged in dialogue, but.

Are we going to do things that there are near term cash flow accretive in longer term beneficial for the for the overall system.

Great to hear and then just a quick second one I was just trying to get a broad sense of how much of the.

Total interest basin.

Permian growth I know you've mentioned there.

A good bit of this is likely to be coming from that recent advantaged JV I'm just trying to get a sense in broad terms is it more for housekeeping is that a large percentage just.

Just trying to get an idea of how much that advantage will be credited to give you a sense.

Vantage 60, 50% that we acquired was roughly 30% to 35000 barrels a day that will give you a sense from a gross basis, what it will come back to that but we have the ability to move barrels from other directions and put them on that pipe.

<unk>.

Eliminate future capital expenditure moving from west to east by displacing those volumes. So I think we have the ability to put additional volume and eliminate or defer significant capital expenditures. So I think that's part of the Lora is to have that type of idle capacity that we can use more.

To more efficiently operate our system.

Great got it thanks guys.

Thanks Neil.

Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to management for any closing remarks.

This concludes today's conference call. Thank you for participating you may now disconnect disconnect.

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