Q3 2022 Energy Transfer LP Earnings Call

November 1, 2022

Good afternoon.

Welcome to the energy transfer third quarter 2022 earnings conference call.

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Please note. This event is being recorded today.

I would now like to turn the conference over to Tom Long Co CEO . Please go ahead Sir.

Thank you operator, good afternoon, everyone and welcome to the energy transfer third 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 the 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 and are discussed in more detail and our quarterly report on Form 10-Q.

For the quarter ended September 32022, which we expect to be filed this Thursday November 3rd.

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'll start today by going over our third quarter financial results. We were pleased to report another strong quarter during which we generated consolidated adjusted EBITDA of $3 1 billion, which was up approximately 20% compared to $2 $6 billion for the third quarter of 2021.

In the third quarter, we experienced a nonrecurring $126 million charge in the crude oil segment related to the resolution of a prior year legal matter.

In addition, we had an approximately $130 million negative impact due to the timing of the recognition of gains or hedged inventory in the NGL and refined product segment.

These two items adjusted EBITDA for the third quarter would have been 334 billion.

Results for the third quarter benefited from higher volumes across all of our segments, including record volumes in the midstream intrastate crude oil and through our fractionator.

In addition, the acquisition of the enable assets in December of 2021 contributed to our growth over the prior period.

DCF attributable to the partners as adjusted was $1 6 billion for the third quarter of 2022 compared to $1 $3 billion for the third quarter of 2021.

This resulted in excess cash flow after distributions of approximately $760 million.

On an incurred basis, we had excess DCF of approximately $265 million after distributions of $819 million and growth capital of approximately $500 million.

On October 25th we announced the quarterly cash distribution of <unk> 26, and a half cents per common unit or $1 <unk> on an annualized basis.

This distribution will be paid on November 21 to unit holders of record as of the close of business on November 4th.

This distribution represents a more than 70% increase over the third quarter of 2021 as a reminder, future increases to the 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 <unk>.

On annualized basis, while balancing our leverage target growth opportunities and unit buybacks.

As of September 32022, the total available liquidity under our revolving credit facility was approximately $2 $3 2 billion.

Now turning to our results by segment.

I'll start with the NGL and refined products adjusted EBITDA was $634 million compared to $706 million for the same period last year. This change was primarily due to the previously mentioned $130 million negative impact due to the timing of the recognition of gains on hedged NGL.

Dori during the current period.

We expect to fully realize the offsetting gains on our financial derivatives and physical forward sales as the majority settled in the fourth quarter.

With a small amount settling in the first quarter of 2023 adjusting for the noncash timing matter around hedging adjusted EBITDA for the third quarter would have been $764 million results. In this segment were otherwise driven by higher fractionation transportation terminal services.

And storage margins related to increased volumes and higher rates.

NGL transportation volumes on our wholly owned and joint venture pipelines increased to $1 9 million barrels per day compared to $1 8 million barrels per day for the same period last year. This.

This increase was primarily due to higher volumes on our NGL pipelines that deliver into our Nederland terminal as well as a record volumes on the combined Mariner east pipelines.

And our average fractionated volumes set a new partnership record, averaging 940000 barrels per day compared to 884000 barrels per day for the third quarter of 2021.

NGL export volumes significantly exceeded the third quarter of last year driven.

Driven by record ethane exports out of both Nederland and Marcus Hook at.

At Nederland. This was driven by the second tranche of satellites contracts going into effect on July one.

Which doubled the volume commitments from the initial term.

Year to date, we have loaded approximately 29 million barrels of ethane out of Nederland and for full year 2022, we expect to load more than 40 million barrels of ethane out of Nederland with that increasing to approximately 60 million barrels for 2023 in total we continue to export more Ngls.

<unk> than any other company or country.

With our percentage of worldwide NGL exports remaining at approximately 20% of the world market.

For midstream adjusted EBITDA was $868 million compared to $556 million for the third quarter of 2021. This was primarily due to the increased throughput in all of our operating regions favorable natural gas.

And NGL prices and the acquisition of the enabled assets in December of 2021 gathered gas volumes were a record $19 1 million <unk> per day compared to 13 million <unk> per day for the same period last year, excluding enable gathered gas volumes on our legacy.

The assets were also a partnership record for the third quarter.

Permian Basin inlet volumes remain at or near record highs. We continue to utilize the Permian bridge daily to optimize our available processing capacity as we await the completion of two new plants that are currently under construction.

For the crude oil segment, adjusted EBITDA was $461 million compared to $496 million for the same period last year.

Earnings were offset by a $126 million charge related to the resolution of a prior year legal matter absent. This charge adjusted EBITDA would have been $587 million for the third quarter of 2022.

These results were otherwise driven by improved performance on our Bakken pipeline increased throughput at our Gulf coast terminals stronger refinery utilization and higher export demand as well as the addition of the enable assets in December of 2021.

Crude oil transportation volumes increased to a record $4 6 million barrels per day compared to $4 2 million barrels per day for the same period last year, driven by higher crude oil prices and strong refinery demand as well as the addition of the Ted Collins link and Cushing, South pipelines and increased <unk>.

<unk> put through our Houston terminal, excluding enable crude oil transportation volumes were also a record for the third quarter.

In our Interstate segment, adjusted EBITDA was $409 million compared to $334 million for the third quarter of 2021.

During the quarter, we benefited from increased rates higher production in the Haynesville shale that drove greater utilization on Tiger improved demand on trunk line and line CP as well as the addition of the other interstate enable assets.

We continue to see heavy utilization on many of our Interstate pipelines, including Tiger FGT SESH and Rover.

And for our intrastate segment, adjusted EBITDA was $301 million compared to $172 million for the third quarter of last year.

This was primarily due to higher optimization opportunities increased retained fuel revenues related to higher natural gas prices as well as the addition of the enable assets utilization of our <unk> system remains strong due to the increased demand for gas takeaway.

And a rich pipeline system continues to flow at or near capacity due to increased activity in the haynesville.

Turning to a brief update on our M&A activity in August of this year, we completed the sale of our 51% interest in energy transfer Canada for cash proceeds of approximately $300 million.

The sale reduced our consolidated debt by approximately $850 million. It also allowed us to divest of these noncore assets at an attractive valuation and utilize the cash proceeds to further deleverage our balance sheet and redeploy capital within our U S footprint and in September of this year we.

<unk> completed our acquisition of the Woodford Express LLC, which owns a mid continent gas gathering and processing system for approximately $485 million. This bolt on opportunity provided roughly 400 million cubic foot per day of cryogenic gas processing and treating capacity in Grady County.

<unk> 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.

Now looking at recent developments at our ongoing growth projects year to date Lake Charles LNG has executed six LNG offtake agreements for an aggregate of nearly 8 million tons per annum.

<unk>, a 20 year LNG agreement with shell in a LNG LLC that was executed in August .

As we have 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 and more industry participants in conjunction with LNG offtake agreements. We have recently signed non binding letter of agreements with two.

Japanese customers for LNG offtake, and we are in active negotiations with several customers for long term offtake contracts for significant volumes of LNG, we are making progress on all aspects of the project and we're now targeting by the end of the first quarter of 2023.

One 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 We believe that our Lake Charles LNG project will provide an important contribution towards solving the growing global.

Energy demand.

As a reminder, our Mariner east pipeline system is fully commissioned and capable of transporting more than 365000 barrels per day, including ethane.

As we have previously mentioned, we completed work at our Marcus Hook terminal to allow us to increase ethane exports out of markets. As a result, we reached a new record for ethane exports out of Marcus Hook terminal in the third quarter.

NGL demand both in the U S as well as from overseas customers continues to increase and we have sufficient commitments to move forward with 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 to initially expand at either terminal.

Construction of Frac eight continues as scheduled and we expect it to be in service in the third quarter of 2023, which will bring our total Mont belvieu fractionation capacity to over $1 1 million barrels per day.

Construction of our new 200 million cubic foot per day Gray 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 being serviced by the end of 2022.

Construction is underway on the bear plant, our second 200 million cubic foot per day processing plant also located in the Delaware Basin.

Which was accelerated to meet growing demand. We expect this plant to be in service in the second quarter of 2023. In addition, given the significant amount of demand. We are seeing we are evaluating the necessity and potential timing of adding another processing plant in the region.

Mainline construction of the Gulf run pipeline was recently finished and we expect to complete a modification of compression by the end of this year Gulf run, which is a 42 inch Interstate natural gas pipeline with 165 Bcf per day of capacity will provide natural gas transportation between our upstream.

Pipeline network and from the Haynesville shale for delivery to the Gulf Coast connector.

Connecting some of the most prolific natural gas producing regions in the U S with the LNG export market.

It is backed by a 20 year commitment for one one Bcf per day from Golden Pass LNG and we recently completed a non binding open season.

On Gulf run due to the growing product demand.

We are pleased with the results of the open season and customer discussions are ongoing which will likely necessitate additional facilities beyond the initial design of the $1 six five Bcf per day.

Modernization and Debottlenecking work on our <unk> pipeline continues which will add an incremental 60000 Mcf per day.

A much needed capacity out of the Permian basin, we expect it to be partially in service by the end of this year with full service by the end of January of 2023.

In addition to these ongoing projects, we continue to evaluate and have customer discussions regarding a number of other projects that over the long term could provide significant upside to our business. These.

These include the Warrior pipeline project, which is the most optimal solution for customers to transport gas out of the Permian as well as opportunities to develop a pet Chem project, along the Gulf coast or acquire pet Tim facilities. We remain optimistic that we can bring these projects to RFID and look forward to sharing any.

Updates on these projects at the appropriate time.

On the alternative energy front, our focus remains on reducing emissions across our pipeline, including pursuing a number of projects related to carbon capture and sequestration enhanced oil recovery for use in the food and beverage industries as well as sequestering Cotwo from our proposed Lake Charles LNG.

<unk> liquefaction facility.

We will be excited to update you once we have a project in specific agreement in place.

Looking at our growth capital spend for the nine months ended September 32022 energy transfer spent approximately $1 3 billion organic growth projects, primarily in the midstream Interstate and NGL and refined products segment, excluding sun and USA compression capex.

For full year 2022, we expect growth capital expenditures to be near the high end of our range of one eight to $2 1 billion.

Over 90% of our 2022 growth capital spend is comprised of projects that are already online or are expected to be online and contributing cash flow before the end of 2023.

At very attractive returns.

We will provide our 2023 growth capital outlook on our fourth quarter earnings call.

For 2022, adjusted EBITDA guidance, given our strong performance for the first nine months of the year as well as continued demand for our products and services. We now expect our adjusted EBITDA to be between $12 8 billion and $13 billion. This is up compared.

Third to our previous guidance of $12 6 billion to $12 8 billion.

Overall, our outlook is strong as we have a stable business that has demonstrated its ability to manage through various market cycles, and we expect future growth to be supported by production improvements improved market conditions increased utilization of our existing assets as well as strong domestic and international.

<unk> for our products.

We remain bullish about the future of our industry and the growing worldwide demand for crude oil natural gas and natural gas liquids, we expect to reach our leverage target range of four to four five.

Times by the end of 2022, and we will continue to strategically allocate our cash flow in a manner that best positions us to further improve our financial flexibility and leverage <unk>.

Best in high returning growth projects and returned value to our unit holders.

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

This concludes our prepared remarks operator, please open the lineup for our first question.

We will now begin the question and answer session.

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At this time, we will take our first question, which will come from Jeremy Tonet with J P. Morgan. Please go ahead.

Hi, good afternoon.

Hello, Jeremy.

Just wanted to kind of start off with the.

LNG project with Lake Charles if I could just walking through a number of kind of different details that have emerged over the past quarter. So you've had smaller competitors kind of fall by the wayside if you will.

It's still kind of an inflationary environment, where it's hard to kind of lock in contractors I think just wondering how you see these different influences coming together and how that impacts I guess your outlook for Lake Charles at this point.

Hi, Jeremy.

Great question, a lot of moving parts to your question, but as there is in the LNG World right now.

Obviously as you touched on the EPC costs.

We have escalated since.

Our first did we got two years ago.

<unk> had an impact on pricing.

Faction.

<unk> has made good progress in.

Increasing our liquefaction charge as we progress with it.

Contracts.

We're excited about where we are in terms of.

Being a bigger company and a strong balance sheet and great natural gas pipeline network, we are the strongest.

Brownfield facility with the storage tanks and docs.

Really good position to.

To get to the Golar.

Got it that makes sense, there and then maybe just kind of pivoting to the Permian a bit.

If you could update us I guess as far as.

As how you see the takeaway outlook evolving here latest thoughts on warrior I'm.

Imagine negative wahhab prices do not hurt your business, but just wondering if you could provide more details on that and I guess open capacity you have and maybe how that could increase over the first half of the year.

Yes, Jeremy this is mackie.

We continue to be very excited about that project as we've experienced the last two or three weeks. When there is any kind of a blip on a pipeline that's moving gas out of the Permian basin, we see these wide spreads.

We do like most industry, we believe that as we deepen that this year and throughout most of the next two years.

The basis is going to blow out we do sit in a very fortunate situation that we do have capacity available today.

Actually gets a little bit more over the next few years across the states. So we will be able to benefit from a wider spreads but at the same time. We are we do have a team diligently working toward getting to the finish line of warrior and after the announcement of this.

42 inch line to it is going to move a couple of Bcf across it's kind of slowed things down.

But we will be the next part limits announced out of there we are.

Are the best option for anybody coming out of the Permian basin, whether it's Delaware or Midland, we provide Katy ship channel as well as other.

Really good markets off of our intra intrastate system. So we'll keep our head down, but we're going to be very prudent when we make that decision and we hope to do that in the next couple of quarters.

Okay.

Got it that makes sense I'll leave it there thanks.

Thank you.

Our next question will come from Chase Mulvehill with Bank of America. Please go ahead.

Hey, good afternoon, everybody I.

I guess question on ethane.

Obviously ethane prices have softened a little bit here.

I'd be kind of curious on your thoughts about ethane rejection and kind of how that plays out over the coming quarters and.

And kind of rolling into that about your thoughts on that.

<unk> exports and if you see that as kind of a near term release valve or do you actually think that we're running kind of.

Up against the full capacity there.

Hey, Chad.

Mackie.

Yes, we're just so pleased at what we've done as far as building out Marcus Hook and building out neither one.

Around the ethane as we've said, we now have sufficient contracts to expand.

Take three or four years to to expand once we get to.

Once we make a decision whether it's in the north are along the Gulf Coast.

But the way we look at rejection.

Our recoveries.

In the region, so from the energy transfer standpoint, maybe.

Rejecting ethane in some areas and recover others, but right now where ethylene prices are and where gas prices are we are recovering ethane in most of the regions.

As you know a tremendous amount of ethane was rejected daily up in the northeast with a lot of ethane up there for a project.

And then as we head toward a decision to expanding.

At either Marcus hook or neither one.

We will look at.

Maximizing what we have today.

As we've said in our opening remarks.

Satellite kicked into their second tranche. So we've got that we also have additional capacity that will be we will be fully utilizing on a month to month basis as the market dictates.

Okay.

Another follow up.

Just really lone star.

Right I think you've got some latent capacity there but.

But kind of what what I'd like to ask is if theres opportunities for you to kind of work with some of your peers to maybe offload some of their long haul Permian NGL volumes I mean.

And the reason that I asked one of your competitors actually delayed one of there.

Expansion projects.

NGL.

Okay.

And maybe somebody else analysis here.

Here later this week, but just kind of curious because you do have some latent capacity and just kind of if there is an.

<unk> for you to work with some of your peers and offload some of those volumes.

Helped the industry kind of be a little bit more capital efficient.

Yes. This is Mackie again, yeah, I'd love to know who you are talking about.

That's interesting.

Telephone number.

Certainly would offer transportation to anybody.

Through our.

Natural gas liquids pipelines and.

We feel real good of where were at we over the last several weeks, we've set records out of the Permian I think we exceeded 800000 barrels a day.

And actually.

Around our NGL business, we almost hit a million barrels here this past week.

Fractionation at Belvieu with these colder temperatures. So we have the ability to move more volume significantly more volume out of the Permian as our two new cryogenic plants come on.

The second quarter of next year. So we certainly have built to accommodate our own barrels, but everybody is out there and they are trying to get their barrels to Mont Belvieu, we would love to hear from them.

Alright, perfect I'll turn it over I appreciate the color.

Our next question will come from Mark Sollecito with Barclays. Please go ahead.

Hey, good afternoon. So maybe following up on one of the earlier questions around why basis exposure I think a few quarters ago, you referenced a couple of hundred Mcf that was opened with another couple of hundred becoming available over the next couple of years. So just wondering if you are sharing an update if you could provide that.

Sure I'll quantify it a little bit with no matter, what I say, we are in negotiations on warrior and that very easily could impact.

<unk> is available in the next year or two because that kind of comes into those negotiations, but notwithstanding that we've got about we've had about 250000 a day available.

We said in our opening remarks, we've got about another 60000 coming available later part of this year and the first part of next year, so that puts us right around $300. A day that we will have available as we sit here today.

Great. That's very helpful. And then just with respect to the updated guidance first just wanted to clarify whether the previous guidance range included the legal settlement settlement in the crude segment.

Then as we think about the upward revision was that mostly a function of just upside to your conservative commodity price assumptions or other operational drivers and then any variable.

Between the lower and upper end of the revised range.

Curious if you have any color there.

Okay.

Yes, Mark this is Tom long.

Short answer is that the legal settlement was not included in the previous guidance. So this guidance you see right now that we came up with it does include the $126 million.

But I will tell you. It also includes the $130 million.

The timing around the.

Mark to market on some of the Ngls. So the guidance, we're giving you right now $12 $813 billion does now include include both of those but as we highlighted in the prepared remarks, we are expecting that the one when our most of the 130 to come back to us in the fourth quarter, So keep that keep that in.

Mind that that guidance.

It does include that what occurred in the third quarter, but the reversal of most of it in the fourth quarter.

And Mark as far as I think the rest of your question that you were going through we've always stayed fairly conservative on the commodity prices.

We continue to do that I think you see with where some of the prices at least on the natural gas side of it are going here right now it was prudent for us to do that but at the same time, we don't have many months left in the year for much of an impact.

You had quite a few other parts of that question you might need.

Repeat what part of it up not answered here.

Just as far as within the revised range, the upper and lower end what are some of the drivers between the upper and lower parts of the range.

Yes. It continues to be pricing that was running a little higher than what we had what we anticipated once again, a little bit of that got shaved off with what youre seeing occur right now.

In the fourth quarter.

Other piece of that is we just continue to have a great commercial team and the optimization efforts that are occurring across our system.

Our really.

Huge compliments to the team and what Theyre able to do and so that's probably the primary to two drivers.

Got it I appreciate the time.

Thank you.

<unk>.

Our next question will come from Gabe Moreen with Mizuho. Please go ahead.

Hey, good afternoon guys.

But just as you sit here today kind of Directionally, where you think things may be headed for Capex next year.

Yes, that's always a good question.

We worked hard in trying to hold off until that fourth quarter and and.

In fairness a lot of that is because we do have so many great projects Mackie was gone over serve 11th so you've got everything from the Lake Charles LNG to the warrior to several other items <unk> et cetera. So it's really it's really difficult probably to give you that right now thats. The reason, we wait till the end of the fourth quarter to be able to provide.

But we've talked about pretty much everything that's out there that we're seeing that we're seeing so if you really kind of go back.

To what guidance, we given this year the one eight to $2 $1 billion.

Yes.

Theres not a lot of.

Additional guidance, we can we can give you for next year until we have a little more visibility into those but as you can see it's not going to be a really large number.

Got it Tom. Thank you and then maybe if I can follow up sort of on a two part Haynesville pipeline question.

Just wondering where you guys think you are in terms of I guess utilization out of all the multiple straws you have in and out of the Haynesville and also I guess, a re pricing contracts to market now that that capacity is really in demand and the second part would just be kind of an update on golf Ron on the possibility of expanding that with her with.

Lake Charles.

Okay. This is mackie again.

What an exciting area of my goodness stupid ever seen this maybe album claimants saw it years ago, but.

When you see these wells coming on 50, 60, 70000 day and holding out for a while what what.

Great place to own 342 inch pipe and a whole lot of other systems. So.

Very excited about that you've touched on some things like.

You said earlier in our remarks rig that's pretty pretty full so we're looking at backhaul that into some of our enable asset to get down the Carthage.

So we get to our Gulf run and Tiger pipelines.

So we're doing everything we can to utilize capacity in both directions from all of our pipelines in north Louisiana.

The Gulf run very excited to be bringing that on by the end of the year. We've got the 165, we have one one bcf thats sold to.

Golden pass for a long term contract. We also have secured another 350 of that we've got at couple of hundred left that we are.

Trying to extract as much value as we can as we finalize that and we're continuing to evaluate what is the next step is it adding compression to adding a bcf or looping the entire 42 inch.

As we get closer and arrive.

We opened in the first quarter of next year.

Lake Charles that will.

The very much the impetus behind us probably looping that line at 42, and so that is probably where we'll end up once we get there, but we also do that anyway.

In addition to that as you said, we're really excited about values on Tiger.

CP, which will be Gulf run.

It was down to 4567, almost passed away and we're seeing that move out and we're excited to see that we are seeing wider margins, we're seeing a much higher value for gas east of Louisiana as you go further in <unk>.

Real need as you get closer to the Florida. So we're.

We're very pleased where we sit and we will fully utilize those to the maximum that we can for our revenues and our unit.

Thanks for taking my vote to locate and expand export expansion based on who wins the world series, but I'm not sure if that's all right.

Yes.

Thanks for the time guys I appreciate it.

Got it thank you.

Our next question will come from and Salisbury with Bernstein. Please go ahead.

Hi.

Yes, and yes.

Is did I think a bit in the quarter by the Medford Frac being down I think that there is a new third party, perhaps starting by the end of the year and then early next year, you kind of view that does that.

One quarter.

In your view can you kind of maintain that incremental earning over multiple quarters.

Hello, and this is mackie again.

Yes kind of step back we've really seen a tightening of TNF or really that last 18 months or so and over the last five or six months early summer mid summer it really got tight and now similar to some of the spreads on some of other assets were seeing it move out so.

If you just look at the Frac spreads.

We're very optimistic that whatever frac capacity, we have available before our eight frac comes on that that will have significant revenues from our from that capacity, we see a very tightening of it yes.

Coming on a warm thats coming on isn't that accessible to Mont belvieu. The fracs that are more Mont belvieu like art and a few others really arent until the third and fourth quarter and into 24 of next year. So there is going to be a tightening of capacity. There already is at Mont Belvieu and we hope to benefit from that as the.

Value of fracking.

<unk> there.

Widens.

That's really helpful. Thank you for that color.

And then can you remind us currently on your Permian crude pipelines, just roughly how much it still take or pay and if theres any re contracting interest yet on the pipe, it's not take or pay or if you see that happening in the next couple of years when other pipeline start to rollout.

Yes, we don't have I don't have the exact number ahead of how much take or pay but it's a little bit of a loaded question in the sense of.

What exactly that means, but we feel that pipe up as much as we can on a daily basis. There is some portion of it is locked in at wider spreads and where we see today, but similar to what we just talked about we believe even what they overbuilt.

Crude oil pipelines.

<unk> will see widening in the reasonably do with some of our customers is what we say on every earnings call.

And at other times is that we're not just offering mid.

Midland to naval under Midland to Houston Service, we're offering blending we're offering storage, we're offering access into Bayou bridge or into the header add or.

Our author to feed into the refineries as well as at the header system and other pipeline systems in Houston. So we.

It did see that start to move out here several months ago, we do expect that to have move out more but.

We don't have all of that.

Contracts that really what margins most of that has gone away and we are feeling that and daily monthly and and also will do in term deals at what we see is slowly widening spreads.

Thanks, a lot.

Sure.

Our next question will come from Michael Blum with Wells Fargo. Please go ahead.

Thanks, Good afternoon, everyone.

I just had a couple of questions. One can you talk about once you get to that $1 22 distribution I guess looking into next year.

How are you thinking about buybacks versus distribution growth and I guess, especially in light of.

Rising interest rates.

That's a great question.

We are so thankful to be talking about it from that standpoint versus the other alternatives. So we.

I will tell you at this point, we are planning this quarter by quarter as far as the distribution side of it and looking at it.

There has not been dialogue.

On anything around the distribution growth.

After the above 22 and meeting our target. So we're going to continue to look at that when it comes to unit buybacks I don't want to say that we're going to continue to look at paying down that debt, we really want to get that leverage target in that four to four five range, we'd be quite happy to get it to the <unk>.

Yes closer to that two four range and we're going to have some opportunities next year with all the free cash flow that we're seeing and some of that some of the debt maturities. We're going to continue to look at that so we would put that up there.

Higher than that.

Unit buyback to get to the lower leverage but also the great capital projects that we're talking about those likewise set up set up a little bit higher than that.

Buybacks, so let us get to that point.

Good healthy discussion, we have quarter by quarter with our.

The board of directors as we look at the distribution and how we're going to do that but right now our target is to get to get to about 22, and my gosh. We've made great progress on that it's great to be here.

At this level at 70% higher than where we were so we've executed on it.

It's really looking at.

We've got ourselves to a great place from that standpoint.

Got it that makes sense. Thanks, and then just wanted to ask on potential.

Cracker. So obviously there is some weakness and pet Chem fundamentals right now spreads et cetera.

Does that give you pause in terms of making that investment does that make you more likely to want to make that investment and does it change the calculus between buying versus building.

Hey, Matt. This is Mackie certainly give pause to people that we're trying to take capacity with right now that's for sure but.

The way we're looking at that project is we're not spending a material amount of dollars at this point.

Coincidentally as of today, we have filed our second permits so in the last couple of days, we've filed our TCE Q permit and we all are core wetland permits so that kind of gets us.

Those are 18 to 24 months processes, depending on whether it goes full blown EIA ethanol that so we've kind of started that and done all that work. Our team is working diligently with a number of players throughout the country and really the world and Theres a great deal of interest.

We do believe we will get there but to answer your question, we're not going to get there unless we have sufficient commitments to get US a rate of return that meets our threshold. So if the hesitancy to have to sign up right now because the crack spreads are so narrow compared to what we need to build it and we won't get anything signed but we know the.

The industry as you and like many out there no it's very cyclical.

You can generate a lot of income in a short period of time in good times and in there. So.

So we're approaching this project like we do everything we're not going to speculate to trying to hit a homerun or not from time to time, we're going to wind this up with both are up.

Both are up.

Okay.

Partners potentially as we've said, we we anticipate we'll own about 25% at the end of the day.

Expect to bring in partners that will also be part of the yield that they will take but as we go around all of these customers. We continue to hear and believe that this will be the most unique and the most flexible cracker in the world. If you look at the upstream pipeline that we've talked about before pipeline network to all the refineries bringing.

Butane products and gasoline by products as well as we've got four pipelines that are feeding in Kansas at enormous amounts of ethane propane butane and natural gasoline to Nederland and then you look at the takeaway we will have the ability to add storage for our customers and over two delivered into ethylene and propylene pipelines.

And into the export market. So once again way early but thats going to be one of those projects that if we get.

We'll have sufficient commitments from great customers to have a great project from a rate of return and we will have some good partners.

Thanks for all that I appreciate it.

Yes.

Our next question will come from Keith Stanley with Wolfe Research. Please go ahead.

Yeah.

Hi, Thank you two two clarifications first Tom it seemed like you were alluding to probably paying down some debt again next year to try to get to the low end of our leverage target I know the company has.

Recent amount of maturities for next year can you just talk to how you're planning on addressing that as it pace on down with cash and then would you look to issue new debt here or would you look to leverage <unk>.

Short term borrowing facilities more.

Yes, Keith.

We're clearly looking at pay it stand.

Dale.

As much as we can there is still there is still a little bit.

Just to go as far as getting a getting what our free cash flow is going today.

In fairness, we do have a very very good capacity left on our revolver.

From our credit facility. So we've got options as to how to how to.

Navigate that and we're going to be careful don't really want to get out in front of it and try to pre announce but you nailed. It when you said looking at trying to pay down as.

As much as we can have it.

If it's not moving some of it to the revolver only because when you look out over the remainder of the year and you see what the free cash flow continues throughout the year.

We have a lot of financial flexibility right now is the way I'd like to leave that and we're going to we're going to play it.

The best options, we can reaching all the targets that we want it.

We're going after.

Great and on on Lake Charles So it sounds like the base case is still for up to a 75% sell down.

When you talked about 2023 capex that.

Lake Charles was one of the areas of uncertainty when you look to next year.

Are there scenarios, where you could possibly need to fund a meaningful amount of Lake Charles next year as part of your capital budgeting or is.

Is that pretty unlikely.

Yes.

I think finding a meaningful about next year would probably be more.

I would call unlikely probably very unlikely that we would have to do that for next year.

We will see.

See where it all goes but at this point based upon the way we would move through it through 2023.

We'll leave it in the unlikely category.

Thank you.

Hi.

And our last question today will come from Brian Reynolds with UBS. Please go ahead.

Hi, good afternoon, everyone.

Maybe one quick follow up on the capital allocation I was curious if you could just opine on how the desire for a credit rating upgrade influences the timing and financial flexibility for a buyback or an additional distribution base and then maybe perhaps on just the growth capex, having tire having a little bit of priority I was just curious as it relates to <unk>.

93, Capex, specifically, if there's just limited upside to that number at this point given that lake Charles seems to be pushed out a quarter or two at this point. Thanks.

Yes, I think.

Best way to start with that one is the.

The target, 4% to four and a half pretty much all three agencies.

Put out there that you get to that closer towards maybe the.

Lower end of that range you are now looking at looking at upgrades and that is important to us we really didn't want to continue to get into that.

Four to four and a half and get into that next higher notch.

On the rating agencies all the all the dialogue we've had with them has been very constructive and by the way we think that.

We think we've got a lot of credibility with them and we're going to continue to have this dialogue with and so it remains a priority I would say that to continue to pay down debt pay down the debt to get within those targets.

Leverage targets that we've got laid out there.

The capital portion of your of your question.

We really do when you really look at our entire infrastructure and you look at the critical mass we have et cetera. When we look at these capital projects, they're looking at a much broader benefit that comes to our.

It comes to energy transfer.

When a question was asked earlier about what are the drivers.

On the guidance continuing to get moved up and a lot of that is around the optimization. When you really look at all the various access we have to some of the very best pricing points and the flexibility we have around that a lot of these capital projects are very very important and we continue to work on the demand side, we've talked about the lake.

Charles LNG.

You've heard us talk today a lot about the.

Pet Chem.

We're not trying to own at large percentage of a lot of these.

All of these assets what we're trying to continue to do is look at the demand side as much as we look at the supply side. So these capital projects are important we do give them a high priority and we will continue to be very disciplined in how we spend every dollar.

Great and I guess, just a quick follow up it just seems like Theres limited upside in 'twenty three capex given those comments at this point.

Yes, I'm sorry.

Do you mind, Brian tens of new new.

New projects coming into the backlog it seems pretty set from the slide deck that you guys provided that it doesn't seem like any new large projects have come into 'twenty. Three capex is really more about 24 and 25% if those projects come to fruition.

Yes, that's a fair assumption I will just leave it as a fairly immaterial amount as far as 2023.

Great. Thanks, and then just quickly on the last question I know, we've talked a lot about Permian and Haynesville spreads curious is golden pass.

<unk> capacity all year during 2023.

Gulf run have open capacity, given Golden pass and come online for another year or so effectively benefit from the spreads all year.

Then second is there open capacity number for the Permian that you guys have provided for 'twenty three that's it for me. Thanks.

Yeah.

Second quick.

The second half of that.

I didn't understand if this is mackie again.

Golf run, yes, we saw one one Bcf a day.

To Golden pass and they're paying a demand charge. So they are getting geared up where they actually build to use some of that but.

The way we look at that pipeline is likely to look at all of our assets. We will do everything we can to fully utilize the capacity that's not being utilized regardless, whether it's demand charge being paid for it or not and I'm sorry. Your second question second half.

Just how much open capacity does energy transfer I have on the Nat gas takeaway side for 'twenty three.

<unk> already talked about earlier, so yeah as I mentioned earlier, we've got about $2 50 now.

Sometime in the end of January we should have approximately 300000, a day across the state.

Okay. Thank you for the clarification have a good rest of your evening everyone.

Okay.

Thank you.

And that concludes our question and answer session.

I would like to turn the conference back over to Tom long for any closing remarks.

Yes, and this is mackie.

I'm compelled to do this but if I could statement real quick and the reason I am we've got an election coming up here in about a week and also whats driving it is this relentless attack on fossil fuels and I have teenage boys are asking the fossil fuels going away tomorrow. So.

I'm going to make a quick statement.

And kind of ironically.

Youll fossil fuels change humanity, if you look at over the last 20 years of these aspirational policies and trillions of dollars.

With subsidies and with taxes and incentives and credits.

It's barely put a dent in our hasnt been at all the growth in fossil fuels in fact, I think 3% of electricity demand in the world.

I mean, not demand of electricity production in the world comes from renewables.

And as everybody knows on this call.

Products that we use every day and fossil fuels has increased our lifespan.

Increased our our help us increase our standard of living tremendously, it's made us more mobile planes trains and automobiles.

Ben.

It's so impactful to our lives and I think it's fair to say that modern life with a reasonable standard of living and affordable energy is simply not possible without fossil fuels and logical and rational politically led rush to renewables, we will have devastating impacts from a cost reliability and security of interview around the world.

We are seeing in Europe , and other places and we find it interesting is that the cofounder of <unk>.

Large environmental at this organization has come out early recently and said that he has now left in one of the reasons was as their mantra became within the organization that doesn't matter what the truth is it matters what the public believes the truth is so that particular environmental movement has turned into a political movement that is.

Really being.

Perfect.

By the media and by the administration so.

Yes.

Statements that have been made recently some kind of played horizon here. The energy transition is not feasible in any meaningful timeframe. It is a dangerous delusion to base policies and the idea that such a transition is even possible and so what we believe the new transfer is to reduce emissions.

Around this world is build more natural gas fired generation to replace coal fired generation.

More natural gas liquids around the world, especially to undeveloped world countries.

Countries are burning wood.

Biomass and animal waste and everything else. That's the solution to all of this and so I'll end on this irony is that we have an administration right now that came into this.

Put in very hospital administrators at FERC, and the EPA FCC to attack our industry and that's gone on for a while and this administration, where theyre, not allowing new leases not allowing drilling permits.

Not allowing are slowing down.

Approval of the pipelines and even going after pipelines that have been in service for years in trying to take them out of service.

Lo and Behold here, we've got an election coming up and we start drain in the strategic Petroleum reserve and we come out with.

<unk>.

Yes.

Approaching countries like Venezuela, and countries like Iran, who just.

Promote terrorism.

Hate the U S to try to get them to produce more oil and then what do we do the last few days, we come out and attack our oil and gas producers and say, they're going to be and last but not produce more I mean my goodness.

Doesn't seem like a sitcom or a Saturday night live skit it would be funny that wasn't so tragically sad and starting to get up on this podium but.

Yes, we're kind of tired of being attacked in the fossil fuel business I'm tired of marvell with him about it anyway, so I'm going to close.

Yeah.

Listen we as always we thank all of you for joining us today and we really do appreciate your support and look forward to talking to you in the near future.

Okay.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

[music].

Good afternoon, and welcome to the energy transfer third quarter 2022 earnings Conference call.

All participants will be in a listen only mode.

Should you need any assistance please signal our conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions.

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To withdraw your question. Please press Star then two.

Please note. This event is being recorded today.

I would now like to turn the conference over to Tom Long Co CEO . Please go ahead Sir.

Thank you operator, good afternoon, everyone and welcome to the energy transfer third 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 the prepared remarks, hopefully you saw the press release, we issued earlier this afternoon as well as the slides posted to our website.

For the quarter ended September 32022, which we expect to be filed this Thursday November 3rd.

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.

In the third quarter, we experienced a nonrecurring $126 million charge in the crude oil segment related to the resolution of a prior year legal matter.

In addition, we had an approximately $130 million negative impact due to the timing of the recognition of gains or hedged inventory in the NGL and refined products segment.

These two items adjusted EBITDA for the third quarter would have been three $3 4 billion.

Results for the third quarter benefited from higher volumes across all of our segments, including record volumes in the midstream intrastate crude oil and through our fractionator.

In addition, the acquisition of the enable assets in December of 2021 contributed to our growth over the prior period.

DCF attributable to the partners as adjusted was $1 $6 billion for the third quarter of 2022 compared to $1 3 billion for the third quarter of 2021.

This resulted in excess cash flow after distributions of approximately $760 million.

On an incurred basis, we had excess DCF of approximately $265 million after distributions of $819 million.

And growth capital of approximately $500 million.

On October 25th we announced the quarterly cash distribution of 26, and a half cents per common unit or $1 <unk> on an annualized basis. This.

This distribution will be paid on November 21 to unit holders of record as of the close of business on November 4th.

Annualized basis, while balancing our leverage target growth opportunities and unit buybacks.

As of September 32022, the total available liquidity under our revolving credit facility was approximately $2 three 2 billion.

Now turning to our results by segment.

Dori during the current period.

We expect to fully realize the offsetting gains on our financial derivatives and physical forward sales as the majority settle in the fourth quarter.

And storage margins related to increased volumes and higher rates.

<unk> transportation volumes on our wholly owned and joint venture pipelines increased to one 9 million barrels per day compared to $1 8 million barrels per day for the same period last year.

This increase was primarily due to higher volumes on our NGL pipelines that deliver into our Nederland terminal as well as a record volumes on the combined Mariner east pipelines.

And our average fractionated volumes set a new partnership record, averaging 940000 barrels per day compared to 884000 barrels per day for the third quarter of 2021.

NGL export volume significantly exceeded the third quarter of last year.

Driven by record ethane exports out of both Nederland and Marcus Hook.

At Nederland. This was driven by the second tranche of satellites contracts going into effect on July one.

Which doubled the volume commitments from the initial term.

<unk> than any other company or country.

With our percentage of worldwide NGL exports remaining at approximately 20% of the world market.

And NGL prices and the acquisition of the enabled assets in December of 2021 gathered gas volumes were a record $19 1 million Btu per day compared to 13 million <unk> per day for the same period last year, excluding enable gathered gas volumes on our legs.

C assets were also a partnership record for the third quarter.

For the crude oil segment, adjusted EBITDA was $461 million compared to $496 million for the same period last year.

Earnings were offset by a $126 million charge related to the resolution of a prior year legal matter absent. This charge adjusted EBITDA would have been $587 million for the third quarter of 2022.

Put through our Houston terminal.

Excluding enable crude oil transportation volumes were also a record for the third quarter.

In our Interstate segment, adjusted EBITDA was $409 million compared to $334 million for the third quarter of 2021.

We continue to see heavy utilization on many of our Interstate pipelines, including Tiger FGT SESH and Rover.

And for our intrastate segment, adjusted EBITDA was $301 million compared to $172 million for the third quarter of last year.

And our rich pipeline system continues to flow at or near capacity due to increased activity in the haynesville.

Turning to a brief update on our M&A activity in August of this year, we completed the sale of our 51% interest in energy transfer Canada for cash proceeds of approximately $300 million.

The sale reduced our consolidated debt by approximately $850 million.

It also allowed us to divest of these noncore assets at an attractive valuation and utilize the cash proceeds to further deleverage our balance sheet and redeploy capital within our U S footprint and in September of this year, we completed our acquisition of the Woodford Express LLC, which owns a mid continent gas gather.

And processing system for approximately $485 million. This bolt on opportunity provided roughly 400 million cubic foot per day of cryogenic 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 <unk>.

In 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 now.

Now looking at recent developments at our ongoing growth projects year to date Lake Charles LNG has executed six LNG offtake agreements for an aggregate of nearly 8 million times per annum.

Including a 20 year LNG agreement with shell in a LNG LLC that was executed in August .

And these customers for LNG offtake and we are in active negotiations with several customers for long term offtake contracts for significant volumes of LNG, we are making progress on all aspects of the project and we're now targeting FID by the end of the first quarter of 2023.

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 We believe that our Lake Charles LNG project will provide an important contribution towards solving the growing global.

Energy demand.

As a reminder, our Mariner east pipeline system is fully commissioned and capable of transporting more than 365000 barrels per day, including ethane.

NGL demand both in the U S as well as from overseas customers continues to increase and we have sufficient commitments to move forward with 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 to initially expand at either terminal.

Construction of Braccate continues as scheduled and we expect it to be in service in the third quarter of 2023, which will bring our total Mont belvieu fractionation capacity to over $1 1 million barrels per day.

Construction of our new 200 million cubic foot per day Graywolf 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 2022.

Construction is underway on the bear plant, our second 200 million cubic foot per day processing plant also located in the Delaware Basin.

Mainline construction of the Gulf run pipeline was recently finished and we expect to complete the modification of compression by the end of this year Gulf run, which is a 42 inch Interstate natural gas pipeline with 165 Bcf per day of capacity will provide natural gas transportation between our upstream.

Pipeline network and from the Haynesville shale for delivery to the Gulf coast connecting.

Connecting some of the most prolific natural gas producing regions in the U S with the LNG export market. It is backed by a 20 year commitment for one one Bcf per day from Golden Pass LNG and we recently concluded a non binding open season.

On Gulf run due to the growing product demand.

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

Modernization and Debottlenecking work on our <unk> pipeline continues which will add an incremental 60000 Mcf per day.

A much needed capacity out of the Permian basin, we expect it to be partially in service by the end of this year with full service by the end of January of 2023.

<unk> updates on these projects at the appropriate time.

Alternative energy front, our focus remains on reducing emissions across our pipelines, including pursuing a number of projects related to carbon capture and sequestration enhanced oil recovery for use in the food and beverage industries as well as sequestering Cotwo from our proposed Lake Charles LNG.

Faction facility.

We will be excited to update you once we have a project and specific agreement in place.

Looking at our growth capital spend for the nine months ended September 32022 energy transfer spent approximately $1 3 billion in organic growth projects, primarily in the midstream Interstate and NGL and refined product segment, excluding sun and USA compression capex.

For full year 2022, we expect growth capital expenditures to be near the high end of our range of one eight to $2 1 billion.

Over 90% of our 2022 growth capital spend is comprised of projects that are already online or are expected to be online and contributing cash flow before the end of 2023.

At very attractive returns.

We will provide our 2023 growth capital outlook on our fourth quarter earnings call.

Third to our previous guidance of $12 6 billion to $12 8 billion.

<unk> for our products.

Remain bullish about the future of our industry and the growing worldwide demand for crude oil natural gas and natural gas liquids, we expect to reach our leverage target range of four to four five.

Times by the end of 2022, and we will continue to strategically allocate our cash flow in a manner that best positions us to further improve our financial flexibility and leverage invest in high returning growth projects and return value to our unit holders as we look for additional ways to address existing and new demand.

And for our products, we will continue to pursue strategic growth projects that enhance our existing asset base and generate attractive returns as part of our capital allocation strategy.

This concludes our prepared remarks operator, please open the lineup for our first question.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

We ask that you please limit yourself to only one question and one follow up.

At this time, we will take our first question, which will come from Jeremy Tonet with Jpmorgan. Please go ahead.

Hi, good afternoon.

Hello, Jeremy.

Just wanted to kind of start off with.

Hi, Jeremy.

Great question, a lot of moving parts to your question, but as there is in the LNG World right now.

Obviously as you've touched on the EPC costs.

Have escalated since.

Our first did we got two years ago.

<unk> had an impact on pricing.

Faction.

Have made good progress in.

Increasing our liquefaction charge as we progress with it.

Contracts.

And we're excited about where we are in terms of.

Being a bigger company with a strong balance sheet and great natural gas pipeline network, we are the strongest.

Brownfield facility with the storage tanks and docs.

Really good position to.

To get to the Golar.

Got it that makes sense, there and then maybe just kind of pivoting to the Permian a bit.

If you could update us I guess as far as.

As how you see the takeaway outlook evolving here latest thoughts on warrior.

Yes, Jeremy this is mackie.

We do like most industry, we believe that as we deepen that this year and throughout most of the next two years.

The basis is going to blow out we do sit in a very fortunate situation that we do have capacity available today.

But we will be the next part limits announced out of there we are by far the best option for anybody coming out of the Permian basin, whether it's Delaware or Midland, we provide Katy ship channel as well as other.

Really good markets offered by our intra intrastate system. So we'll keep our head down, but we're going to be very prudent when we make that decision and we hope to do that in the next couple of quarters.

Okay.

Got it that makes sense I'll leave it there thanks.

Thank you.

Yeah.

Our next question will come from Chase Mulvehill with Bank of America. Please go ahead.

Hey, good afternoon everybody.

I guess question on ethane.

Obviously ethane prices have softened a little bit here.

I'd be kind of curious on your thoughts about ethane rejection and kind of how that plays out over the coming quarters.

And kind of rolling into that about your thoughts on that.

<unk> exports and if you see that as kind of a near term release valve or do you actually think that we're running.

Up against the full capacity there.

Hey, Chad.

Mackie.

Yes, we're just.

So pleased at what we've done as far as building out Marcus Hook and building out neither one.

Around the ethane as we've said, we now have sufficient contracts to expand.

Take three or four years to to expand once we get to.

Once we make a decision whether it's in the north or along the Gulf Coast.

But the way we look at rejection.

Our recoveries.

In the region, so from a energy Transfer's standpoint, maybe.

Rejecting ethane in some areas and recover others, but right now where ethylene prices are and where gas prices are we are recovering ethane in most of the regions.

As you know a tremendous amount of ethane was rejected daily up in the northeast with a lot of ethane up there for a project and then as we head toward a decision to expanding.

At either Marcus hook or at theater run well.

We will look at.

Maximizing what we have today.

As we've said in our opening remarks.

Satellite kicked into their second tranche. So we've got that we also have additional capacity that will be we will be fully utilizing on a month to month basis as the market dictates.

Okay.

Follow up.

Just really on Lone star.

If I'm right I think you've got some latent capacity there but.

But kind of what I'd like to ask is if theres opportunities for you to kind of work with some of your peers to maybe offload some of their long haul Permian NGL volumes I mean.

And the reason that I asked one of your competitors actually delayed one of there.

Expansion projects.

NGL.

Okay.

And maybe somebody else analysis here.

Here later this week, but just kind of curious because you do have some latent capacity and just kind of if there is an opportunity for you to work with some of your peers and offload some of those volumes.

Helped the industry kind of be a little bit more capital efficient.

Yes. This is Mackie again, yeah, I'd love to know who you are talking about.

That's interesting.

Telephone number.

Certainly would offer transportation to anybody.

Through our.

Natural gas liquids pipelines and.

We feel real good of where were at over the last several weeks. We've set records out of the Army I think we exceeded 800000 barrels a day.

And actually.

Around our NGL business, we almost hit a million barrels here this past week.

Fractionation at Belvieu with these colder temperatures. So we have the ability to move more volume significantly more volume out of the Permian as our two new cryogenic plants come on.

The second quarter of next year. So we certainly have built it to accommodate our own barrels, but everybody is out there and theyre trying to get their barrels to Mont Belvieu, we would love to hear from them.

[laughter] alright, perfect I'll turn it over I appreciate the color.

Our next question will come from Mark Sollecito with Barclays. Please go ahead.

Hey, good afternoon. So maybe following up on one of the earlier questions around why basis exposure I think a few quarters ago, you referenced a couple of hundred Mcf that was opened with another couple of hundred becoming available over the next couple of years. So I'm. Just wondering if you are sharing an update if you could provide that.

Sure I'll quantify it a little bit with no matter, what I say, we are in negotiations on warrior and that very easily could impact.

That is available over the next year or two because that kind of comes into those negotiations, but notwithstanding that we've got about we've had about 250000 a day available.

We said in our opening remarks, we've got about another 60000 coming available later part of this year and first part of next year, so that puts us right around $300. A day that we will have available as we sit here today.

Then as we think about the upward revision was that mostly a function of just upside to your conservative commodity price assumptions or other operational drivers and then any variable.

Between the lower and upper end of the revised range.

Curious if you have any color there.

Okay.

Yes, Mark this is Tom long.

Short answer is is that the legal settlement was not included in the previous guidance. So the guidance you see right now that we came up with it does include the $126 million.

But I will tell you. It also includes the $130 million.

The timing around the.

Mark to market on some of the Ngls. So the guidance, we're giving you right now 12 12 $813 billion.

Does now include include both of those but as we highlighted in the prepared remarks, we are expecting that the one when our most of the 130 to come back to us in the fourth quarter. So keep that keep that in mind that that guidance.

It does include that what occurred in the third quarter, but the reversal of most of it in the fourth quarter.

And mark as far as that I think the rest of your question that you were going through we've always stayed fairly conservative on the commodity prices.

We continue to do that I think you see with where some of the prices at least on the natural gas side of it or are going here right. Now it was prudent for us to do that but at the same time, we don't have many months left in the year for for much of an impact.

You had quite a few other parts of that question you might need.

Repeat what part of it up not answered here.

Just as far as within the revised range, the upper and lower end what are some of the drivers between the upper and lower parts of the range.

Yes. It continues to be pricing that was running a little higher than what we had what we had anticipated once again, a little bit of that got shaved off with what youre seeing occur right now.

In the fourth quarter.

Other piece of that is we just continue to have a great commercial team and the optimization efforts that are occurring across our system are are really.

Huge compliments to the team and what they are able to do and so that's probably the primary to two drivers.

Got it appreciate the time.

Thank you.

<unk>.

Our next question will come from Gabe Moreen with Mizuho. Please go ahead.

Hey, good afternoon guys.

It may still be a little bit early days, but can you talk about the capex outlook for next year, whether you think youre going higher or lower I realize there's still a lot of things on the drawing board, but just as you sit here today kind of Directionally, where you think things may be headed for Capex next year.

Yes, that's always a good question.

We worked hard in trying to hold off until that fourth quarter and in fairness a lot of that is because we do have so many great projects Mackie was gone over several items. So you've got everything from the Lake Charles LNG to the warrior.

Several other items pet Chem et cetera. So it's really it's really difficult probably to give you that right now thats. The reason, we wait till the end of the fourth quarter to be able to provide that but we talked about pretty much everything that's out there that we're seeing that we're seeing so if you really kind of go back.

What guidance, we given this year, the one 8% to $2 1 billion.

Theres not a lot of.

Additional guidance, we can we can give you for next year until we have a little more visibility into those but as you can see it's not going to be a really large number.

Got it Tom. Thank you and then maybe if I can follow up sort of on a two part Haynesville pipeline question Im just wondering where you guys think you are in terms of I guess utilization out of all the multiple straws you have in and out of the Haynesville and also I guess, a re pricing contracts to market now that that capacity is really.

Demand in the second part would just be kind of an update on golf Ron on the possibility of expanding that with or without lake Charles.

Okay. This is mackie again.

Yes.

Citing area and my goodness stupid ever seeing this maybe album Clinton and saw it years ago, but.

When you see these wells coming on 50, 60, 70000 day and holding out for a while what what.

Great place to own 342 inch pipe and a whole lot of other systems. So were very excited about that you touched on some things like that.

Said earlier in our remarks rig that's pretty pretty full so we're looking at backhaul that into some of our enable asset to get down to Carthage.

So we get to our Gulf run and Tiger pipelines.

So we're doing everything we can to utilize capacity in both directions from all of our pipelines in north Louisiana.

The Gulf run very excited to be bringing that on by the end of the year. We've got the 165, we have one one bcf thats sold to.

Golden pass or a long term contract. We also have secured another 350 of that we've got a couple of hundred left that we are.

Trying to extract as much value as we can as we finalize that and we're continuing to evaluate what is the next step is it adding compression to adding a bcf or is it looping the entire 42 inch.

As we get closer.

Rob.

We opened in the first quarter of next year.

Lake Charles that will be very much the impetus behind us probably looping that line at 42, and so that is probably will end up once we get there, but we also do that anyway.

In addition to that as you said, we're excited about values on Tiger.

CP, which will be Gulf run that narrowed down to 4567, almost given capacity away and we're seeing that move out and we're excited to see that we are seeing wider margins, we're seeing a much higher value for gas east of Louisiana as you go further.

Real need as you get closer to the Florida. So we're.

We're very pleased where we sit and we will fully utilize those to the maximum that we can for our revenues and our unit holders.

Thanks, Matt and I will go to locate for ethane export expansion based on who wins the world series.

Sure.

Yes.

Thanks for the time guys I appreciate it.

Got it thank you.

Our next question will come from and Salisbury with Bernstein. Please go ahead.

Hi, yes.

NGL segment was boosted I think a bit in the quarter by the Medford Frac being down I think that there is some new third party, perhaps starting by the end of the year and then early next year. So you kind of view that does that.

One quarter.

Can you kind of maintain that incremental earning over multiple quarters.

Hello, Ann this is Mackie again.

I'll kind of step back we've really seen a tightening of TNF or really that last 18 months or so and over the last.

Five or six months early summer mid summer it really got tight and now similar to some of the spreads on some of other assets were seeing it move out so.

If you just look at the Frac spreads we are very optimistic that whatever frac capacity, we have available and before our eight frac comes on that debt.

We have significant revenues from from that capacity, we see a very tightening of it yes. There is.

On a warm thats coming on isn't that accessible to Mont belvieu. The fracs that are more.

Belvieu like art and a few others really arent until the third and fourth quarter and into 24 of next year. So there is going to be a tightening of capacity. There already is at Mont Belvieu and we hope to benefit from that as the value of fracking fractionated there.

Widens.

That's really helpful. Thank you for that color.

And then can you remind us currently on your Permian crude pipelines, just roughly how much is still take or pay and if theres any re contracting interest yet on the price, it's not take or pay or if you see that happening in the next couple of years when other pipeline start to rollout.

Yes, we don't have I don't have the exact number ahead of how much take or pay but it's a little bit of a loaded question in the sense of.

Crude oil pipelines.

<unk> will see widening in the reasonably do with some of our customers is what we say on every earnings call.

And at other times is that we're not just offering of Midland to naval under Midland to Houston service, we're offering blending we're offering storage, we're offering access into Bayou bridge or into the <unk>.

Header add or offer to feed into the refineries as well as at the header system and other pipeline systems in Houston. So we.

Did see that start to move out here several months ago, and we do expect that to move out more but.

We don't have all of that.

Contract it really what margins most of that's gone away and we are filling that Ian.

Daily monthly and also will do in term deals at what we see is slowly widening spreads.

Great. Thanks, a lot.

Our next question will come from Michael Blum with Wells Fargo. Please go ahead.

Thanks, Good afternoon, everyone.

I just had a couple of questions. One can you talk about once you get to that $1 22 distribution I guess looking into next year.

How are you thinking about buybacks versus distribution growth and I guess, especially in light of.

Rising interest rates.

That's a great question.

We are so thankful to be talking about it from that standpoint versus the other alternatives. So we.

I will tell you at this point, we are planning this quarter by quarter as far as the distribution side of it and looking at it.

There has not been dialogue.

On anything around the distribution growth.

After the above 22 and meeting our targets. So we're going to continue to look at that when it comes to unit buybacks I don't want to say that we're going to continue to look at paying down that debt, we really want to get that leverage target in that four to four and a half range.

Quite happy to get it to the <unk>.

Higher than that.

Unit buyback to get to the lower leverage but also the great capital projects that we're talking about those likewise set up set up a little bit higher than that.

Buybacks, so let us get to that point. It is a good healthy discussion we have quarter by quarter with our.

Board of directors as we look at the distribution and how we're going to do that but right now our target is to get to the get to about 22 and my gosh, We've made great progress on that it's great to be here.

At this level at 70% higher than where we were so we've executed on it.

It's really looking at that.

We've got ourselves to a great place from that standpoint.

Got it that makes sense. Thanks, and then just wanted to ask on potential.

Cracker. So obviously there is some weakness and pet Chem fundamentals right now spreads et cetera.

Does that give you pause in terms of making that investment does that give you make you more likely to want to make that investment and does it change the calculus between buying versus building.

Hey, Matt. This is Mackie certainly give pause to people that we're trying to take capacity with right now that's for sure but.

The way we're looking at that project is we're not spending a material amount of dollars at this point.

Coincidentally as of today, we have filed our second permits so in the last couple of days, we've filed our TCE Q permit and we all are core wetland permits so that kind of gets us.

Those are 18 to 24 months processes, depending on whether it goes full blown the ice and all that so we've got kind of started that and done all that work. Our team is working diligently with a number of players throughout the country and really the world and Theres a great deal of interest.

The industry as you and like many out there no it's very cyclical.

You can generate a lot of income in a short period of time in the good times and then there is test so.

We're approaching this project like we do everything we're not going to speculate to trying to hit a homerun or not from time to time, we're going to wind this up with both are up.

Both are up.

Okay.

Partners potentially as we've said, we we anticipate we'll own about 25% at the end of the day.

Expect to bring in partners that will also be part of the yield is still tight but as we go around all of these customers. We continue to hear and believe that this will be the most unique and the most flexible cracker in the world. If you look at the upstream pipeline as we've talked about before pipeline network to all the refineries to bring.

And into the export market. So once again wait early but thats going to be one of those projects that if we get.

We'll have sufficient commitments from great customers to have a great project from a rate of return and we will have some good partners.

Thanks for all that I appreciate it.

Yes.

Our next question will come from Keith Stanley with Wolfe Research. Please go ahead.

Yeah.

Hi, Thank you two two clarifications first.

Tom It seemed like you were alluding to probably paying down some debt again next year to try to get to the low end of the leverage target I know the company has.

Decent amount of maturities for next year can you just talk to how you're planning on addressing that as it pay some down with cash and then would you look to issue new debt here or would you look to leverage Europe Youre short term borrowing facilities more.

Yes, Keith.

We're clearly looking at paying.

Paying down.

As much as we can there still are there still a little bit.

Just to go as far as getting a getting what our free cash flow is going today.

In fairness, we do have a very very good capacity left on our revolver.

From our credit facility. So we've got options as to how to how to.

Navigate that and we're going to be careful don't really want to get out in front of it and try to pre announce but you nailed. It when you said looking at trying to pay down.

As much as we can have it.

Yes.

Not moving some of it to the revolver only because when you look out over the remainder of the year and you see what the free cash flow continues throughout the year.

We have a lot of financial flexibility right now is the way I'd like to leave that and we're going to we're going to play it.

The best options, we can reaching all the targets that we want to.

We're going after.

Great and on on Lake Charles So it sounds like the base case is still for up to a 75% sell down.

When you talked about 2023, Capex that Lake Charles was one of the areas of uncertainty when you look to next year.

Are there scenarios, where you could possibly need to fund a meaningful amount of Lake Charles next year as part of your capital budget or is it.

Is that pretty unlikely.

Yes.

Finding a meaningful about next year would probably be more what I would call unlikely probably very unlikely that we would have to do that for next year.

We'll see.

See where it all goes but at this point based upon the white move and move through it through 2023.

Even in the unlikely.

Alright.

Thank you.

Okay.

And our last question today will come from Brian Reynolds with UBS. Please go ahead.

Hi, good afternoon, everyone.

One quick follow up on the capital allocation I was curious if you could just opine on how the desire for a credit rating upgrade influences the timing and financial flexibility for a buyback or an additional distribution base and then maybe perhaps on just the growth capex having tire.

A little bit of priority I was just curious as it relates to 'twenty three capex, specifically, if there's just limited upside to that number at this point given that lake Charles seems to be pushed out a quarter or two at this point. Thanks.

Yes.

The best way to start with that one is the <unk>.

Target, the 4% to four and a half pretty much all three agencies.

Put out there that you get to that.

Closer towards maybe the.

Lower end of that range you are now looking at looking at upgrades and that is important to us we really didn't want to continue to get into that.

Four to four and a half and get into that next higher notch.

The rating agencies all the all the dialogue we've had with them has been very constructive and by the way we think that.

We think we've got a lot of credibility with them and we're going to continue to have this dialogue with them and so it remains a priority I would say that to continue to pay down debt pay down the debt to get within those targets.

Leverage targets that we've got laid out there.

The capital portion of your of your question.

We really do when you really look at our entire infrastructure. When you look at the critical mass we have et cetera. When we look at these capital projects, they're looking at a much broader benefit that comes to our.

It comes to energy transfer.

And when a question was asked earlier about what are the drivers.

On the guidance continuing to get moved up and a lot of that is around the optimization. When you really look at all of the various access we have to some of the very best pricing points and the flexibility we have around that a lot of these capital projects are very very important and we continue to work on the demand side, we've talked about the <unk>.

Charles LNG.

You've heard us talk today a lot about the.

Pet Chem.

We're not trying to own at large percentage of a lot of these.

Great and I guess, just as a quick follow up it just seems like Theres limited upside in 'twenty three capex given those comments at this point.

Yes, I'm sorry.

Do you mind, Brian tens of new new.

Yes, that's a fair assumption I'll just leave it as a fairly immaterial amount as far as 2023.

Great. Thanks, and then just quickly on the last question I know, we've talked a lot about Permian and Haynesville spreads curious is golden pass.

Capacity all year during 2023.

Gulf run have open capacity given Golden pass I mean come on line for another year or so and can effectively benefit from the spreads all year.

Then second is there open capacity number for the Permian that you guys have provided for 'twenty three that's it for me. Thanks.

Yeah.

Second quick.

Second half of that.

Yes, I didn't understand that this is mackie again on Gulf run, Yes, we saw one one Bcf a day.

Golden pass and they're paying a demand charge so they.

Getting geared up where they actually be able to use some of that but.

The way we look at that pipeline is likely to look at all of our assets. We will do everything we can to fully utilize the capacity that's not being utilized regardless of whether it's demand charge being paid for or not and I'm sorry. Your second question second half.

Just how much open capacity does energy transfer I have on the Nat gas takeaway side for 'twenty three.

They have already talked about earlier, so yeah as I mentioned earlier, we've got about $2 50 now.

The sometime in the end of January we should have closed.

Approximately 300000, a day across the state.

Okay. Thank you for the clarification and have a good rest of your evening everyone.

Okay.

Thank you.

And that concludes our question and answer session.

I would like to turn the conference back over to Tom long for any closing remarks.

Yes, and this is Mackie I don't know why.

I'm compelled to do this but if I could statement real quick and the reason I am we've got an election coming up here in about a week and also whats driving it is this relentless attack on fossil fuels and I have teenage boys, they're asking the fossil fuels going away tomorrow. So.

I'm going to make a quick statement.

And kind of ironically.

Youll fossil fuels change humanity, if you look at over the last 20 years of these aspirational policies and trillions of dollars.

With subsidies and with taxes and incentives and credits.

It's barely put a dent in our hasnt been at all the growth in fossil fuels in fact, I think 3% of electricity demand in the world.

I mean, not demand of electricity production in the world comes from renewables.

And as everybody knows on this call theres thousands of products that we use everyday and fossil fuels has increased our lifespans.

<unk> increased our our health has increased our standard of living tremendously, it's made us more mobile planes trains and automobiles.

Ben.

It's so impactful to our lives and I think it's fair to say that modern life with a reasonable standard of living and affordable energy is simply not possible without fossil fuels and this.

A logical and rational politically led rush to renewables, we will have devastating impacts from a cost reliability and security of energy around the world as we're seeing in Europe , and other places and we find it interesting is that the cofounder.

Large environmental Act. This organization has come out fairly recently and said that he has now left and what regions was as their mantra became within the organization that doesn't matter what the truth is it matters what the public believes the truth here. So that particular environmental movement has turned into a political movement that is.

Really being <unk>.

Perfect.

By the media and by the administration so.

Yes.

Statements that have been made recently some kind of played horizon, here's the energy transition is not feasible in any meaningful timeframe. It is a dangerous delusion to base policies and the idea that such a transition is even possible and so what we believe the new transfer is to reduce emissions.

Around this world is build more natural gas fired generation to replace coal fired generation.

More natural gas liquids around the world, especially to undeveloped world countries.

Countries are burning wood.

Biomass and animal waste and everything else. That's the solution to all of this and so I'll end on this irony is that we have an administration right now that came into this.

Put in very hospital administrators at FERC, and the EPA and SEC to attack our industry and that's gone on for a while and this administration, where theyre, not allowing new leases not allowing drilling permits.

Not allowing are slowing down.

Approval of pipelines and even going after pipelines that have been in service for years in trying to take them out of service.

Lo and Behold here, we've got an election coming up and we start draining the strategic petroleum reserve and we come out with.

<unk>.

Yes.

Approaching countries like Venezuela, and countries like Iran, who just.

Promote terrorism.

Doesn't seem like a sitcom or Saturday night live skit it would be funny that wasn't so tragically sad and starting to get up on this podium but.

Yes, we're kind of tired of being attacked in the fossil fuel business I'm tired of marvell with him about it anyway, so I'm going to close.

Yeah.

Listen we as always we thank all of you for joining us today and we really do appreciate your support and look forward to talking to you in the near future.

Okay.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Q3 2022 Energy Transfer LP Earnings Call

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