Kinetik Holdings Inc. Q1 2023 Earnings Call
Irritation there'll be a Q&A session. If I can ask a question by pressing star followed by one on your telephone keypad, if you'd like to withdraw. Your question you May Press Star two.
I'll now hand over to Matthew Wagner director of Investor Relations to begin. Please go ahead.
Thank you good morning, and welcome to kinetics first quarter 'twenty two 'twenty three earnings conference call here with me is our President and Chief Executive Officer, Jamie Welch as well is not wall, our chief operating officer, Steve Stellato, Chief accounting and administrative officer Tod Carpenter, our general counsel.
Nicole Trevor Howard, our VP of finance, and Chris Kendrick and Tyler Myeloma Rvp's of commercial the press release, we issued yesterday, the slide presentation and access to the webcast for today's call are available at Www Dot kinetic dot com before we begin I would like to remind all listeners that our remarks, including the question and answer Sir.
<unk> will provide forward looking statements and actual results could differ from what is described in these statements. These statements are not guarantees of future performance and involve a number of risks and assumptions. We may also provide certain performance measures that do not conform to U S. GAAP, we provided schedules that reconcile these non-GAAP measures as part of our earnings press release.
After our prepared remarks, we will open the call to Q&A with that I will turn the call over to Jamie.
Thank you Matt Good morning, everyone and thank you for joining us today.
As the degree of interest in the kinetic story increases we've decided to shift our approach to our quarterly calls.
We will be more selective with our prepared commentary to avoid unnecessary repetition with our press release and accompanying earnings presentation.
Go with this change is to be respectful of your time and emphasize more of an open forum with the broader leadership team, which we hope leads to a more interactive and informative Q&A session. So let me get started yesterday, we reported first quarter 2023, adjusted EBITDA of $197 $5 million.
In line with our internal budget beginning in March we saw a ramp up in activity and volumes across our system.
To put things into perspective, most of our turn in line activity in any year and certainly after winter storm years occurred during late first quarter and continued through the third quarter.
We expect 70% of our new wells connected to the system in 2023 to occur during the six month window from March through August today gathered and processed natural gas volumes are at all time record highs.
In April we processed an average of 152 billion cubic feet per day.
Representing a 21% increase over the equivalent fourth quarter 2022 volumes, we expect sustained momentum throughout the year supported by an active customer base and our performance from recent wells connected to the system. We are certainly seeing rising <unk> across our.
Our system, indicating that the basin is getting guests here.
This is simply frame a situation we exceeded our 2023 exit rate guidance of $1 5 billion cubic feet per day of processed volumes in April and currently expect to exit 2023 at one 6 billion cubic feet.
The day of processed volume.
This new exit rate represented by year on year increase of over 25%.
In late March we closed on a small acquisition of a midstream infrastructure system in Reeves County supported by a new 20 year agreement with one of our largest customers.
The $65 million acquisition represents less than four times EBITDA multiple right out of the gate. We also executed a win win incentive agreement with the customer accelerating additional near term drilling activity on dedicated acreage for gas processing and produced water.
Services the material revenue uplift from this incentive program will effectively start in 2024 and result in less than a four time set up multiple.
As Kinder Morgan remarks last week, we are making progress on the PHP expansion. However, due to supply chain constraints for certain components and materials. The expected in service date has been delayed to December 2023.
During the first and second quarters, we have actively hedged 2023, and 2024 commodity exposure.
As of March 31st 94% of our remaining 2023 gross profit is from fixed fee contracts and hedges.
We now anticipate achieving the high end of our 2023 EBITDA guidance of 800 million July $860 million, even with the delayed in service of the PHP expansion our exit rate for 2023 is now well over $900 million of annualized EBITDA.
And our EBITDA step change from 2023 to 2024 remains intact.
2023 capital expenditures are trending towards the upper end of our guidance range due principally to the accelerated producer activity requiring additional compression to support these higher volumes.
We are continuing to evaluate portfolio monetization opportunities, particularly our stake in Gulf Coast Express pipeline as a means to accelerate the achievement of our capital allocation priorities.
A potential monetization of <unk> would have an immediate impact to the drip.
Accelerate the achievement of our three five times leverage target and allow us to pull forward the point at which we return capital to shareholders.
On the operations front, our team has done an exceptional job ensuring flow assurance and reliability for our customers, while keeping operating costs down.
Despite higher than expected volumes and continued materials and labor cost inflation remaining 2023 operating expenses are right in line with internal expectations.
Our budget in February in.
In April we placed the diamond Cryo expansion and service. The project was both on budget and on time now our installed processing capacity exceeds 2 billion cubic feet per day, our gathering system expansion into Lea County, New Mexico is proceeding as planned the project is on budget.
And on schedule and should be in service in January 2024, well ahead of the expected contract start date of April one.
We are currently in commercial discussions with several new Mexico produces and are excited about the potential near term opportunities. We will continue to provide more commercial and operational updates related to our new Mexico activities as they occur.
Delaware Link 30 inch residue gas pipeline to Wahaha is on budget and on schedule. We are targeting an in service date in October and with that I'd like to hand, the call over to Trevor Howard VP of finance.
Thanks, Jamie we reported pro forma adjusted EBITDA of $187 million in the first quarter of 2023 looking at our segment results. Our midstream logistics segment generated an adjusted EBITDA of $119 million in the quarter.
As Jamie mentioned, we saw a ramp up in volumes beginning in March and we have seen meaningful growth in April which will benefit our second quarter and full year results shifting to our pipeline transportation segment, we generated an adjusted EBITDA of $72 million up 4% year over year growth within this segment was driven.
The volume and margin expansion at Shin Oak and epic crude as well as the receipt of a tariff settlement at gcs.
Throughout the quarter, we derisked and strengthened our balance sheet.
Through our commodity hedging program, we reduced our remaining 2023 commodity linked gross profit to 6% down from 10% when we initiated 2023 guidance.
From a capital investment standpoint, total capital expenditures for the quarter were $121 million, which is approximately 23% of expected capital expenditures in 2023.
$49 million was within our midstream logistics segment and $72 million was that the pipeline transportation segment.
For the quarter, we generated an adjusted distributable cash flow of $127 million and free cash flow of $26 million.
Turning to the balance sheet kinetic exited the quarter with a 4.0 times leverage ratio.
Furthermore, we swapped a significant portion of our floating interest rate exposure to fixed in March in total since our comprehensive refinancing last June we have executed two in a quarter billion dollars of fixed rate swaps for the May 2023 through May 2025 period, our average swap rate.
It implies an attractive six 1% average cost of debt across our bank facilities and our 2030 senior notes currently only 8% of our total current debt is exposed to floating interest rates.
On April 19th we declared a <unk> 75 per share quarterly dividend to be paid on may 17th. This represents a dividend coverage ratio of approximately one two times for the full quarter.
During the first quarter, we opportunistically repurchased approximately 82000 shares for $2 $4 million under the previously announced $100 million repurchase program. The repurchase kinetic shares will partially offset share issuances under the drip.
Turning to our sustainability initiatives I am pleased to share that we have made significant progress.
We reduced our 2022 scope, one and scope two greenhouse gas emissions intensity by 8% as compared to 2021. Similarly, we reduced our scope one and scope two methane emissions intensity by 13% year over year. In 2022. This was achieved in part through our Lidar program.
Empresa blow down best practices, and new equipment installations as a direct result of our emissions intensity reduction efforts and corporate diversity initiatives, we achieved our sustainability linked financing framework performance targets for 2022, which will result in interest savings beginning in July 2023, and.
With that I would like to open the lines for Q&A.
Okay.
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The first question today comes from Spiro <unk> from Citi. Please go ahead.
Thanks, Jamie.
If we could maybe start with Gulf Coast Express.
It sounds like Youre moving into closer there to a more formal sales process, Jimmy can maybe talk a little bit about the timing around that.
Could maybe even see recommencing dividend growth as soon as this year and not wait till 2034.
And then lastly, if there's anything else you'd consider maybe less 40 years.
Spiro good morning, I think as far as gcs concerned obviously.
Ready to start formally exploring.
The sale of that particular interest as evidenced by the fact that we put it in writing as part of our press release I think that process typically should take you inside three months, So look I think.
Expectations, if a successful outcome was to eventuate, which we've I think Phil.
High degree of conviction with.
We'd see an announcement in or around that second quarter earnings for us in the beginning of August .
Which would obviously be ideal as far as your question on accelerating the potential for the dividend. We still obviously have a significant capital program that we need to knock down for the balance of this year.
Obviously realizing significant.
Proceeds from <unk> sale at a very attractive multiple.
Make a significant inroads from both a balance sheet credit profile standpoint.
And I think set you up.
Achievement of the capital allocation priorities and targets that we've that we've laid out and identified for 24 to.
It's a long way of saying.
Yes, I think the first thing is to moderate the drip.
That obviously reduces dilution to our equity holders I think thats the first step.
24 is probably the first time that one could reasonably.
And conservatively consider doing something on the dividend.
Otherwise incremental return of capital to shareholders.
Sure.
Got it that's helpful. Thanks to that Jamie.
Second question, just thinking through 2020 for Capex. It sounds like activity levels have picked up dramatically since the last update as evidenced by your guidance increase here.
I remember last quarter, you sort of talked about this less than $150 million of Capex for 2024 is that a.
A good number to use here, we see pressure higher.
I think thats still a very good number to use I think we have been very consistent in discussions whether it's with you or investors in general that we will walk the talk the only thing that you see in the context of this picture, particularly when you look at the Investor presentation that we put out on slide five.
Five is.
Is if that ramp continues into next year, what we should invest.
Investors and U and we should be discussing is we <unk> at the end of next year, a new processing facility and if so where.
That is because this trend line I think what has surprised us Spiro is the outperformance is not is not.
Is not.
Specific to just one particular producer we probably have almost a handful that have brought wells online.
In areas that are dedicated that have that have far exceeded type curve expectations and we have a lot of data to look at type curves and yes. We've been in this space and now for 10 years. So we really think that we actually understand the nuances of the rock, but what's.
Interesting to us whether it's calin, whether it's diamondback, we see it with PR, most recently with katara with on back on their resolute acreage.
The results were just <unk>.
Quite surprising positively surprising so what that tells US is yes. The basin is just getting gas here much much gas here and so this ramp on page five it is not unreasonable to.
We expect that extrapolation of growth will continue and you will be knocking down that remaining balance of $400 million of open space within a very short space of time.
Understood. That's helpful color. Thanks for the time today guys.
No problem.
The next question on the line is from Christian Richardson from Scotia Bank. Please go ahead.
Hey, Good morning, guys, just maybe curious on the volume ramp Youre talking about particularly in April maybe you see where you've seen the concentration of that strength. I mean is this some of the new projects added in June of last year, some of those step ups and nbc's.
The DSL contract, just maybe kind of curious where youre seeing some of the strength on the volume side.
Sure Good morning, Justin.
I didn't think you changed your name, but that's okay.
I think the.
The long and the short of it is we are seeing it in various.
Various pockets more on the northern end and certainly on the western in the context, we've always known the western side of our system is very very gassy.
But we're seeing it also in particular as we sort of migrate up in Q.
The top end, we've counting up into loving County.
I think it is not it is not a case that we have a little bit of catch up on some of the nbc's because as use as we announced back in February we saw a little bit of softness in the context of volumes versus the MVC for at least one of our customers.
But that is I would say inconsequential relative to the real driver here and the real driver here is it is the handful of producers I talked about and their level of activity.
You and I have talked about before is so much of our activity is a march through August .
That is pretty much we see the cadence for our for our customers and I think more generally.
Particularly post winter storm area, I think winter storm Yuri change producer behavior.
People are very reticent to bring wells on in February and rightfully. So I mean that was catastrophic.
It was.
A tragic event and one that obviously had.
<unk> monetary consequences for everybody, including producers and I think they've learned and said look the better the better part of Valor is why don't we think about our turn in line forecast really starting at the beginning of March and ramping forward through the end of <unk>.
Going into September .
October that's the timeframe you think about <unk> and November December it can be sort of a little bit a potluck because it depends on how people are tracking I think in large part, particularly for the public's against the guidance. So I think just generally we've always looked at central southern Reeves as being solid not spectacular we announcing some real.
Outsized performance, we are seeing some different benches, and we are seeing some of the benefits of these different benches and I think that is a real that really does move the needle as far as Gol is a concern and overall activity.
It does make for match job in line, who runs ops that chubb is challenging of how to balance the system and more importantly get the compression in the right places right sizing compression and getting it to where it is.
And this is all within sort of what I'll call.
The footprint we have today the.
The commercial guys are actively engaged in new Mexico and that changes the game, yet again for US right because it's an entirely new catchment area for us underpinned by that contracted starts in April which is supported by one of our largest customers in that large NBC and there is significant activity up there.
That we are able to capitalize on with customers that I think have become very comfortable and very happy with our overall performance and execution.
Appreciate it Jamie and then maybe just on the tuck in in Reeves County.
I'm just thinking about the four times multiple do we do we grow into that over time or is that sort of just base EBITDA, what youre seeing today and then maybe also fitting.
I appreciate the commentary on the high end of the guide thinking about that maybe splitting between volumes coming in ahead of schedule versus the contributions from from the.
The infrastructure system in Reeves.
So as far as the.
Midstream acquisition, we did the $65 million.
We said, it's less than a four times.
Our four times acquisition multiple that's out of the box right out of the gate.
It is a very small it is a.
A smallish produced water.
Gathering and disposal asset.
With our friends at Permian resources, we have a tremendous amount of respect for the for these guys. If nothing else I think will and James have done a phenomenal job of growing that business and very very creative and we love doing people with creative people, we love doing business with creative people and.
So we looked at it and we went this is a win win for both of US from a standpoint, the actual that system sits on acreage that's already dedicated to us from a guest standpoint, so we actually know the entire footprint.
From their vantage point they I.
<unk> been very impressed and happy with our overall run times and overall consistent performance.
What is important for them as they go as we said well that's just a tip of the iceberg.
The real sizzle on this is to create a unique alignment with them and us to accelerate drilling on some of the gassy acreage they have which is the legacy centennial silverback acreage.
And give them an economic incentive to do so that to them is the equivalent of almost of a contribution of native construction. It's just one more ingredient that goes into the decision on where they allocate capital for the drillbit and from our vantage point it allowed us to accelerate activity over and above the base plan.
And that was really the interesting thing so what that meant was money.
We gave them the $60 million.
They are on they are basically being held to account they've got actually execute a certain amount of lateral feet. It's.
Done by a particular area and it gets measured on a very on a high frequency basis.
And you will see in 2020 for the upside over and above based plan, which when you look at your numbers Tristan or you look at your peers.
That plan is pretty much predicated into your 2024 number already this is upside. So you look at the <unk>. We said, it's less than four times. So say on just on the gas side, it's going to be more than $50 million of incremental EBITDA that youll see and what we like about it is we've got.
As I said, it's one of our more tenured or season contracts.
So the rates are good we get to control residue, we get to control. We've got Ngls. So the gas value chain to US was the critical component of coming up with that.
Creative arrangement, so that when you look at it Youll last piece, which was your last question in the context of how much is outperformance.
I would say the overall increase.
Because of that the water business is in the teens as far as contribution the balances outperformance offsetting that puts and takes.
Obviously, we said PHP, we had already made adjustments with Apache. So yes, we've got those takes.
And the Gibbs, where meaning the positive contributions where the outperformance and this sort of acquisition. So I feel really proud of the team that look at this point in time with all of the volatility we have and obviously things don't go quite according to plan that we are looking at that high end of our eight of our <unk>.
<unk> hundred 60 range as far as EBITDA.
For this year.
I appreciate the highlights thank you guys very much.
No problem. Thanks, Jason.
The next question is from Neel Mitra from Bank of America. Please go ahead.
Alright, good morning, Thanks for taking my question.
Jamie I wanted to take the other side on the <unk>.
Phil I know you want to get to investment grade status.
As fast as possible, but I know the rating agencies also look at scale and getting to a billion dollars of EBITDA as well as.
Earnings mix, so be giving up let's just say roughly $50 million of high quality take or pay contract.
And moving more towards the GMP side, which has no volumetric risk.
Do you weigh those issues and when you consider the sale and becoming investment grade.
With the sale of Gtx.
And it's a very good question and one we debate we have debated.
Numerous times.
And I think the way I look we look at it is this yes. It is $50 million of high quality cash flows and.
What's interesting on the midstream logistics business take it from what we have actions in the last 12 months.
Biggest announcements have all been backed by large scale commitments and slash Nbc's NBC.
And the counter parties that we've been signing Nbc's with.
Are the same.
Quality as underpin shippers on Gtx in other words strong investment grade Counterparties.
And so we look at that and say well, what's the difference in NBC has an obligation to pay money and obligation to take or pay and ship on our pipeline is an obligation to pay money if deficient.
It's one and the same so I do agree with you, but I think we've looked at and said listen.
Yes. It means that pipeline transportation will go would go down by $50 million, obviously offsetting that you obviously have the increase with the expansion to PHP coming up.
And the MVC contributions most recently with new Mexico. The two that started in October we've got more in the Hopper all of Nbc's.
I think by moving to an MVC when moving to a more de risked G&P business that has typically existed within the footprint of the Permian.
And I think that to me.
Sort of can offset the question on.
Yeah.
Cash flow risk.
And now this is Trevor I'm, just going to jump in I think one I think one other point that's important is with our stock right now trading with a double digit yield it's a cost of capital discussion at this point.
And so with using using <unk> proceeds, which on an unlevered basis can portend a sale it could be.
Less than 10% cost of capital and you're subsidizing that instead of dripping.
It's really how we're looking at at this point and.
Frankly from our vantage point to the extent that we're able to significantly reduce or turn off the drip when you actually look at it on 2024 numbers it's accretive.
Two per share financial metrics.
Which is a little bit unique when you think about selling an asset to pay down debt.
And really the offset or is that you're avoiding a fair amount of dilution that would otherwise take place in the third and fourth quarter dividends.
But to be fair there are some capital intensity associated with the.
The G&P business right to get that extra business.
So how do you look at that when you look at.
Adding the incremental EBITDA from GMP versus what you already have with <unk>.
With gcs.
And that's a fit and look that's a fair comment I think the way to look at it is when we announced the.
Deals with in <unk>.
October the build multiples the overall capital was pre.
We are very manageable.
And it was less than a one time to build for probably one of the contracts and virtually nothing on the other.
As we think about the straw into new Mexico.
That obviously has with it the capital component in there, but once we put it the story, we're able to source additional capacity over and above the MVC obligations that obviously brain without incremental without significant incremental capital that brings obviously, the overall multiple down and get to your 10.
And recovery of capital So look I do here versus $50 million, you're not putting more capital in its money that sunk and you just get that.
On the remaining contract life I think.
As Trevor mentioned, it's I would say the driver for us is.
Not as much just because we don't control the rating agencies the investment grade it is getting to the three five times and it's really being able to in fact.
Take fee on the front foot as it relates to the balance of our drip through 'twenty three.
Which is Trevor pointed out equities expenses.
And that drip, obviously every quarter given the magnitude that creates significant incremental shares.
And we've managed it and we see a way to actually.
Correct that and actually now changed the overall dynamic.
Okay understood and if I could.
One more in there.
Could you comment on what the initial build multiple is.
For the new Mexico contract.
To build the pipe.
From new Mexico down into Texas.
And then.
Understand that build multiple it's going to.
Compress over time as more volumes are able to flow into that pipe.
What is the maximum volume that you can flow I guess I know that 20 inch pipe that you're building across the state when we look at it and what is the bill more full now and what do you expect it.
Eventually drive into.
So the build multiple today just based on the MVC is less than five times.
It is the the 20 inch can move.
Yes.
200 250.
That we can move across that pipeline.
And so if you add incremental volume you would bring that multiple down by.
Half.
Yeah.
I think it's already.
I don't know activity deals that you could do that sort of like on a two and a half multiple if you sell it all out so that should be a pretty good proposition.
Yes, Neil just one more thing.
One more thing just in conclusion.
Combining those last two questions together I think another thing and how we're thinking about the gtx sale is a.
Free cash flow from our business today is being earmarked towards deleveraging and to the extent that we can subsidize incremental growth projects that are mid single digit multiples with.
Harvesting a double digit multiple sale.
Allows us to recycle in an accretive way.
Capital back into the business, which we think is value accretive to shareholders.
Got it. Thank you I appreciate the comment.
Thanks Dale.
Yes.
The next question is from Keith Stanley from Wolfe Research. Please go ahead.
Hi, good morning so.
First just curious if you see any potential for other tuck in type acquisitions with your existing customers like you did with the water system agreement today.
Any general commentary on how many of your customers still own midstream related assets in your areas.
There's probably one or two.
But.
And I think they may be have us even smaller size. So you got to ask yourself, whether it's whether it's worth it but I think we're a creative bunch Keith as you know and I think we've got some ideas on doing some things we're always looking to try to create what we think.
Win win opportunities for customers.
That obviously give them.
Sure.
It creates the right out that creates the right alignment on both sides. So I would say, it's not there's not an abundance unexpected. There's 15 is like one or two that potentially could fit that.
Opportunity set.
Got it thanks, and sorry to beat a dead horse here, but one just clarifying one on potential gtx sale. So you've made it clear the priority is to turn off the drip.
I guess, one alternative you could do is to use proceeds to actually repay debt and get to the leverage target.
Sooner.
Do you see that as one option on the table or do you see achieving the leverage target is more just a function of EBITDA growth into next year. Thanks.
Yes sure. Thanks for the question.
No I mean really the drip right now is being used towards deleveraging and to the extent that we're successful with the sale of <unk> that will that will get us.
Very close to achieving our capital allocation priorities.
And so when we get to that point and we actually are ready to.
Present the results.
We're going to also provide an update on the drip and what that could look like but the intent is that we're trying to get to our three five times as soon as possible.
And so that I guess that message from us is still intact, but.
I don't necessarily things that you need you definitely you don't need to do both in order to achieve that three five times leverage.
In the near to intermediate term.
Thank you.
As a reminder, that if you'd like to ask any further questions. Please press star followed by one on your kind of thank you Pat now.
Okay.
The next question is from Robert Moskow from Mizuho Securities. Please go ahead.
Good morning, everyone.
Just to follow up on the tentative agreement and are there any specific return requirements within that arrangement.
Or the penalties like only tied to activity I think you mentioned the viral slipped metrics just trying to understand how sticky that.
Multiple beyond 'twenty, four or I guess weather.
Similarity with the rock, it's kind of what gives you comfort that those return thresholds are going to be met.
We have a certain amount of activities undertaken.
Yeah, So Rob I would say if I think I understood. The question. The question was how.
How much insight in how confident and comfortable you in the context of the overall.
The ingredients that go into that incentive arrangement and I had mentioned on my prepared remarks actually on one of the questions of the dollars per lateral foot short answer so, let's let's knockdown each component.
This is one of these are two of our most tenured contracts in other words, we have lived through a lot of drilling activity on these on these this particular acreage positions. So we know the rock very well, we've got years and years.
<unk> data right and so we know what is higher Gol what is lower.
The overall contracts themselves are slightly different one has a percentage and that one is more fixed fee.
And I look at we look at it and we say.
It was it's dots.
As of.
Yes sort of towards the end of this year, because obviously when we close the deal at the end of March it's hard to change drilling activity within the current year and so the PR Guy said listen by the time, we start to basically adjust what we're going to do on this acreage it will be the fourth quarter before we.
Starting to think about drilling.
And therefore 2024 is when you see the benefits.
The benefits happen as I said, it's on a six.
<unk> on a regular frequency basis, it's measured every six months.
There is a you either drill.
To a certain lateral footage, depending upon which area you've got.
And if you don't drill then there is a refund and that includes a I would say a penalty which is far in excess of our cost of capital.
So theres, a quite a bit of detail into how it all works, but our confidence level is.
<unk> is solid.
The content of that four times, we should see significant activity through 'twenty five and through 26. So I think you will see a nice accelerant accelerated runway on that acreage Thats got still a lot of remaining inventory.
On it and I think it's as I said, it's a very it's a nice win win arrangement with the folks at <unk>.
Great that's helpful color James.
And maybe switching gears I guess, even with the increase.
Exactly.
You still have a lot of spare capacity on your system and I'm wondering with the call.
Those stations are not all quota changing at all I think you noted the pricing for <unk> and.
And it just seems like some of your peers might be more comfortable building plants now.
Expectation that Youre dedicated volumes you can be what feels like a capacity number one.
Also.
So I think the first thing Rob is offload on a core part of our business, we get very few offload for us off loads, maybe we got a plant down for maintenance.
And that's about it might be for a couple of days it might be three days it might be for one who knows or it may be an unexpected outage, but it's not something we forecast and it's something that when we talked to you that that offloads and never really never part of the narrative there never part of how we think about our business. So we've never thought about that.
In the context of all look we'll get all these uploads that to us would just be gravy.
We just didn't expect manna from Heaven, maybe a better way to describe it.
The way I think we think about the overall basin as evidenced by we saw.
<unk> with long lead times. This morning, we saw western maker announcement that they may need more capacity.
More processing capacity all of those things I think point you in the direction that the basin is getting a gas yet yes activity remained strong.
It's very different than making a decision then on a purely dry gas basin, such as the Haynesville and Marcellus Utica, We're obviously gas prices.
Start to impact drilling activity.
But from our vantage point, we still in fact, what's interesting to US is we believe the narrative by getting into new Mexico would open up a significant volume opportunity for us set for us that we will be able to capitalize on and thus far in the now almost three months since.
We announced it back on February 27.
It is not it has.
Certainly lived up to expectations.
I think we are.
Incredibly excited by all the opportunities that we've got in front of us.
And that will allow <unk> see us obviously, not just sell out the balance of 400 debt that you would see against the $1 six expectation into this at the end of this year, but also think about the prospect of adding additional capacity going into late next year and thinking about and making.
An announcement on a build at that point in time.
Alright, I appreciate the time everyone.
Thank you.
We have no further questions. So I'll hand back to Jamie to conclude.
Thank you very much for your time I know, it's everyone's slammed right now just given the announcements.
Announcements on earnings from everybody. So we look forward to seeing you at EIC in the next couple of weeks. Thank you.
This concludes today's call you may now disconnect your lines and enjoy some actually good day thank team.