Q2 2023 ONEOK Inc Earnings Call

Good morning, everyone and welcome to the one one second quarter 2023 earnings conference call and webcast.

Speaker 1: Good morning everyone and welcome to the one-oak second quarter 2023, our name's Lincoln Corbett, conIGOTC

Speaker 1: All participants will be in listen-only mode for the duration of the call. Should you need assistance at any time, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

All participants will be in listen only mode for the duration of the call.

Should you need assistance at any time basically all the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Speaker 1: To ask a question, you may press star one on your telephone keypad. And 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 Andrew Ziola, Vice President of Investor Relations. Please go ahead.

Ask a question you May press star one on your telephone keypad and you 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 Andrew's Iola, Vice President of Investor Relations. Please go ahead.

Thank you Amy and welcome to one off second quarter 2023 earnings call, we issued our earnings release and presentation. After the markets closed yesterday.

Speaker 2: Thank you MJ and welcome to one of second quarter 2023 earnings call. We issued our earnings release and presentation after the markets closed yesterday and those materials are on our website.

Those materials are on our website.

Speaker 2: After our prepared remarks, management will be available to take your questions.

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

Speaker 2: Statements made during this call that might include one of the expectations or predictions

Statements made during this call that might include one offs expectations or predictions should be considered forward looking statements and are covered by the safe Harbor provision of the securities acts of 1933 of $19 34.

Speaker 2: should be considered forward-looking statements and are covered by the Safe Harbor provision of the Securities Act of 1933 and 1933.

Speaker 2: Actual results could differ materially from those projected in forward-looking states.

Actual results could differ materially from those projected in forward looking statements for a discussion of factors that could cause actual results to differ please refer to our SEC filings.

Speaker 2: For discussion of factors that could cause actual results to differ, please refer to our SEC file.

Speaker 2: Just a reminder for Q&A, we ask that you limit yourself to one question and a follow-up in order to fit in as many of you as we can.

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

Speaker 2: With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer. Pierce. Thanks Andrew. Good morning everyone and thank you for joining us.

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

Speaker 2: On today's call is Walt Hulse, Chief Financial Officer and Executive Vice President, Investor Relations and Corporate Development, and Kevin Burdick, the Executive Vice President and Chief Commercial Officer. Also available to answer your questions are Sheridan Swords, our Senior Vice President, Natural Gas Liquids and Natural Gas Gathering and Processing, and Chuck Kelly, Senior Vice President, Natural Gas Pipeline.

On today's call is Walt Hulse, Chief Financial Officer, and Executive Vice President Investor Relations, and corporate development, and Kevin Burdick Executive Vice President and Chief Commercial Officer also available to answer your questions are Sheridan swords, our senior Vice President natural gas liquids and natural gas gathering and processing.

And Chuck Kelly Senior Vice President natural gas pipelines.

Speaker 2: Yesterday we announced second quarter 2023 earnings and increased our full year 2023 financial guidance.

Yesterday, we announced second quarter 2023 earnings and increased our full year 2023 financial guidance.

Strength in volumes across our operations, particularly in the Rocky Mountain region in Permian Basin.

Speaker 2: Strengthened volumes across our operations, particularly in the Rocky Mountain region and Permian Basin, resulted in higher second quarter results and positive momentum entering the second half of 2023.

<unk> in our second quarter results and positive momentum entering the second half of 2023.

Speaker 2: We continue working toward a successful closing of our pending merger transaction with Magellan, while remaining focused on the growth of our legacy asset.

We continue working towards a successful closing of our pending merger transaction with Magellan, while remaining focused on the growth of our legacy assets.

Speaker 2: Initial activities have begun on two NGL pipeline expansion projects.

Initial activities have begun on two NGL pipeline expansion projects.

Speaker 2: The growth we are seeing across our existing operations is driving the need for these economically attractive projects.

The growth we are seeing across our existing operations is driving the need for these economically attractive projects Walton Kevin will talk more about the early work that we're doing on the Elk Creek and West, Texas natural gas liquids tablets.

Speaker 2: Walt and Kevin will talk more about the early work that we are doing on the Elk Creek and West Texas Natural Gas Liquids Top Line.

Regarding our pending acquisition of Magellan midstream.

Speaker 2: Regarding our pending acquisition of Magellan Midstream.

Speaker 2: We've recently accomplished two critical milestones toward completing the transaction, including the expiration of the HSR waiting period in June , and the filing of the definitive proxy materials with the SEC in July .

We've recently accomplished two critical milestones toward completing the transaction, including the exploration of the HSR waiting period in June and the filing of the definitive proxy materials with the SEC in July .

Proxy mailings are already hitting investors mailboxes as we look ahead to the shareholder and unitholder votes on September 21st we're confident that the investors.

Speaker 2: Proxy mailings are already hitting investors mailbox.

Speaker 2: As we look ahead to the shareholder and unit holder votes on September 21st, we're confident that the investors...

Speaker 2: Both companies will see the compelling long-term value proposition this transaction brings, with immediate financial benefits and incremental growth through the combination of these two companies.

Both companies will see the compelling long term value proposition. This transaction brings with immediate financial benefits and incremental growth through the combination of these two companies.

Today, we will walk you through both the macro and micro takeaways of our synergy assumptions.

Speaker 2: Today we will walk you through both the macro and micro takeaways of our synergy assumptions.

Speaker 2: I will cover the macro and Kevin will go into more detail with the micro explanation.

I'll cover the macro and Kevin will go into more detail with the macro explanations.

Speaker 2: On slide six in our earnings presentation, which was provided yesterday with our news release, you will see a summary of how we've organized the synergy opportunities we've identified to date and have targeted to realize as a combined company.

On slide six in our earnings presentation, which was provided yesterday with our news release, you will see a summary of how we've organized the synergy opportunities we've identified to date and have targeted to realize as a combined company.

Speaker 2: You can see we have slotted these commercial opportunities into four categories and have provided a breakdown for both the assumed scenario in our proxy and for the incremental potential near-term commercial opportunities.

You can see we have slotted these commercial opportunities into four categories and have provided a breakdown for both the assume scenario in our proxy and for the incremental potential near term commercial opportunities.

Speaker 2: So now I'd like to cover the macro takeaways from page 6 previously referenced.

So now I'd like to cover the macro takeaways from page six previously referenced first.

Speaker 2: Combined, these companies will have opportunities that were not possible as stand-alone companies.

Combined.

These companies will have opportunities there, we're not possible as stand alone companies.

Second.

Batching and blending are done both backed by both companies today. Therefore, these operational techniques are well understood by both companies they are not new.

Speaker 2: Batching and blending are done by both companies today. Therefore, these operational techniques are well understood by both companies. They are not new. But, the difference is, with these assets under one company's direction, batching and blending value can be realized on a larger scale.

But the difference is with these assets under one company's direction batching and blending value can be realized on a larger scale.

Speaker 2: Third, with the exception of bundling, the three remaining commercial categories are within 100% of our control. This means that we make the decision to pursue opportunities if they make commercial and economical sense, instead of relying on factors outside of our control.

Third.

With the exception of bundling the three remaining commercial categories are wind going 100% of our control. This means that we make the decision to pursue opportunities if they make commercial and economical sense instead of relying on factors outside of our control.

Fourth as we integrate the two employee basis post close we can focus on widespread collaboration and believe that we will find even more opportunities not identified to date and finally, there is significant potential value in the near term. The next one to four years above ours.

Speaker 2: Fourth, as we integrate the two employee bases post-close, we can focus on widespread collaboration and believe that we will find even more opportunities not identified today.

Speaker 2: Finally, there is significant potential value in the near term, the next one to four years, above our assumed case in the proxy.

<unk> case in the proxy.

Speaker 2: One Oak has proven our commercial creativity over the course of our company's transformative history.

<unk> proven our commercial creativity over the course of our company's transformative history.

Speaker 2: And together with Magellan's team, we believe our companies have as many opportunities to continue improving the services that we offer to our customers and returning value to our investment.

Together with Magellan's team, we believe our companies have as many opportunities to continue improving the services that we offer to our customers and returning value to our investors with that I'll turn the call over to Walt her pulse for the discussion of our recent financial performance.

Speaker 2: With that, I'll turn the call over to Walt Holtz for the discussion of our recent financial performance and guidance in current.

And godless increase thank.

Speaker 3: Thank you, Pierce. With yesterday's earnings announcement, we increased our 2023 financial guidance expectations. We now expect a 2023 net income midpoint of $2.49 billion and an adjusted EBITDA midpoint of $4.675 billion, a $100 million increase from our original adjusted EBITDA midpoint provided in February .

Thank you Paris with yesterday's earnings announcement, we increased our 2023 financial guidance the guidance expectations. We now expect a 2023 net income midpoint of $2 four $9 billion and an adjusted EBITDA midpoint of 4.67.

$5 billion, a $100 million increase from our original adjusted EBITDA midpoint provided in February .

Speaker 2: These midpoints are one-off specific and exclude the impact of the pending merger with the jewellain and any future merger related costs in order to be an apples to apples comparison with our original guidance provided in February .

These mid points are one oak specific and exclude the impact of the pending merger with Magellan and any future.

Merger related costs in order to be an apples to apples comparison with our original guidance provided in February .

Speaker 2: Higher guidance expectations were driven by volume growth.

Higher guidance expectations were driven by volume growth.

Speaker 2: Volume strength across our operations, higher average fee rates, and lower than expected, third party NGL for actionation.

Strength across our operations higher average fee rates and lower than expected third party NGL fractionation costs in the second quarter, we recorded $31 million of third party fractionation costs compared with $46 million in the first quarter.

Speaker 2: In the second quarter, we recorded $31 million of third-party fractionation costs compared with $46 million in the first quarter.

Speaker 2: We expect approximately $30 million, a third-party fractionation costs per quarter to be a good run rate for the remainder of the year, as MB5 is fully operation.

We expect approximately $30 million of third quarter third party fractionation costs per quarter to be a good run rate for the remainder of the year as MB five is fully operational.

Strong producer activity and a constructive volume outlook also drove the increase in our capital expenditure guidance. We now expect total capital expenditures, including growth and maintenance capital of approximately 1.5 $75 billion in 2023.

Speaker 2: Strong producer activity and a constructive volume outlook also drove the increase in our capital expenditure.

Speaker 2: We now expect total capital expenditures, including growth and maintenance capital of approximately $1.5, $75 billion in 2023.

Speaker 2: Initial activities, including the purchase of long, long lead time components related to the expansion of elk creek pipeline and the decision to complete the full looping of the West Texas NGL pipeline are included in our updated guidance. Kevin will provide more detail on these projects short.

Initial activities, including the purchase of long long lead time components related to the expansion of the Elk Creek pipeline and the decision to complete the full looping of the West Texas NGL pipeline are included in our updated guidance, Kevin will provide more detail on these projects short.

Now a brief overview of our second quarter financial performance.

Speaker 2: Now a brief overview of our second quarter financial performance.

Speaker 2: One out second quarter, 2023 net income totaled $468 million, or $1.04 per share.

<unk> second quarter, 2023, net income totaled $468 million or $1.04 per share second.

Speaker 2: Second quarter adjusted EBITDA totaled $971 million, a 10% increase year over year. If you exclude merger-related and third-party fractionation costs, second quarter adjusted EBITDA increased nearly 15% and would exceed a billion dollars.

Second quarter, adjusted EBITDA totaled $971 million a 10%.

Increase year over year, if you exclude merger related and third party fractionation costs second quarter adjusted EBITDA increased nearly 15%.

It would exceed $1 billion.

In June 2023, we redeemed $500 million of our seven 5% senior notes due September 2023 with cash on hand.

Speaker 2: In June 2023, we redeemed $500 million of our 7.5% senior notes due September 2023 with cash on hand. Our net debt to EBITDA remains well below our long-term target of 3.5 times, and we had more than $100 million of cash and equivalence as of June 30.

Net debt to EBITDA remains well below our long term target of three five times, and we had more than $100 million of cash and equivalents as of June 30.

Early in the second quarter Moodys upgraded one oak's credit rating to be double eight two from B double a three.

Speaker 2: Early in the second quarter, Moody's upgraded One Oaks credit rating to BAA2 from BAA3. As it relates to our pending acquisition of Magellan, I note all three rating agencies, Moody's, S&P, and Fitch, reaffirmed our investment grade credit ratings pro forma for the acquisition, showing a recognition of increased scale, earnings diversity, and growth opportunities that this acquisition provides.

As it relates to our pending acquisition of Magellan I'd note all three rating agencies, Moody's S&P and Fitch reaffirmed our investment grade credit ratings pro forma for the acquisition showing a recognition of increased scale earnings diversity and growth opportunities.

This acquisition provides.

Speaker 2: As it relates to merger and transaction financing, we expect to complete a note suffering prior to the close of the transaction. We are monitoring the markets and will be offered to NISTIC in our timing of that offering. I now turn the call over to.

As it relates to merger transaction financing, we expect to complete a notes offering prior to the close of this transaction. We are monitoring monitoring the markets and we will be opportunistic in our timing of that offering.

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

Speaker 2: Thanks Walt. Let's start with our natural gas liquid second.

Thanks, Paul let's start with our natural gas liquids segment.

Speaker 2: Second quarter, 2023 in GL volumes increased 11% year over year and compared with the first quarter, 2023.

Second quarter, 2023, NGL volumes increased 11% year over year and compared with the first quarter 'twenty to 'twenty three.

Higher volumes were driven by increased producer activity, particularly in the Rocky Mountain region and Permian Basin.

Speaker 2: Higher volumes were driven by increased producer activity, particularly in the Rocky Mountain region and Permian base.

Speaker 2: Both regions saw double digit volume increases year over year and compared with the first quarter 2023.

Both regions saw double digit volume increases year over year and compared with the first quarter 2023.

Permian Basin volumes saw the largest increase up 26% year over year, driven by continued growth from existing plants and volume from our new plant connections in the first quarter 2023.

Speaker 2: Permian Basin Volumes saw the largest increase, up 26 percent year over year driven by continued growth from existing plants and volume from a new plant connection in the first quarter of 2023.

Speaker 2: Volumes in the Rocky Mountain region increased 17% compared with the first quarter 2023 and 14% compared with the same period last year, driven by increased propane plus volume and slightly higher incentivized ethane.

Volumes in the Rocky Mountain region increased 17% compared with the first quarter, 'twenty 23, and 14% compared with the same period last year, driven by increased propane plus volumes and slightly higher incentivized ethane.

Mid continent region volumes increased 8% compared with the first quarter 2023, partially driven by increased ethane recovery.

Speaker 2: Midcontinent region volumes increased 8% compared with the first quarter 2023, partially driven by increased ethane recovery.

While we've seen ethane prices decrease recently from July highs they remain at a level driving recovery in most basins. We think the recent volatility in ethane pricing is the market responding to some short term dynamics along with the general tightening in the overall supply and demand balance.

Speaker 2: While we've seen ethane prices decrease recently from July highs, they remain at a level driving recovery in most basins. We think the recent volatility in ethane pricing is the market responding to some short-term dynamics, along with the general tightening in the overall supply and demand balance.

Given these market conditions, we remain confident in our ethane recovery assumptions included in our updated guidance the Permian in near full recovery, the mid continent, and partial recovery and opportunities to incent recovery in the Williston.

Speaker 2: Given these market conditions, we remain confident in our ethane recovery assumptions included in our updated guide.

Speaker 2: the Permian in near full recovery, the Mid-Continent in partial recovery, and opportunities to incent recovery in the Willis.

As Walt mentioned, we've begun initial work, including purchasing long lead time components for two NGL pipeline expansion projects.

Speaker 2: As Walt mentioned, we've begun initial work, including purchasing long lead time components for two NGL pipeline expansion projects.

Speaker 2: Activities are underway to complete the looping of West Texas NGL pipeline, which will more than double one of NGL capacity out of the Permian Basin.

Activities are underway to complete the looping of West, Texas, NGL pipeline, which will more than double one oak's NGL capacity out of the Permian basin.

Speaker 2: The full loop is expected to be in service in the first quarter 2025, which aligns with our customers' needs.

The full loop is expected to be in service in the first quarter, 2025, which aligns with our customers' needs.

We also are taking steps towards expanding the Elk Creek pipeline to 400000 barrels per day to provide capacity for growing volumes in the Williston.

Speaker 2: We also are taking steps towards expanding the elk creek pipeline to 400,000 barrels per day to provide capacity for growing volumes in the Willis.

Speaker 2: In the natural gas gathering and processing segment, second quarter processed volumes averaged nearly 2.2 billion cubic feet per day, a 16% increase year over year.

And the natural gas gathering and processing segment second quarter processed volumes averaged nearly 2.2 billion cubic feet per day, a 16% increase year over year.

Speaker 2: In the Rocky Mountain region, processed volumes average nearly 1.5 billion cubic feet per day during the second quarter and have averaged more than 1.5 B.C.F. per day in the month of July .

In the Rocky Mountain region processed volumes averaged nearly 1.5 billion cubic feet per day during the second quarter and have averaged more than 1.5 Bcf per day in the month of July .

Speaker 2: We've connected more than 280 wells in the region through the first half of the year compared with approximately 160 connections in the first half of 2022. A 75% increase.

We've connected more than 280 wells in the region through the first half of the year compared with approximately 160 connections in the first half of 2022.

75% increase.

As we sit today, we're on pace to reach the high end of our 475 to 525, well connect guidance range for the year.

Speaker 2: as we sit today, we're on pace to reach the high end of our 475 to 525 well-connect guidance range for the year.

Currently there are approximately 35 rigs and 20 completion crews operating in the basin with 19 rigs and approximately half of the completion crews on our dedicated acreage, which remains more than enough activity to grow production on our acreage.

Speaker 2: Currently, there are approximately 35 rigs and 20 completion crews operating in the basin with 19 rigs and approximately half of the completion crews on our dedicated acreage, which remains more than enough activity to grow production on our acreage.

In the mid continent region second quarter processed volumes increased 12% year over year and decreased slightly compared with the first quarter 2023, primarily due to the timing of new pads coming online.

Speaker 2: In the mid-continent region, second quarter process volumes increased 12% year over year, and decreased slightly compared with the first quarter of 2023, primarily due to the timing of new pads coming online.

We've seen some recent decreases in stack and scoop activity in the past few months, but continue to see increased activity in western Oklahoma as producers are focusing on higher crude producing areas. We currently have nine rigs on our dedicated acreage in the mid continent and have connected 20.

Speaker 2: We've seen some recent decreases in stack and scoop activity in the past few months, but continue to see increased activity in Western Oklahoma as producers are focusing on higher crude producing areas.

Speaker 2: We currently have nine rigs on our dedicated acreage in the mid-continent and have connected 23 wells in the region through the first half of the year.

Three wells in the region through the first half of the year.

Speaker 2: In the natural gas pipeline segment, strong year-to-date results continue to benefit from demand for natural gas storage and transportation service.

In the natural gas pipeline segment strong year to date results continue to benefit from demand for natural gas storage and transportation services and we now expect the segment to exceed the high end of its original earnings guidance range.

Speaker 2: And we now expect the segment to exceed the high end of its original earnings guidance rank.

We recently completed an expansion of our natural gas storage capabilities in Oklahoma, allowing us to utilize and subscribe an additional 4 billion cubic feet of our existing capacity.

Speaker 2: We recently completed an expansion of our natural gas storage capabilities in Oklahoma, allowing us to utilize and subscribe an additional 4 billion cubic feet of our existing capacity.

We have subscribed 100% of this incremental capacity through 2027 and 90% through 2029.

Speaker 2: We have subscribed 100% of this incremental capacity through 2027 and 90% through 2029.

Speaker 2: We continue to evaluate the Saguaro Connector Pipeline, a potential intrastate pipeline project that would provide natural gas transportation to the U.S. and Mexico border for ultimate delivery to an export facility on the west coast of Mexico.

We continue to evaluate the <unk> connector pipeline of potential intra state pipeline project that would provide natural gas transportation to the U S and Mexico border for ultimate delivery to an export facility on the West coast of Mexico.

There continues to be positive developments related to the potential LNG export project with support from multiple large well known customers anchoring the project.

Speaker 2: There continues to be positive developments related to the potential LNG export project with support from multiple large well-known customers anchoring the project.

Speaker 2: We expect to make a final investment decision on the One Oak Pipeline later this year.

We expect to make a final investment decision on the one O pipeline later this year.

Now I want to end, where Pearce left off with the micro look at the Magellan transaction synergies.

Speaker 2: Now I want to end where pierce left off with a micro look at the Magellan transaction synergy.

Speaker 2: I will discuss how we define each category, an example of the opportunity, the sensitivities, and comments on the overall risk weight.

I'll discuss how we define each category. An example of the opportunity the sensitivities and comments on the overall risk weighting.

The dollar ranges between our assumed case and the near term potential are shown on page six of our investor presentation for all four categories.

Speaker 2: The dollar ranges between our assumed case and the near-term potential are shown on page 6 of our investor presentation for all four categories.

Liquids pipelines provide opportunities to move natural gas liquids and refined products through the same product pipelines.

Speaker 2: Liquids pipelines provide opportunities to move natural gas liquids and refined products through the same product pipelines. Both companies refer to

Both companies refer to this as batching.

Speaker 2: This operational technique utilizes available capacity and combined connectivity to ship a refined product or natural gas liquid to a demand center to capture a higher value.

This operational technique utilizes the available capacity and combined connectivity to ship, a refined product where natural gas liquid to a demand center to capture a higher value.

Speaker 2: An annualized average of 100,000 barrels per day in any combination of refined products or NGLs at 7 cents per gallon would result in more than $100 million annually.

An annualized average of 100000 barrels per day in any combination of refined products or Ngls at seven cents per gallon would result in more than $100 million annually.

The ability to mixed products to obtain a higher value is called blending.

Speaker 2: The ability to mix products to obtain a higher value is called blending.

Speaker 2: The combined assets will increase unletted butane blending as well as other incremental blending opportunities.

The combined assets will increase unleaded butane blending as well as other incremental blending opportunities.

Speaker 2: Increasing an additional 25,000 barrels per day annually at a 20 cent per gallon uplift on any given slate of products or NGOs would result in approximately $75 million annually.

Increasing an additional 25000 barrels per day annually at a 20 cent per gallon uplift on any given slate of products or Ngls would result in approximately $75 million annually.

Speaker 2: As volumes grow or contracts expire, a wider variety of services can be combined or bundled to offer greater value to customers.

As volumes grow or contracts expire a wider variety of services can be combined or bundled to offer greater value to customers. This focuses on optimizing system utilization and connectivity to and from key customers and market centers.

Speaker 2: This focuses on optimizing system utilization and connectivity to and from key customers and market centers.

Speaker 2: This is the one category where time and decisions, primarily by customers, will jointly be needed to realize this synergy.

This is the one category, where time and decisions primarily by customers will jointly be needed to realize the synergies.

Speaker 2: picking up an incremental 25,000 barrels per day at 10 cents per gallon would provide approximately 40 million dollars a year.

Picking up an incremental 25000 barrels per day at 10 cents per gallon would provide approximately $40 million a year.

Additional opportunities that can be realized within the one to four year timeframe include incremental refined product NGL and crude oil storage and optimization activities. We.

Speaker 2: Additional opportunities that can be realized within the one to four year time frame include incremental refined product, MGL, and crude oil storage and optimization activity.

Speaker 2: We also see value and opportunities to leverage the challenge proven Marine Export Expertise.

We also see value and opportunities to leverage magellan's proven marine export expertise.

Speaker 2: We have consistently said that acquisitions of this size often result in a 25% reduction in GNA costs, which in this case would be $200 million.

We have consistently said that acquisitions of this size often result in a 25% reduction in G&A cost, which in this case would be $200 million.

Speaker 2: However, we have assumed only $100 million in both the assumed case and the near-term potential case.

However, we have assumed only $100 million in both the assumed case and the near term potential case.

It's also important to point out when the transaction was announced we significantly risk weighted our financial assumptions to come up with our total assumed $200 million of synergies.

Speaker 2: It's also important to point out when the transaction was announced, we significantly risk weighted our financial assumptions come up with our total assumed $200 million of energy.

This should highlight the level of conservatism, we've applied to our expectations and also the potential upside to our assumptions, which we think could drive synergies to more than $400 million.

Speaker 2: This should highlight the level of conservatism we've applied to our expectations and also the potential upside to our assumptions which we think could drive synergies to more than $400 million.

As we've said previously we have a high level of confidence in achieving the assumed 200 million of near term synergies.

Speaker 2: As we said previously, we have a high level of confidence in achieving the assumed 200 million of near-term synergy.

For obvious commercial reasons, we're not going to provide specific project level details at this time however.

Speaker 2: For obvious commercial reasons, we're not going to provide specific project level details at this time. However, we have provided realistic potential outcomes by Categor.

However, we have provided realistic potential outcomes by categories.

Speaker 2: We believe our ability to batch and blend products on our combined pipeline systems, as well as bundle services to increase value for customers, will provide significant synergy opportunities over the next one to four years. Pierce, that concludes my remarks. Thank you, Kevin, and thank you, Walt.

We believe our ability to batch and blend products on our combined pipeline systems as well as bundled services to increase value for customers will provide significant synergy opportunities over the next one to four years Pierce that concludes my remarks, Thank you Kevin and thank you Walt.

We've had a strong first half of the year with a promising second half still ahead of US we continue to focus on the fundamentals of our business that have gotten us where we are today.

Speaker 2: We've had a strong first half of the year with a promising second half still ahead of us.

Speaker 2: We continue to focus on the fundamentals of our business that have gotten us where we are today.

Speaker 2: These fundamentals include customer service, reliability, innovation, and most importantly, a focus on operating safely in response.

These fundamentals include customer service.

Liability innovation and most importantly, our focus on operating safely and responsibly.

Speaker 2: We have a long and successful track record of growing and transforming our business, while innovating for future opportunities.

We have a long and successful track record of growing and transforming our business, while innovating for future opportunities, but even for a change in advancements over our more than 100 year history.

Speaker 2: But even through change and advancements over our more than 100 year history, one of employees have been consistent in their dedication to doing things the right way.

One oak employees have been consistent in their dedication to doing things the right way.

Speaker 2: In the coming weeks, we'll be publishing our fifth-need annual Sustainability Report. I'd encourage you to review the report and see our many updates related to our environmental safety and health performance. Related targets, employee initiatives, and examples of how we're economically participating in the future of energy transformation.

In the coming weeks, we'll be publishing our 15th annual sustainability report I'd encourage you to review the report and see are many updates related to our environmental safety and health performance related targets employee initiatives. An example of how we're economically participating in the future of <unk>.

<unk> transformation.

Speaker 2: for proud to share our efforts and accomplishments, but we also know we can't stop there.

We're proud to share our efforts and accomplishments, but we also know we can't stop there.

Speaker 2: As our company continues on our journey of growth, change in progress, we remain committed to operating responsibly and sustainably.

As our company continues on our journey of growth change and progress we remain committed to operating responsibly and sustainably.

Speaker 2: As we look forward to increasing our operations, workforce, and expertise through the merger of Magellan, we're also excited to join two companies with proud histories with a more promising future combined. I want to thank all the employees from both companies that are working on integration plans while continuing to run daily operations.

We look forward to increasing our operations workforce and expertise through the merger of Magellan. We're also excited to joined two companies with proud histories with a more promising future combined.

Want to thank all the employees from both companies that are working on integration plans, while continuing to run daily operations. We look forward to building on all of that both companies have accomplished.

Speaker 2: We look forward to building on all that both companies have a cop.

Speaker 2: creating a larger, more diversified company with a shared commitment to safety and stakeholder value. With that, operator, we're now ready for questions.

Meaning a larger more diversified company with a shared commitment to safety and stakeholder value with that operator, we're now ready for questions.

Speaker 1: Thank you. We will now begin the question and answer session. To ask a question you may press stars and one on your telephone keypad. If you're using a speaker phone, please check up your headset before pressing the key.

Thank you we will now begin the question and answer session.

I ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the key.

Speaker 1: To withdraw from the question queue, please press star then 2. At this time, we will pause momentarily to assemble our rocket.

Withdraw from the question queue. Please press Star then two.

At this time, we will pause.

To assemble our roster.

Okay.

Speaker 1: Today's first question comes from Brian Reynolds with UBS. Please go ahead.

Today's first question comes from Brian Reynolds with UBS. Please go ahead.

Speaker 4: Hi, good morning, everyone. I appreciate the prepared remarks and slide details around the commercial synergy opportunities, but I was curious if we could just view, you know, if we could talk about if we should view the upside opportunity of synergies to be around 800 million versus the original 200 million that you talked about when the deal was announced. And then second, you know, are there any assumptions around growth synergies on slide six just given, you know, the larger integrated framework that you'll have? And if not, you know, how should we think about the size and scope of those opportunities? Thanks.

Hi, Good morning, everyone. Appreciate the prepared remarks on slide details around the commercial synergy opportunities, but was curious if we could just view you know if we could talk about if we should view the upside opportunity of synergies to be around 800 million versus the original 200 million that you've talked about when the deal was announced and then second you know are there any assumptions around <unk>.

With synergies on slide six just given you know the larger integrated framework that you'll have and if not you know how should we think about the size and scope of those opportunities. Thanks.

So all this is pierce Bryan I'll start out with some comments and I'll, let Kevin feel in our share of it either one.

Speaker 2: So all this is Pierce. Brian , I'll start out with some comments and I'll let Kevin fill in or share it in either way.

Speaker 2: So the 800 million is a list of opportunities that we have that's fairly lengthy as far as what the potential could be based on certain volume assumptions, pricing assumptions, you know, and time. And so...

So the 800 million is a list of opportunities that we have that's fairly lengthy as far as what the potential could be based on certain volume assumptions pricing assumptions.

And in time and so.

Speaker 2: You come up with your list first, and then you have to go back and risk weight those as to what you think can realistically be done. I think in any of these transactions, you want to come up with the most comprehensive list possible realizing that you may not get them all. So we're very comfortable in that range of 200 to 400 million. And so, but we wanted to add the color to kind of show how we risk weighted both ends of that end of that.

You come up with your list first and then you have to go back and risk weight those as to what you think it.

It can realistically be done I think in any of these transactions you want to come up with the most comprehensive list possible. Realizing that you may not get them. All so we're very comfortable in that range of $200 million to $400 million.

So, but we wanted to add the color to kind of show, how we risk weighted both ends of that into that into that assumption.

Speaker 4: Great appreciate that and I guess just to follow up is there you know can you talk about the fight and scope of those potential growth synergy opportunities whether it's you know downstream I guess.

Great appreciate that and I guess, just a follow up is there you know can you talk about the size and scope of those potential growth synergy opportunities, whether it's you know downstream I guess thanks.

Yeah.

Speaker 2: Brian's, Kevin, no, I mean, we kind of provided as much as we're going to provide it this time. Again, we just for, you know, competitive reasons, we're not going to, we don't, we prefer not to get into the details at this time of some of that. A lot of these will happen with, with not a lot of capital. Some, some may require a little bit, but we'll work those details as, as once we get closed and get into.

Brian It's Kevin No I mean, we've kind of provided as much as we're going to provide at this time again, we just for.

Competitive reasons, we're not you know we don't we prefer not to get into the details at this time of of some of that a lot of these will.

Happened with with not a lot of capital. Some some may require a little bit but we'll work. Those details is is once we get closed and get into it.

Speaker 2: Fair enough. The only thing I'd add to that, Brian , this is Pierce is

Fair enough, it's the only thing I'd add to that Brian . This is Pierce is.

Speaker 2: There's not one large opportunity in any one of those buckets that's driving it. It's multiple opportunities.

Theres not one large opportunity in any one of those buckets, that's driving it it's multiple opportunities.

Fair enough and if I may just you know I know, it's a little bit too early to discuss you know what the final company will look like post merger, but kind of just curious if you could just talk about leverage for a larger integrated company. You know we've seen NGL peers take leverage to three times and you know we've seen some recent spin co announcements talk about five times as being the right number. So it just kind of curious you know as a combined.

Speaker 4: Fair enough, and if I may, I know it's a little bit too early to discuss what the final company will look like, post-merger. But kind of just curious, if you could just talk about leverage for a larger integrated company. We've seen NGL peers take leverage at three times, and we've seen some recent spin co-announcement talk about five times as being the right number. So just kind of curious, as a combined entity, what do you think the right leverage target is for one outcome of Jellen?

Entity, what do you think the right leverage target is for one I'll come Magellan.

Yeah.

Speaker 3: Well, we definitely haven't changed our view on where we want to be from a long-term standpoint. We've had out there the three and a half times. We thought was a good benchmark for us.

Well, we definitely haven't changed our view on where we want to be from a long term standpoint.

You know we've had out there the three and a half times, we thought was a a good benchmark for us we.

Speaker 3: We are going to trend that direction pretty quickly with this transaction. And, you know, as we said,

We are gonna trend that direction pretty quickly with this transaction.

And.

We said in the past we have no issue, if we trend a little bit lower than that three and a half times, but we think that puts us in a good position to take advantage of opportunities as they come down the road over time.

Speaker 3: We have no issue if we trend a little bit lower than that 3.5 time.

Speaker 3: But we think that puts us in a good position to take advantage of opportunities as they come down the road over time.

Great I'll leave it there thanks for the time.

Speaker 1: The next question comes from Jeremy Tonnet with JP Morgan. Please go ahead.

The next question comes from Jeremy Tonet with J P. Morgan. Please go ahead.

Hi, good morning.

Good morning, Jeremy.

Just wanted to start with the underlying the fundamental business fundamentals of the underlying business here with the results that you've had raising the guidance as far as we are into 'twenty. Three just wondering if you could talk a bit more on operational momentum in the business right now how you see that trending into 24 to the extent you're able to comment.

Speaker 5: Just wanted to start with the underlying, the fundamental business, fundamentals of the underlying business here, with the results that you've had, raising the guidance as far as we are into 20.

Speaker 5: Just wondering if you could talk a bit more on operational momentum in the business right now, how you see that trending into 24 to the extent you're able to comment, and specifically with regards to the numbers put forth in the perspective and knowing that that is not guidance, but just wondering if there's any frame of reference you could provide there is how you see results potentially shaping up versus that. that.

Specifically with regards to the numbers put forth in the prospectus and knowing that that is not guidance, but just wondering if there's any frame of reference you can provide there as how you see.

Results potentially shaping up versus that that number.

Speaker 2: Jeremy's Kevin, I think it's shaping up very well. The activity levels we're seeing across our footprint, really in all three of the major areas, and even a little activity in the powder, but primarily the the bockin and the Permian announcing or talking about these expansion projects that we're pushing forward to these signals that volumes come in.

Jeremy It's Kevin I think I think it's shaping up very well you know the activity levels, we're seeing across our footprint really in all three of the major areas and even a little activity in the powder, but primarily the Bakken and the Permian.

Announcing or talking about these expansion projects that we're pushing forward to me signals that volumes come in.

Speaker 2: And the activity levels we're seeing right now in the Wilston and the Permian would absolutely dictate that we would be continuing to grow as we move through 24.

And the activity levels, we're seeing right now in the Williston and the Permian Permian would absolutely dictate that we would be continuing to grow as we move through 'twenty four.

Yeah.

Jeremy the one thing I might do is give you a little bit of context on those numbers that were in the in the proxy.

Speaker 2: Jeremy, the one thing I might do is give you a little bit of context on those numbers that were in the proxy. Those were numbers that were developed in September of 2022 for our board meeting in November where we got the 2023 plan approved.

Those were numbers that were developed in September of 'twenty two.

For our board meeting in November .

We got the 2023 plan approved.

The numbers for 2023, where the primary focus of those numbers.

Speaker 2: The numbers for 2023 were the primary focus of those numbers.

Speaker 2: But as we, we made, as we started in these conversations and you'll remember, if you looked at the proxy that it goes back to September of 2022, we were using the same numbers for our board that we were using in our planning process.

But as we have made as we started in these conversations and you'll remember if you looked at the proxy that it goes back to September of 2022, we were using the same numbers for our board that we were using in our planning process.

Speaker 2: They were not a forward projection of our full view of what we would do in outer years. It was a pretty good view of 2023. So as we see these business opportunities grow, we will give guidance for 24 and beyond, you know, when we get the February and the future peer.

They were not a forward projection.

Of our full view of what we would do in outer years was a pretty good view of 2023.

So as we see these business opportunities grow we will give guidance for 'twenty four and beyond.

You know when we get to February and in future periods.

Got it maybe just one more cut at this is there any way I guess to provide color on what inputs were for it.

Speaker 5: got it maybe just one more cut at this. Is there any way I guess to provide color on what Introduction ofgemry with this method is basically unizailed, as we say.

Speaker 5: driven into the 2024 numbers such as Bockenrid count or other and how they trend now versus

Driven into the 2024 numbers, such as Bakken rig count or other and how they trend now versus what you saw at that point in time.

Well I think I said I think that you should think about those numbers with the primary focus on 2023.

Speaker 2: I think that you should think about those numbers with the primary focus on 2023. To try to look forward 15 months and give a rig count is something that we don't typically try to do. We usually freshen that up and the team is actively thinking about that as we head into the fall for 2024.

You know to try to look forward 15 months and give a rig count is something that we don't typically try to do.

We usually freshen that up and the team is actively thinking about that as we head into the fall for 2024.

Got it just real quick last one if I could if you could provide updated thoughts on the west, Texas LPG loop in Elk Creek, what type of project Economics do you see for those investments.

Speaker 5: provide updated thoughts on the west Texas LPG loop and elk creek with type of project economics you see for the

Investment.

Jeremy This is Sheridan I'll start with the West, Texas completing that loop. So if we're just finishing completing the loop that we started in 2018, it's a very low cost per barrel of capacity loop, and we will be adding well.

Speaker 6: completing that loop. So if we're just finishing completing the loop that we started in 2018, it's a very low cost per barrel of capacity loop. And we'll be adding, well, the pipeline capacity when it's done coming out of the primary will be well over 700,000 barrels.

Pipeline capacity, when it's done coming out of the Permian, but well over 700000 barrels we have contracts in place that gives us a very nice return on that project was still up a lot of capacity left to be contracted as we go forward. So we're very excited about that project I think that's going to be a very very low.

Speaker 6: We have contracts in place that give us a very nice return on that project. With still a lot of capacity left to be contracted as we go forward. So we're very excited about that project. I think that's going to be a very, very low multiple project when we're done.

People project when we're done high return projects down on the coming out of the Elk Creek as we continue to see volume grow in the Elk Creek on obviously out of our G&P presence up there, but we have a large majority 60% of the market share up there and then off of what volumes do we see from third parties that we've already contracted.

Speaker 6: on the coming out of the elk creek, as we continue to see volume grow in the elk creek on obviously out of our G&P presence up there, where we have a large majority, 60% of the market share up there, and then also what volumes we see from third parties that we've already contracted. We now see the opportunity that we need to grow this pipeline to make sure we don't get caught short. So with the margin we see on there and there.

We now see the opportunity that we need to grow this pipeline to make sure. We don't get caught short so with the margins we see on there and I'm just putting in pumps on our pipeline and just the last bit of capacity, it's going to be another very high return low multiple project on that so obviously very excited as that.

Speaker 6: Just putting in pumps on our pipeline and just the last bit of capacity. It's going to be another very high return, low multiple project on that. So obviously very excited as we continue to grow forward.

As we continue to grow for just another example, as we said we will not get caught short of volume coming out of the Bakken.

Speaker 6: Just another example is we said we will not get caught short of volume coming out of the box.

Got it that's great. Thank you.

Speaker 1: The next question comes from Teresa Chen with Barclays. Please go ahead.

The next question comes from Theresa Chen with Barclays. Please go ahead.

Yes.

Speaker 7: Morning. First, I'd like to get a little bit more detail on the bashing opportunities. Do you have examples of which pipes you see the most outside for bashing? And are you already seeing commercial interest in this? And just what underlies that seven cent per gallon S.

Good morning.

First I'd like to get a little bit more detail on the bashing opportunities do you have examples of what.

Hi, you see the most upside on for fashion and are you already seeing commercial interest in this and.

What underlies that southern cent per gallon estimate.

Speaker 6: I think we're this sure again. I'll give you one example of what we can do it as a batching opportunity is obviously with

I think where this share and again I'll give you. One example of what we can do it isn't a batching opportunity is obviously with.

Speaker 6: our sterling pipeline that runs in between the Gulf Coast and the mid-continent region, we can put refined products on that to move refined products in between those two locations on the state pipeline as we are moving in GLs on that pipeline as well. So that's an example of an area where we could be moving back and forth between two areas on refined products on the NGL pipeline. That's an example of batching.

Our sterling pipeline that runs in between the Gulf Coast and the mid continent region. We can put refined products on that to move refined products in between those two locations on the <unk> pipeline as we are moving Ngls on that pipeline as well. So that's an example of an area, where we could be moving back and forth between two areas on refined products on the M.

El pipeline, that's an example of batching.

And but under life of seven estimate.

Illustrative estimate.

Speaker 6: The reason we use seventh and seventh and seventh estimates, that's kind of what we see the overall tariff in between those two areas tend to be from more on a refined products pipeline. As we see that, obviously, there could be upside to that as we go forward, depending on where the markets are, but that's we wanted to use a number that was out there in the market, and that's what we see today.

The reason we use seven said illustrated estimate that's kind of what we see the overall tariff in between those two areas tend to be from more on a refined products pipeline as we see that that obviously there could be upside to that as we go forward, depending on where the markets are but that's we wanted to use them.

A number that was out there in the market and that's what we see today.

Got it and on the blending piece are you for instance, within just an.

Speaker 7: Got it. And on the blending piece, are you, within this illustrative example, are you looking to blend 25,000 barrels per day of incremental butane into the gasoline pool? Or are you looking to expand margins by 20 cents for 25,000 barrels per day?

Illustrative example are you looking to blend 25000 barrels per day of incremental butane into the gasoline pool are you looking to expand margins by 'twenty four 'twenty 5000 barrels per day.

I think we see a lot of opportunities in both area. We're trying to give you an idea of what the impact could be and give you more of a notionally, where we're thinking about going on that it could be both we could be that where do we think that there's opportunity for increased margin and we also think theres an opportunity for increased volume, but we're trying to give you an idea of what the impact could.

Speaker 6: I think we see a lot of opportunities in both areas. We're trying to give you an idea of what the impact could be and give you more of a notionally. Where we're thinking about going on that, it could be both. We could be where we think that there's opportunity for increased margin. We also think there's an opportunity for increased volume. But we're trying to give you an idea of what the impact could be in a little bit of sensitivity around that. That's how we came up with the numbers of the...

Being a little bit of sensitivities around that that's how we came up with the numbers that we gave you.

Thank you.

Speaker 1: The next question comes from Michael Bloom with Wells Fargo. Please go ahead.

The next question comes from Michael Blum with Wells Fargo. Please go ahead.

Thank you good morning, everyone.

Speaker 8: Thank you, good morning everyone. I want to go back to the proxy again for a minute, specifically on the cat-backs in the proxy.

I wanted to go back to the.

<unk> again for a minute specifically on the Capex and the proxy.

For 2023.

Speaker 8: It's higher than you revised capex guidance

It's higher than your revised Capex guidance here.

This morning, So I'm wondering if you could just explain the variance there and then does that imply that 'twenty three capex could go higher if you do more projects.

Speaker 8: morning. So I'm wondering if you could just explain the variance there and then does that imply that 23-capact could go?

The balance of the year.

Yeah.

Speaker 2: Michael, if you again think of the timing when we did it. This is back in September of last year. At that point in time we thought the Saguaro pipeline would be further along in its process. You know, we've now said that we expect FID between now and the end of the year, so that just from a timing standpoint, that's what we did not study in

Michael If you again think of the time and when we did this was back in September of last year at that point in time.

We thought the swirl pipeline would be further along and it's a process. We've now said that we expect between now and the end of the year.

So that just from a timing standpoint that that that.

Our analysis assumes that the <unk> pipeline was fully included.

Speaker 2: Analysis assumed that the Swarrow pipeline was fully included. And with

And with the.

Speaker 2: you know, the timing moving on that and some other projects. You know, we see some of that kind of shifting out. Some of it won't be realized that we'll actually do it. The other may be other projects. So the capital, as we look at commercial operations,

The timing moving on that and some other projects. We are we see some of that kind of shifting out of some of it won't be realized that will actually do it and you know there may be other projects and capital as we look at the commercial opportunities.

Speaker 2: is continually revisited. And the number that we gave you today is our expectation for 2023.

He is continually re re visited.

The number that we gave you today is our expectation for 2023.

Okay. Okay, perfect and then just wanted to ask on the Elk Creek expansion.

Speaker 8: Perfect. And then I just wanted to ask on the Elk Creek expansion.

I'm assuming that this would be brought on in phases. So is that correct and anything you can provide in terms of a timeline for when you'll be adding capacity and then.

Speaker 8: brought on in stages. So is that correct?

Speaker 8: Anything you can provide in terms of timeline for when you'll be adding capacity and then

What is the cost of the project.

Michael It's Kevin.

Speaker 2: Michael is Kevin. On the on the timing, we're not we're just going to we're not going to get cut short. As we look at our customers, we're going to make sure we've got that capacity there. We're still working through.

On the AR on the timing, we're not we're just going to we're not going to get cut short as we look at our customers we're going to make sure. We've got that capacity there we're still working through.

Speaker 2: And on the cost, we're given consistent with the NGL expansion as well. We decide to give, here's what the impact's gonna be in 23 as we move forward and we get to 24, then we'll provide, it will be included in those numbers there as well.

And on the cost we were were given consistent with the NGL expansion as well, where we decided to give here's what the impact is going to be in 'twenty three as we move forward and we get to 'twenty four.

Then we'll provide it will be included in those numbers there as well.

Alright, thank you.

Speaker 1: The next question comes from zero-duin-ess of city. Please go ahead.

The next question comes from Spiro <unk>.

Please go ahead.

Speaker 9: Thanks, everybody. Maybe just a follow up on some of these questions, starting with CapEx. Sounds like these pipeline expansions are going to be pretty capital efficient, but maybe just give us a general sense of the trajectory on CapEx going into 24 on a standalone basis. Obviously, month-l-v-5 dropping off, you still have month-l-v-6, you've added these pipeline expansions. And so, directionally, without SORO, let's say, does it seem like a trending in any particular direction versus 23?

Thanks, operator, good morning, everybody.

Just to follow up on some of these questions and he's starting with Capex. It sounds like the pipeline expansions are going be pretty capital efficient.

If you could just give us a general sense of the trajectory on capex going into 24 on a standalone basis, obviously, Mont belvieu five dropping off.

Mont Belvieu six you've added these pipeline expansions and so directionally without swirl, let's say does it seem like its trending in any particular direction for 2003.

Speaker 2: I mean, spare this cabin again. We're not going to start guiding to 24 yet, but just notionally you think about the projects. We've got our, at the activity levels we're seeing, it'd be relatively consistent from just kind of that routine stuff. So to the extent we don't.

I mean, it's fairly it's Kevin again, we're not going to start guiding to 'twenty four yet, but just notionally you think about the projects. We've got all the activity levels, we're seeing it would be.

Relatively consistent from just kind of that routine stuff so to the extent we don't.

Speaker 2: announce any other larger projects, then it would be in the ballpark, but again, like Walt said, we're constantly looking at projects, we're evaluating projects and some...

Announced any other larger projects then it wouldn't be in the ballpark, but.

But again like Walt said, we're constantly looking at projects, we're evaluating projects and some some pop in and get to the point, where we execute and others don't so it's kind of hard to say, but we don't there's nothing we're seeing other than sort of it's you know it's it's more pipeline.

Speaker 2: some pop and get to the point where we execute and others don't. So it's kind of hard to say, but...

Speaker 2: There's nothing we're seeing other than Saguaro that's more pipeline expansion type stuff.

Mansion type stuff.

Got it and second question actually is on Zoro and they are still working towards an F. I D. There, but I guess I'm just curious if you've seen any incremental interest.

Speaker 9: Got it. And second question actually is on SWRO. I know you're still working towards an FID there, but I guess I'm just curious if you've seen any incremental interest beyond the LNG project downstream of that pipeline, and if you're also sort of feeling any interest from potential JV partners yet.

The LNG project downstream of that pipeline and if you're also sort of feeling any interest from potential JV partner yet.

Our focus right now on Zoro is there you know I mean like we said in the remarks, there have been some positive developments that's great, but our focus is on continuing to drive out and ensure we get the presidential permit and the timelines, we need them and continuing to refine our estimates and we're focused on that the U S side of that pipeline.

Speaker 2: Our focus right now on Suaro is, you know, like we said in the remarks, there have been some positive developments, that's great, but our focus is on continuing to drive out and ensure we get the presidential permit and the timelines we need and continuing to refine our estimates and we're focused on the U.S. side of that pipeline.

Got it I'll leave it there thanks guys.

The next question comes from Tristan Richardson with Scotiabank. Please go ahead.

Speaker 1: The next question comes from Tristan Richardson with Scotiabank. Please go ahead.

Hey, good morning, guys.

Speaker 10: Hey, good morning guys. Kevin, you talked a little bit about the volatility we saw in June and July around Athane, but can you talk about maybe the dynamic you're seeing in the North, obviously with a tighter market of Bellevue with relief on the way and then obviously weather's impact there. We're able to see some incentivized Athane come in into June and then just curious maybe what you're seeing in the third quarter.

Kevin you talked a little bit about the volatility we saw in June and July around ethane, but can you talk about maybe the dynamic youre seeing in the north obviously with.

Tighter tighter market in Bellevue with relief on the way and then obviously weathers impact there.

Well be able to see some incentivized ethane come in into June and then just curious maybe what youre seeing in in the third quarter.

Just I'll start and just in general at a high level you know the environments does bounce around and that's why we talk about you know we'll have opportunities to incentivize ethane.

Speaker 2: Just all start and just in general at a high level, you know, the environments does bounce around. That's why we talk about, you know, we'll have opportunities to incentivize that thing.

Speaker 2: Once again, you've got to look at what's going on with gas prices up north in Canada and what's going on with Bell View F-Aing. So we've had those opportunities, it's moved around. We're not going to provide the specific volumes, but again, it continues to be an opportunity for us. I mean, shared anything. The other thing I'd add with that is that with this...

Once again, you got to look at what's going on with gas prices up North in Canada and.

What's going on with Belvieu ethane. So we've had those opportunities it's moved around.

We're not going to provide the specific volumes, but oh, but again it continues to be an opportunity for us I'm sure. You know the other thing I'd add to that is that with this we had a big ramp in run up in ethane prices and it came off and overall was still higher than it was in the first part of June which has allowed the mid continent.

Speaker 6: We had a big run up and nothing price. It's in it came off and overall was so higher than it was in the first quarter of June . Which has allowed the mid-content.

For a later part of June July and into August to be in full ethane recovery.

Speaker 6: for later Park June , July and into August to be in full.

Speaker 10: That's helpful. Thank you. And then maybe Walt, I understand we're not talking about, you know, 24 CapEx just yet or or even identifying the cost of specific projects at this point. But maybe can you talk a little bit about long lead time procurement in 23 and maybe, you know, just generally what proportion of a project that might.

That's helpful. Thank you and then maybe Walter I understand we're not talking about 'twenty four capex, just yet or are even identifying the cost of specific projects at this point, but maybe can you talk a little bit about long lead time procurement in 'twenty three and maybe.

Just generally what proportion of a project that might be.

Speaker 3: Well, I think that I would, I would, if you look forward, kind of think about it this way that, as Kevin mentioned, you know, most of what we're looking at is buildouts from our existing system, whether it's expansions or add-ons to that. So at the moment, we don't have any.

Well I think that I would I would as you look forward kind of think about it this way that as.

As Kevin mentioned, you know most of what we're looking at is a build outs from our existing system.

Whether it's expense expansions or or add ons to that so.

At the moment, we don't have any.

Speaker 2: significant sized project that we have looming out there other than you know, we've obviously talked about the potential of the Swarrow pipeline

The significant sized projects that are we have looming out there.

Other than we've obviously talked about the potential of a swirl pipeline.

And the long lead times.

Speaker 2: In this environment, you always have to be, you know, on that game. And so we are looking at that as it relates to all of our projects and how we can be there to meet the needs of our customers going forward. So that's just a reality in the stay-at-age.

In this environment, you always have to be.

That game and so we are looking at that as it relates to all of our projects and how we can be there to meet the needs of our customers going forward.

So that's just a that's just a reality in this day and age.

I appreciate it thank you all.

The next question comes from Jean Ann Salisbury with Bernstein. Please go ahead.

Speaker 1: The next question comes from Jean-Anne Salazar with Bernstein. Please go ahead. Hey, good morning. Kevin, can you give a little bit more detail on why the gas pipeline segment is doing so much better than guidance? It seems like a lot of it is from renegotiating storage up to higher rates. So if you can give any kind of direction on how much of your storage capacity has been renegotiated up to the current rates already and how much might be yet to come, that would be helpful as well.

Good morning, Kevin can you give a little bit more detail on why the gas pipelines segment is doing so much better than guidance and it seems like a lot of it is from renegotiating storage up to higher rates and so if you can give any kind of direction on how much of your storage capacity has been renegotiated up to the current rates already and how much might be yet to come and that would be helpful as well.

Oh Gee and it really it's just the segment hitting on all cylinders as a variety of things I mean, absolutely. The after Yuri the increase in storage both from a amount of storage contracted up and the rates we were getting that was a benefit in.

Speaker 2: G&E really is just segment hitting on all cylinders there's a variety of things. I mean, absolutely the after-yuri, the increase in storage, both from a amount of storage contracted up and the rates we were getting, that was a benefit. The segment has seen an opportunity, again, through its retained fuel and some gas sales to be opportunistic there.

The segment has seen an opportunity again through its retained fuel and some gas sales to be opportunistic there.

Speaker 2: that's been strong. And with some market dynamics and how they've handled here recently, parking loans and so forth has been a little bit of a benefit to us.

That's been strong and with some market dynamics and you know how they've handled here recently parking loans and so forth has been a little bit of a benefit to us. So really the segments just performed outstanding and we continue to find other projects as well we're not done when it when it is.

Speaker 2: Really, the segment just performed outstanding and we continue to find other projects as well. We're not done as it relates to looking at other storage opportunities, expansion opportunities, whether it be in Texas or Oklahoma. So again, segments just doing a great job capturing the market opportunities that are provided.

As it relates to looking at other storage opportunities and expansion opportunities, whether it be in Texas or Oklahoma. So again segments, just doing a great job capturing the the market opportunities that are provided.

Speaker 11: Great, thanks, and one more for you if I can. It seems like back in volumes are outpacing your expectations a bit. If you can just kind of say whether that's primarily been a function of more oil growth overall, higher GOR than you forecast or more essay recovery than you forecast or just all three, that would be helpful.

Great. Thanks.

If I can it seems like Bakken volumes are outpacing your expectations a bit if you can just kind of say, whether that's primarily been a function of more oil growth over all.

Higher DLR than you forecast or more ethane recovery than you forecast or just all three that would be helpful.

Well when we think about gas the gas production that wouldn't have as much ethane recovery, but it's definitely the activity levels. We're seeing the productivity. It's a combination of both of those producers just continue to get better and better when it is it really.

Speaker 2: Well, when we think about gas, you know, the gas production, that wouldn't have as much about ethane recovery, but it's definitely the activity levels we're seeing, the productivity, it's a combination of both of those. The producers just continue to get better and better when it, as it relates to their drilling techniques, their completion techniques.

Rates to their drilling techniques. Their completion techniques you know some of the length of the laterals has expanded in certain areas. All of those things really go into given US again, a lot of strength as we exit Q2, where we're at.

Speaker 2: You know, some of the length of the laterals is expanded in certain areas. All those things really go into giving us again a lot of strength as we, you know, exit Q2 where we're at and where we think it's gonna go. So you're right, we do see strength and we think we're in a great position.

Where we think it's gonna go so and so youre right, we do see strength and we think we're in a great position.

Great. That's all for me thank you.

Speaker 1: The next question comes from Neil Mitra with Bank of America. Please go ahead.

The next question comes from Neel Mitra with Bank of America. Please go ahead.

Speaker 12: Hi, I think sure taking my question, I noticed on the GMP side, you hit kind of the top end of your rate at $1.20 mcs. I was wondering kind of the factors behind that, whether it was inflation, more well driven towards the back end and then how any commodity sensitivity would play into that. And if that rate is sustainable going forward.

Hi, Thanks for taking my call.

I noticed on the G&P side, you hit kind of the top end of your rate at $1 20, Mcf I was wondering kind of the factors behind that whether it was inflation.

Sure Walter I mean towards the Bakken and then how.

Any commodity sensitivity would play into that and if that rate is sustainable going forward.

Neil This is Sheridan.

Speaker 6: Neil, this is Sheridan. You know, a lot of that obviously, the increase in rates is gonna be, we had inflationary factors in there. We had to depends on the contract, mix what contracts are coming in there. We've a renegotiated contract. So it's overall as we move through, we continue to improve those contracts, it can go forward. So I think one of the biggest ones is probably more the inflationary escalators have.

A lot of that obviously.

And the increase in rates is going to be we had inflationary factors in there we it depends on the contract mix, where what contracts coming in there we've renegotiated contracts. So it's overall as we move through we continue to improve those contracts to kind of go forward. So, but I think one of the biggest ones is probably more of an inflationary escalators, having the biggest impact.

Speaker 12: And then just a general question on the commercial synergies with batching, blending, how much of these synergies are kind of spread-based and opportunistic persons.

Okay, and then just a general question on the.

Commercial synergies with batching and blending bundling.

How much of these synergies are kind of spread based and opportunistic versus.

Speaker 12: You know, finding need demand centers were kind of serving demand on a base of basis.

Finding need demand centers, where you're kind of surveying demand on a basic basis.

Okay.

Speaker 2: Neil, this is Kevin. I'll take in again. We're not going to get into projects specific details, but I think Sheridan mentioned earlier, those opportunities are going to be a mix of both. It's going to be volumetric and it's going to be rate. To the extent we can find opportunities for the higher rates, great. If it's more volume, that's great too. That's how we're thinking about it.

Neil This is Kevin I'll take it and again, we're not going to get into project specific details, but I think shared mentioned earlier, it's gonna be those opportunities are going to be a mix of a mix of both it's gonna be volumetric and it's going to be.

Right and to the extent, we can find opportunities for higher rates great. If it's more volume that's great too so that that's kind of how we're thinking about it.

Yeah.

Okay. Thank you.

The next question comes from Keith Stanley with Wolfe Research. Please go ahead.

Hi, Thank you first just a quick follow up on the blending synergies. There's 70 to a 195 million is that predominantly butane blending or are there other types of product blending activities you see with the merger and I ask just because Ms. Magellan's business today is about $150 million a year on beauty.

Speaker 13: Hi, thank you. First just a book follow up on the blending synergies, this 70 to 190.

Speaker 13: I ask just because Magellan's business today is about 150 million a year on Butane Blood.

Jane blending so the synergy number is just a pretty large.

Keith This is Sheridan, we see some opportunities in butane blending, but we see opportunities in other blending as well not just on butane, but the other ngls into different products that we see.

Speaker 6: Keith, this is Sheridan. We see some opportunities in butane blending, but we see opportunities in other blending as well, not just on butane, but other NGOs and to different products.

Speaker 6: be able to expand that and be able to actually do the butane blending that is being done today also.

To be able to expand that and be able to actually do the butane blending that is being done today also cheaper.

Got it thanks and.

Speaker 4: got it. Thanks. And second question, just want to better understand the components of S.W.A.R.O. So it seems like

Second question, just wanted to better understand the components of smart <unk>. So it seems like Mexico Pacific's made really good progress with with the trains being fully commercialized the first two anyway.

Speaker 4: You given up there, don't where you see things for the connecting pipeline in Mexico. I just have not heard as much about that.

Can you give an update on where you see things for the the connecting pipeline in Mexico I just have not heard as much about that is it is your understanding there's a lot that needs to be done on that to move forward or that's progressing well as well and consistent with your your timeline.

Speaker 4: Because you're understanding there's a lot that needs to be done on that to move forward or that's progressing well as well.

Well again this is Kevin.

Speaker 2: Well, again, this is Kevin Keith. The remarks I made earlier, we're gonna stick to those. We're working, there've been some positive developments, like you said, but at the end of the day, we're focused on the US side and making sure we are in line with the overall timing and these are the projects. So that's our focus right now, it's really on the US side.

Keith.

The remarks I made earlier, we're going to stick to those were work in there've been some positive developments like you said, but at the end of the day, we're focused on the U S side and making sure.

We are in line with the overall timing and needs of the project. So.

That's our focus right now is really on the U S side.

Okay. Thank you.

The next question comes from Neal Dingmann with Jewish. Please go ahead.

Speaker 1: The next question comes from Neil Dingman with Truist. Please go ahead.

Speaker 14: Hi, thank you for the question. This is Jake Neibascha for Neil. Just one for me, I go back to synergies, but just touching on the different segments, the bundling part, you know, knowing, like you guys said, this is not entirely in your control, but I just wanted to get a sense.

Hi, Thank you for the question. This is Jamie Bhatia on for Neil just one from me going back to the synergies, but just touching on the different segments. The bundling part.

Like you guys said theres not an entirely in your control, but I just wanted to get a sense should we assume the synergies or the potential synergy opportunities that you're seeing here is that would that would be like evenly spread throughout the I guess one to four year time, you're just near term in general or is that going to be lumpy.

Speaker 14: Should we assume the synergies or the potential synergy opportunity that you're seeing here? Would that be evenly spread throughout the, I guess, one to four year time, just near term in general? Or is that going to be lumpy, potentially? Just trying to get a sense of the dynamic there. Thank you.

Essentially I'm, just trying to get a sense of the debt.

Dynamic there thank you.

Yes, Neal this is sheridan.

Speaker 6: Yeah, Neil, this is Sheridan. Yeah, I think there's some opportunities near term, but it is going to be a little bit of lumpy as we said in the remarks. This is what's going to be depend on when contracts come up. And as we continue to see how these two assets work together and in multiple touch points with the same customer is going to create opportunities. So we're going to see some of the beginning and then as contract roll off, we'll be lumpy throughout the four-year time period.

So I think there's some opportunities near term, but it is going to be a little bit lumpy as we said in the remarks, it's a lot's going to depend on when contracts come up and as we continue to see how these two assets work together and in multiple touch points with the same customer is going to create opportunity. So we're going to see some of the beginning and then as contracts roll off will be lumpy throughout the four year time period.

Got it. Thank you that's it for me.

Speaker 1: The next question comes from Craig Shear with two wee brothers. Please go ahead.

The next question comes from Craig Shere with Tuohy Brothers. Please go ahead.

Good morning, Thanks for fitting me in.

Speaker 15: Morning, thanks for fitting me in. Beyond existing asset and commodity optimization synergies, I just want to dig in a little different manner, more in Brian's question on combined growth project opportunities.

Beyond the existing asset optimization synergies I just want to dig.

A little different manner.

More on to Brian's question on combined growth project opportunities I understand you don't want to get into commercially sensitive.

Areas, maybe relating to crude transport exports and all kinds of other things.

But would it surprise you.

Speaker 15: to see the combined business, perhaps produce two to three billion more aggregate incremental growth projects opportunities at your normal historical four to six times build multiple by late deck.

To see the combined business, perhaps produce $2 billion to $3 billion more aggregate incremental growth projects opportunities at your normal historical 4% to six times build multiple by late decade.

Okay.

Yes, Craig.

I think I would leave you with the thought that a lot of these opportunities are incremental off of our existing assets or magellan's assets. So in most cases, we're expecting you know.

Very low returns look very high return low multiple.

Opportunities so not a enormous amount of capital that is necessary to.

Make those hit.

We will continue to evaluate that and see if there are other growth opportunities that come up but.

Speaker 2: We will continue to evaluate that and see if there are other growth opportunities that come up. But I think that we would expect to be at the lower end of that four to six, if not significantly better.

I think that we are.

Yeah, we would expect to be at the lower end of that four to six if not significantly better than that.

Speaker 15: Gotcha. And one other follow up, maybe a little over the skis on this because you got to finish the merger. But once we get past that, you intend to break out commercial synergies on an ongoing basis.

Gotcha.

And one other follow up.

Maybe a little over the skis on this because you've got to finish the merger but.

Once we get past that.

Do you intend to breakout commercial synergies on an ongoing basis.

I think as the big this is pierce.

Speaker 16: I think this is Pierce. You know, we're in the process of deciding exactly how we're going to report all these segments. And then when we make that decision, we're going to move forward, but we're reporting, you know, by segment the way that we report on our business.

You know we're in the process of deciding.

<unk>, how we're going to report all of these segments.

And then when we make that decision we're going to we're going to move forward, but will reporting.

By segment the way that we report on our business.

As far as we'll give you as much detail as we possibly can without compromising anything we have from a competitive advantage standpoint.

Speaker 2: as far as we'll give you as much detail as we possibly can without compromising anything we have from a competitive advantage.

Fair enough. Thank you.

The next question comes from Sunil Sibal with Seaport Global Securities. Please go ahead.

Speaker 1: The next question comes from Senel Sabal with seaport global securities. Please go ahead.

Yeah, Hi, good morning, everybody and thanks for all the details on the amended transaction synergies I was just curious you know so it seems like you know the where things stand now with regard to this transaction. There are some aspects of that transaction, which had beyond okay use control so I.

Speaker 17: Yeah, hi, good morning, everybody. And thanks for all the details on the MMP transactions synergies. I was just curious, you know, so seems like, you know, the where things stand now, with regard to this transaction, there are some aspects of the transaction, which are beyond OKEs control. So I was kind of curious, you know, if this were to go per the plan, what are some of the other levels that, you know, OKE could pull to accelerate, you know, growth in the forward years?

I was kind of curious you know this but.

To go part of the plan without some of the other levels that you know okay. Good excellent.

Accelerate you know grow within the farmer to yes.

Yeah.

Well.

Speaker 2: Well, I think the way I'd answer that question is, is that both companies right now, we're focused on the vote.

I think the way I would answer that question is is that both companies right now.

We're focused on the vote.

Speaker 2: A challenge focused on their vote, and one oak we're focused on our vote.

Magellan is focused on their vote and one oak we're focused on our boat.

Speaker 2: We believe that the Magellan unit holders and the One Oak shareholders are going to see the value in this deal, the combined companies. And I think we're scratching the surface there because when we get these two companies combined and get our employees to see the value in this deal, we're going to see the value in the next one.

We believe that the Magellan unitholders and one oak shareholders are going to see the value in this deal.

The combined companies and I think we're scratching the surface there because when we get these two companies combined and get our our employees.

Speaker 2: collaborating together. I'm very confident in the innovation of both companies is going to turn out to be something that people are going to really be proud that they go to yes for this deal.

Collaborating together I'm very confident.

And the innovation of both companies is going to turn out to be something that our people.

People are going to really be proud that they'd go to yes for this deal.

Thanks for that and then one clarification question. It seems like when we filed the shelf last week for our additional equity. So I was just too just if you could provide some context around that.

Speaker 17: Thanks for that, Noun. And then one clarification question seems like, you know, one week filed a shelf last week for additional equity. So I was just, to just see if we could provide some context around that.

Sure.

Actually glad you asked the question.

That is just renewing the ATM plan that.

We have had in place.

For the.

Better part of.

Speaker 3: seven or eight years. We've had it. We have not utilized that for the last five years and don't really have any expectation to utilize it going forward. But we do think it's a nice liquidity tool to have in our...

Seven or eight years.

We've had it we have not are not utilize that.

If it was in the last five years and don't really have any expectation to utilize it going forward, but we do think it's a nice liquidity tool to have in our.

Speaker 3: You know, to have available to us, but there is no expectation that we would be using the ATM on a going forward basis.

You know to have available to us.

But there is no expectation that we would be using the ATM on a going forward basis.

Thanks for that.

Speaker 1: This concludes our question and answer session. I would now like to turn the call back over to Andrew Zyola for closing remarks.

This concludes our question and answer session I would now like to turn the call back over to Andrew <unk> for closing remarks.

Our quiet period for the third quarter starts when we close our books in October and extends until we release earnings in late October we'll provide details for that conference call. At a later date. Thank you all for joining us and have a good day.

The conference has now concluded. Thank you for your participation you may now disconnect your lines.

Speaker 1: The conference has now concluded. Thank you for your participation. You may now disconnect your lines. Thank you.

[music].

Okay.

[music].

Yeah.

Yeah.

Yeah.

Okay.

[music].