Q2 2023 Energy Transfer LP Earnings Call
Good day and welcome to the energy transfer second quarter 2023 earnings Conference call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions. Please note. This event is being recorded.
I'd now like to turn the conference over to Thomas <unk>. Please go ahead.
Thank you operator, good afternoon, everyone and welcome to the energy transfer second quarter 2023 earnings call.
I'm also joined today by Mackie Mccrea and other members of the senior management team who are here to help answer your questions. After our prepared remarks, hopefully you saw the press release, we issued earlier this afternoon as well as the slides posted to our website. As a reminder, we will be making forward looking statements within the meaning of section 21.
<unk> of the Securities Exchange Act of $19 34. These statements are based upon our current beliefs as well as certain assumptions and information currently available to US and are discussed in more details in our Form 10-Q for the quarter ended June 32023, which we expect to file Tomorrow August.
Third I'll also refer to adjusted EBITDA and distributable cash flow or DCF, both of which are non-GAAP financial measures you will find a reconciliation of our non-GAAP measures on our website.
Let's start today by going over our financial results for the second quarter of 2023, we generated adjusted EBITDA of $3, one 2 billion compared to three $2 billion to $3 billion for the second quarter of 2022, and our base business, we had strong performance from our operations, which delay.
We had record volumes across our intrastate and midstream segments as well as through our NGL pipelines, and NGL and refined products terminals, including record NGL volumes exported out of our Nederland and Marcus Hook terminals.
Our volume growth was more than offset by significantly lower quarterly average natural gas and NGL prices, which declined 70% and 45% respectively over the second quarter of last year DCF attributable to the partners of energy transfer as adjusted was one.
Five 5 billion compared to $1 $88 billion for the second quarter of 2022.
This resulted in excess cash flow after distributions of $579 million.
On July 25th we announced a quarterly cash distribution of 31 per common unit or $1 24 on an annualized basis.
This distribution represents an increase from 23 cents paid in the second quarter of 2022, we continue to target a 3% to 5% annual distribution growth rate, while balancing our leverage reduction increasing equity returns and maintaining sufficient cash flow to invest in our incredible backlog of grow.
With opportunities.
As of June 32023, the total available liquidity under our revolving credit facilities was approximately $2 $3 6 billion.
Now turning to results by segment for the second quarter I'll start with NGL and refined products adjusted EBITDA was $837 million compared to $763 million for the same period last year. This increase was primarily due to higher transportation storage and terminal services.
Margins related to increased volumes and higher rates.
Partially offsetting this was a $51 million negative impact due to timing of the recognition of gains on hedged NGL inventory during the current period.
We expect to fully realize the offsetting gains over the next two quarters.
Adjusting for this noncash timing matter around hedging adjusted EBITDA for the second quarter would have been $888 million.
NGL transportation volumes on our wholly owned and joint venture pipelines increased 13% to a record $2 2 million barrels per day compared to $1 9 million barrels per day for the same period last year. This increase was primarily due to higher volumes from the Permian region and on our NGL.
Pipelines that deliver into our Nederland terminal as well as on the Mariner East pipeline system.
Average fractionated volumes increased 5% to a record 989000 barrels per day compared to 938000 barrels per day for the second quarter 2022.
For the month of April .
Throughput averaged over 1 million barrels per day.
Which was a new monthly record.
NGL export volumes grew 15% over the second quarter of 2022, driven by record NGL exports out of both our Nederland and Marcus Hook terminals.
This was primarily driven by the second tranche of satellites contract going into effect on July one 2022, as well as increased international demand for natural gas liquids.
Year to date, we have loaded more than 30 million barrels of ethane out of Nederland and we're also exporting record volumes of ethane out of Marcus Hook in total we continue to export more ngls than any other company and maintain approximately 20% market share of worldwide NGL exports as.
Well as nearly 40% of U S exports.
For midstream adjusted EBITDA was $579 million compared.
Compared to $903 million for the second quarter of 2022, we saw record throughput as a result of growth in the majority of our operating regions. The strong volume growth was more than offset by significantly lower natural gas and natural gas liquids prices as well as increased operating expenses.
Gathered gas volumes increased 8% to $19 8 million <unk> per day compared to $18 3 million Btu per day for the same period last year.
For our crude oil segment, adjusted EBITDA was $674 million compared to $562 million for the same period last year.
This was primarily due to higher volumes on several of our pipelines increased throughput at our Gulf Coast and Permian terminals as well as the acquisition of the Lotus assets in May of this year crude.
Crude oil transportation volumes were a record $5 3 million barrels per day compared to $4 3 million barrels per day for the same period last year. This was a result of higher volumes on our Texas pipeline systems, the Bakken pipeline and the Bayou bridge pipeline as well as the acquisition of the Lotus asset.
In may of this year.
Excluding the Lotus assets crude oil volumes were still up approximately 10% compared to the same period last year, which was also a record.
Integration of the Lotus assets is going as planned and we continue to discover additional commercial synergies that are in excess of our original forecast.
In our Interstate segment, adjusted EBITDA was $441 million compared to $397 million for the second quarter of 2022.
This increase was primarily due to higher contracted volumes and rates on several of our wholly owned and joint venture pipelines as well as placing the Gulf run pipeline into service in December of 2022.
Volumes increased 17% over the same period last year due to the Gulf run pipeline being placed into service as well as higher utilization on many of our interstate pipelines, including Trans Western Tiger Pebble and trunk line.
For our intrastate segment, adjusted EBITDA was $216 million compared to $218 million in the second quarter of last year.
Benefits from new contracts in Texas, and the Haynesville as well as lower operating expenses were offset by decreases in retained fuel revenues, resulting from lower natural gas prices and fewer pipeline optimization opportunities.
Utilization on our <unk>.
And rig systems increased due to higher demand for gas takeaway and increased production in the Haynesville shale.
Now turning to our growth projects and we will start with our Lake Charles LNG project in May of 2022, we received an extension from FERC or of the deadline for the completion of the construction of Lake Charles LNG facility to December of 2028 and in June 2022, we applied to the dose.
For an extension of the deadline for the commencement of exports as many of you are now aware in April of this year. The Doe denied our request for this extension and in June the Doa denied our request for rehearing of this decision.
We have had discussions with the Doe.
Subsequent to this decision and we believe the best path forward with the Doe is to file an application for a new export authorization.
We expect to file this application in August and during the review of this application we intend to continue to work with our existing customers respective equity investors and other stakeholders.
Progressed the development of this project in this regard in July we entered into three non binding HOA is related to the long term LNG offtake from this project for an aggregate of $3 6 million metric tons per annum.
One of the HOS, yes, with Chesapeake and Gunvor worked for 1 million metric tons per annum. A second HOA is with EQT for 1 million metric tons per annum and the third HOA is with a Japanese customer for one six metric tons per annum.
The HOA as arch subject to negotiation and execution of definitive agreements now turning to our Nederland and Marcus hook export terminals.
These terminals continue to benefit from increased demand both in the U S as well as from international customers. We remain bullish that there will be significant long term growth and international demand for ethane and LPG products as we are well positioned to benefit from that demand last quarter, we <unk> and.
<unk> to our NGL export capacity at Nederland in order to address this demand. We expect this expansion, which is projected to cost approximately $1 $25 billion to add up to 250000 barrels per day of export capacity.
This project is expected to be in service in mid 2025, and will give us flexibility to load various products based upon customer demand, we look forward to providing more specifics on this expansion in the near future. We also continue to pursue <unk> on.
On an optimization project at our Marcus Hook terminal that would add incremental ethane refrigeration and storage capacity at.
At Mont Belvieu, we expect Frac eight to be mechanically complete in the next couple of weeks, which would put it into full service around September of the first.
This addition will bring our total Mont belvieu fractionation capacity to over 115 million barrels per day.
Out in the Delaware Basin, we placed our 200 million cubic foot per day Grey Wolf processing plant into service in December of 2022 and in June we placed the bare plant into service, which is our <unk> 200 million cubic foot per day processing plant in the Delaware Basin. These plants are.
By new commitments and growth from our existing customers. In addition, we continue to evaluate the necessity and potential timing of adding another processing plant in the Permian basin.
Turning to the Gulf run pipeline, which we placed into service in December of 2022 Gulf.
Gulf run provides natural gas transportation between our upstream pipeline network and from the Haynesville shale for delivery to the Gulf coast connecting some of the most prolific natural gas producing regions in the United States with the LNG export market as well as many markets along the Gulf Coast, we continue to use.
<unk> a significant portion of the zone, one capacity on Gulf run and during the second quarter. We added additional long term customer volume commitments through zone two.
Which are being delivered into our trunk line pipeline.
We have very limited available capacity in the near term and are fully subscribed beginning January of 2025. As a result, we are in discussions to add approximately one bcf of capacity via compression, which will require minimal capital investment.
Depending on demand. We also have the ability to dilute the system to another approximately two bcf of capacity.
On the alternative energy front, we continue to make progress on our carbon capture and storage project with capture point that is related to our north Louisiana treating plants.
An application for a class six permit for this sequestration site was filed by capture point with the EPA in June of last year.
Also we are working with oxy related to its Magnolia hub in Allen parish, Louisiana North of the Lake Charles Industrial complex, where.
We're working together to obtain long term commitments of seal to from industrial customers in the Lake Charles Louisiana area.
If this project reaches <unk> energy transfer would construct a C O two pipeline to connect our customers to oxy sequestration site in Alan parish, Louisiana.
We are also continuing to have discussions with third parties related to the development of ammonia facilities at sites, along the Gulf Coast, where we have docks with deepwater access.
Now looking at our growth capital spend for the six months ended June 32023 energy transfer spent $794 million on organic growth projects, primarily in the midstream NGL and refined products and Interstate segments, excluding Sun and USA compression capex.
For full year 2023, we continue to expect growth capital expenditures to be approximately $2 billion.
Which will be spent primarily in the midstream NGL and refined products Interstate and crude segments.
As a reminder, this capital outlook includes the NGL export expansion projects at Nederland as well as expenditures related to the Lotos acquisition.
A significant amount of our 2023 growth capital spend is comprised of projects that are already online or are expected to be online and contributing cash flow before the end of this year at very attractive returns, including Frac, a bear processing plant.
New treating capacity in the Haynesville. Additionally, we continue to evaluate a number of other potential growth projects that we hope to bring to us as we look forward to this potential backlog of high returning growth projects. We now expect our long term annual growth capital run rate to be approximately two to 3 billion.
Yeah.
Now for our adjusted EBITDA guidance.
As we get further into the year, we now expect our 2023 adjusted EBITDA to be approximately $13 1 billion to $13 4 billion, which.
<unk> tightened our range, while keeping the midpoint the same.
As a reminder, with the current forward curve for commodity prices and spreads our guidance does not assume the same upside benefits from pricing and spreads that we experienced in 2022, our base business continues to perform well generating strong volumes and providing stable cash flows which demonstrates our ability to operate.
Through a volatile macro environment, we remain bullish about the future of our industry and the growing worldwide demand for all of our products and our assets are strategically positioned to take advantage of new growth opportunities to meet this demand as such we continue to pursue strategic optimization and expansion projects.
That enhance our existing asset base and generate attractive returns our financial position remains strong and we remain committed to our targeted distribution growth rates and the lower end of our leverage target.
Which we continue to balance while maintaining significant free cash flow for growth. This concludes our prepared remarks operator. Please open the lineup for our first question.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two in the interest of time, please limit yourself to one question and one follow up at this time, we'll pause momentarily to assemble our roster.
Our first question comes from Spiro <unk> from Citi. Please go ahead.
Thanks, operator afternoon everybody.
First question, maybe just go to Lake Charles quickly.
Two part question there. So one do you have any sense on the timing to disappoint to approve a new non FTA authorization.
I wanted to make sure I heard you correctly I believe you mentioned working with equity investors on the project.
Actually identified potential equity counterparties, yet or was that just more of a general statement.
Yes. This is Matt let me start and Tom Mason may add to that.
Confidentiality reasons, we can't talk about who our equity partners may be we can say that we have two very significant partners at a minimum of one one to step up.
A large amount of the equity as well as a lot of the offtake.
And I'll just make a quick comment.
Pretty hard on this project, we slowed down during the pandemic, Tom Mason and his team did a great job pick this back up when you create or started we had tremendous momentum signed up a lot eight or 9 million tons.
Developed relationships all around the world really good relationships with a lot of those folks I've met over the last three or four months to really believe in a project and then lo and behold.
Legs out from under us kind of us without us even expecting it so we kind of re gearing.
A great deal of time with.
Last several weeks, we have a real important meeting next week with them and we're being optimistic.
Work with us to.
Additionally, go down this new path, one down to try to get network authorization approved by them, but in the meantime, as Tom said, we are continuing to work with existing customers new customers and as I said, we have some equity partners that really believe in this project and we'll be excited to add them part of the team as we.
Worked diligently toward toward F&D.
Great. That's helpful color Maggie thanks for that.
And a lot of belief or the next five or 10 years by some that there.
It's gonna be an issue with getting a finding a home for gasoline components, which would also feed could be very good deeds stops for a pet project and then you add that to the our ability to deliver ethylene proclaimed downstream of this project as well the export markets. We couldn't be more excited this is a a very you.
Nique World class facility and we have.
An extreme amount of interest we are focused with one equity partner today is very interested in a significant portion of ownership and also a significant portion of takeaway capacity. They actually have assembled a very large team working with us and at the appropriate time, we will be able to talk more about it like this just like a lot of our projects. It is going to take time.
It's a very unique cracker like nothing else in the world not only because of what it can crack and what it can do but also logistically what are the advantages. It has over here. The crackers, we're very excited about it and we have a great team led.
Led by Raj and others are working on that project and we we do believe at some point road will get F. I D. But it gives me down the road ways.
Great.
Thanks for that Maggie thanks, everybody.
But.
The next question comes from Jeremy Tonight from J P. Morgan. Please go ahead.
Hi, good afternoon.
Afternoon.
Just wanted to pick up with I think some of the comments towards him there with regards to capital allocation priorities and now that the Leverages has come in a bit just wondering how you balance against capital at this point B distribution growth seems like it's a focus there, but also kind of tucking M&A has.
Been something that.
He has done over time it.
It seems like there might be larger industry consolidation of put right now at the same time buybacks has been topical in the industry. So just wondering if you could kind of walk us through the latest thoughts on capital allocation.
Yeah, Jeremy this is Tom.
Still a very very good questions always appreciate it.
As you know we have focused on the on the that were very very obviously pleased to have it have it down an entire four four and a half range.
Kind of at the top of it. So we will continue to look at moving down maybe towards the lower end of that.
Like we mentioned in the prepared remarks.
Let's move on on past the that side of the balance sheets out of it.
We're going to continue to focus on a lot of the projects that we've talked about here I know we've got a.
Fantastic team, that's coming up with a lot of really really good investment opportunities that continue to expand the the great footprint that that we've built and we're just very excited about a lot of these and excited about the returns that we're getting on them. So you're going to see us continue to do that but the distribution growth is the other piece of it.
Moving onto that one where we put out that guidance of 3% to 5%, where we feel very good each.
Each quarter as each quarter goes back to where we are on that so we're going to continue to allocate towards that.
The unit buybacks still remain on the.
Remain on their radar screen, but I will say that you know.
Right now we are continuing to focus on investing in the company.
As well as the balance sheet and.
And of course, the distribution growth of giving back for equities, but I do want to go ahead expanded level. They don't want other Adam you brought up in there and that was the M&A m&a's out of it we do.
Still remain very.
Optimistic that you're going to see consolidation in the midstream space and that's something that we we feel like we're very very good at you can see from from all the acquisitions that we've done we can always make them very accretive and they've got us to where we are today as well as within the organic growth projects that come along.
With each one of these so we're going to continue to stay very focused on on that side of it and al Qaeda you know a lot of time for that that piece of it too.
Got it that's helpful things and maybe picking up with that some of the recent acquisitions b lewdness or even looking back and enable if you could kind of walk us through synergy capture.
It stands now versus the expectations at that time, just curious how things have materialized.
Okay listen why don't you, let me start with that one a little bit, especially on the cost side and then Matt Mack.
<unk>, it's got a lot of great things to talk about there. So if you look it really both of those we'll start with the neighbor one that would just continues to to exceed anything that we ever expected on that so even if you go back to the S. Four and you look at what forecast we had in there.
We are significantly higher.
You know a good probably 40 or 50% higher than what we were anticipating.
And a lot of that was you know some of that was called synergies, but there was a lot of commercials synergies that are now we're seeing everyday as we continue to work through that and once again Mackey will expand on that but I'll I'll comment a little bit on the Lotus obviously staying disciplined this same way, we did with enable as to what.
As to what were transacting on these acquisitions.
Acquisitions and.
At what level were transacting at they they work for us they are creative and their deleveraging and likewise on that one.
We have achieved every bit of the cost savings that we were anticipating on that but likewise that when it's still new we just close to me, but we're still seeing a lot of opportunities on that one also in macchio I'll hand off if you want to add anything more on the on the commercial side on both of those okay, Yeah, Chris hefty into the team of unbelief.
Job those acquisitions it so I'm just talked about had been incredible.
Tom hit on a little bit of naval we keep funding things we.
We were able to move volumes at Louisiana through enabled down to some of our <unk>, Our east, Texas assets and just a lot of things that we're finding they're very beneficial.
Wet acquisition. It is what it is we we bought it at a great multiple and it's proven out at that multiple or better. So we're very pleased with that one and then load is gosh. We we've just closed and are crude team gets excited every week about something some new route some new blending opportunity some new additions that we.
Can add to move or throughput on some areas. We didn't think about so as we as I just mentioned what great acquisitions that will end up paying off a lot more than we anticipated when we purchased.
And Jeremy I'd like to just add real quick when you know when you have the.
Very very strong talent, we do internally. The you know the more tools you can you can provide to them. It is just truly amazing what we find out of each one of these.
Got it that's helpful. Thank you.
Thank you.
The next question comes from Brian Reynolds from UBS. Please go ahead.
Hi, good afternoon, everyone maybe to start off on the longterm annual capital run rate growth Capex run rate of two to 3 billion. Just curious if you could just touch a little bit more perhaps on what these projects can look like differentiating differentiating between perhaps the traditional midstream based business opportunities versus somebody's low carbon opportunities that you discussed LNG.
G C C U S transport pneumonia. Thanks.
Okay is macky again, yeah, we got a lot of things already in the works that we've already got F. I D. On we're moving forward on and then as we've talked about some of these and there's a lot of those opportunities that were chasing.
We certainly are looking at some renewable opportunity for example, Quatre point, because we talked about in the opening remarks would be great project for us not just because it'll be transporting sequestering C. O two but it also helps us with our upstream contract so I'm treating and transportation. So there's added benefits to that and then some of the other <unk>.
<unk> that we're we're looking at will also be contributors, but from a capital perspective, it it'll be pretty minimal compared to a lot of these other projects that we're working on that we've already committed to.
The ones that we think will get to.
Over the coming six months full month period.
And yet a lower only thing I would add to it as as you as you know we do continue to work.
Or look at spend more time more.
More of these downstream projects like what math Matthews mentioned, but we we are spending some time on the international front Likewise and looking at you know looking at various projects.
Great. Thanks, and maybe to follow up on Lake Charles LNG lot of HOA signed during the quarter with some notable E&P counterparties that I've previously voice.
Interest in equity ownership.
<unk>. So you know just given the tight existing timeline that you currently have with the <unk>. We just kind of curious if there's any change in tone or capital structure and your view for Lake Charles in terms of appetite for U T to perhaps one incremental equity.
Ownership, perhaps.
A few months ago, just given the fast pace of Hoa's that have been signed over the past few weeks.
Yes. This is macky and no no nothing's really changed there we kind of have a target of around 25% equity ownership that hasn't changed we won't really talk about who the equity partners potentially are are mentioned a few without naming them, but yes. There was more than that there are some producers.
Producer they've expressed interest and so there there's a wide range as we kind of Ah consummate some of the bigger equity.
Commitments, then we'll go to whatever remaining commitments that we need to attain that kind of 70 per cent of partners in the project. So nothing has changed.
Part of our strategy around Charles.
Great Super helpful I'll leave it there.
The next question comes from Jean and Salisbury from Bernstein. Please go ahead.
Hi, Uhm I think he may have more <unk>.
Gas prices in your mid June 2nd and I hadn't realized can you get any more color on how that expenditure where I, except those floors. If you head down gas price.
Is it as simple as that got pregnant back up next year.
<unk>.
Yeah and this is Tom.
The natural gas prices that's correct.
The sensitivity is there, especially in the in the midstream, but we want to make sure we added in there the ethane component.
That's included in there. So when you start looking at it where those prices were going on the liquid sad that that likewise as well the end of that impact and that's the reason even in our.
<unk> that we put out we put in that kind of 5% to 10%.
A sensitivities related to commodity prices, we use spreads at zero.
5%, but you are seeing is really kind of stay in line with that I do think it's worth noting that when you do get down to a certain certain level that you are able to kind of kept floor or something.
Some of the contracts.
That that that provide kind of a downside protection on these things, but once again when you get with the the whole decisions, we make <unk> on all the process and when we do.
Winter reject Ah.
As far as ethane rejection goes and when we extract but it's really based upon not just the natural gas prices, but but the good thing prices also liquids prices.
Got it Okay and then just the the latest on me up the potential and if you had any any any interest from investors that can't on NLP I'd be interested in Nancy.
Yeah, No you bet, we do continue to do continue to spend time on that and evaluate it.
We.
We haven't advanced it.
Market type studies or anything else, but we do.
We do have various discussions with with banks et cetera views on the market side of the but where a lot of the time was really spent on the structuring also we wanted we wanted to make sure that we get this thing structured in a way that is a win win for all so we're continuing to look at that so it's.
It's clearly on the radar screen something we're going to continue.
Continue to move forward moved down the field so to speak and.
Kind of.
Come out come out at the right time that makes sense.
Great and thinks that company.
Okay. Thank you.
The next question comes from Keith Stanley from Wolf Research. Please go ahead.
Hi, Thank you.
Maybe starting with golf run in the compression expansion project can can you talk to them with customers are saying on.
The timing of needing more takeaway.
And I guess could that project move forward as soon as this year or the needs there that quickly or the haynesville needs more time to to recover.
Yes. This is Matthew no. We don't we don't expect to get the F. B on expansion on golf run.
As Tom said, an opening remarks, our team has done a great job of selling out capacity by January of 25, as he mentioned were sold out.
165 Bcf on the zone to portion of golf run, but now will remain in negotiations.
A lot of that depends on some of the LNG facility to get the F. I D. A lot of it will depend on some commitments that we're looking at further downstream of markets along the Gulf coast, even as far away as Florida, and then also there's some producer push on a lot of that to get down to markets either off Trump plan or potentially even though at G. T.
So we're still a ways away from that but will remain discussions and there's a great deal of interest to move more volume of course from a growing haynesville in other areas down to the Gulf Coast.
Okay, Great and the second question I just wanted to follow up on the the two to 3 billion longterm Capex run right.
It's obviously very manageable within cash flows for the company, but it's a little higher than what you've spent you did 2 billion last year and targeting $2 billion for this year. So can you just give some big picture comments on why you would expect capex to potentially go a little higher in the future and does that reflect the bigger projects as.
That reflect I think Tom you mentioned looking a little more international just.
How you were thinking about that and spending potentially going up a little.
Oh, Yeah, you bet and like a flavor very good very.
Very good question.
Question here on this when you really look at the scale of energy transfer now the size and and then you start looking at all the projects that Mackie previously mentioned.
With with the existing footprint, we have but also continuing to move downstream with some of the other.
<unk> International.
So when you really start looking at all that we do not have projects that are specific to be identified.
Within that this is a number that we're just using based upon the.
The sheer size that we've become start running running over 13 $13 billion a year. So don't have a really a whole lot more description at this point other than just kind of guiding it toward all the various.
Various projects that we have you know.
On the drawing board so to speak.
Oh, Yeah, if I could one thing is that.
We are going to be pretty disappointed if we're not pushing against that $3 billion because the.
The projects that were chasing are really good rates of return and everything that we're chasing that has synergistic revenues not part of the hour are both upstream downstream in many cases, so from the standpoint from a commercial perspective I'm going to be disappointed if we if our team doesn't push closer to 3 billion or even more at the greatest return that we're targeting.
Thank you.
The next question comes from Michael Bloom from Wells Fargo. Please go ahead.
Oh, Thanks, good afternoon, everyone.
Yeah I wanted to ask you about the recent really spike in ethylene prices.
There's definitely been some.
Issues with processing efficiencies and fractionation facilities being impacted so I'm just wondering if you can just.
Any of your facilities impacted by the extreme heat.
The sauce, and then B should we think of an instance, an event that you probably benefiting from or could this be a drag on Q3.
Hey, this is macky, yeah gosh, there's a lot of noise made around if it were a little taken aback not because really had zero impact on us.
One of the only probably the only company in the U S that controls the vast majority of our Frack pronto. So weird we remain long with everything that's of course, while we're expanding our capabilities et cetera, but we kind of dug into it actually are being and had a pretty good article you.
You may be alluding to some of that if we believe it's a combination of a lot of things what RV emission was a little bit. What you said you have cry owes this struggling heat Purdue production struggles and heat we've seen pretty excessive heat.
Ah Ah temperatures Oh, that's been you know, 2% to 3% impact rack struggle a little bit more.
Five 7% of what we see on that or others have seen there's also kind of a shortage of inventory since that's not really track and some members got outfit. The inventories were really short and so it's kind of a lot of those factors, but a number of companies. Unlike us that we're rejecting it takes some time to.
Start recovering and figure out ways to get that Mount Bellevue. So that took a few days. We also heard there were some crackers out there that we're actually selling their ethylene because process. It got so bad so it was a pretty short lived.
Runner and ethnic processed no backing us whatsoever or our customers.
And so it was just the kind of.
<unk> have a lot of different things that happened over a short period of time.
Okay right now that's helpful. And then wanted to ask about L. P G and essien exports.
It seems like your volumes are still very strong through the first half of the year. What are you expecting for the balance of the year on both L. P. G and that's in volumes and if you just speak generally to what you're seeing in those and market right now.
Yeah, <unk> is macky and as we look at the future and we look at the negotiations we have going on while we talked about this earlier today, we're in discussions with over 500000 barrels of ethylene demand.
Potentially coming on line in the next three or four years.
Of that there's probably 150 to 180, that's hardly likely we will contract. So there's a huge demand for ethane.
Yeah for ethene on the propane.
Is everybody probably knows there's a lot of P. D H as being billed for five or six already completed in China and there's another.
A total of another about 12 more so there's a lot of propane demand out there and a lot of propane being built so we're very bullish of course, that's why we're expanding as quickly as we can already bullish from volumes, increasing especially at Nederland will always have a little pullback of that Marcus hook because of location up there.
<unk> a lot of those barrels stay locally how do we are able to take a lot of what clothes and take it a much higher price market from <unk>.
Margin standpoint, but certainly in the south we remain very optimistic we've already seen volume stronger next month.
Then we saw here in July so we remained already bullish not only the next quarter too, but bullish longterm there is a significant growth.
Really everything we do for natural gas for natural gas liquids uneven gosh, we're talking about all of the day there was more all consumed in the world's last quarter than there ever been so [laughter] runaway from oil and the slowdown all should happening if anything it's increasing so that was a long winded answer to we remain very bullish.
Great. Thank you.
The next question comes from Neil Mitchell from Bank of America. Please go ahead.
Hi, Thanks for taking my question.
First question you, obviously have some very capable upstream assets. It can be expanded with golf run in and trunk line are you looking at expanding those separately from the Lake Charles decision in other words.
If you were to twin those pipelines for other facilities would you still be able to manage to get the gas down to lake Charles in an efficient way.
So that both sets of projects can work.
Yeah, the Smacky again.
Our team is looking to move as much gas pipeline network and expand our network to whatever markets. There are so yes simultaneously with with making sure that we will have the pipeline in volume support for LNG. Once it gets to <unk>. We also have teams working daily on delivered to other.
LNG facilities and two other markets.
Everywhere not only the Gulf coast, but wherever anybody's looking for gas. So yeah, we'll we'll continue to chase markets and look to expand the Gulf run Truckline. Other assets made any demands that are out there that way.
And the contract.
Great and then for the follow up just on your.
On your commentary around M&A.
Can you be a little bit more specific or do you have a preference for asset packages versus corporate M&A.
Any specific commodities and then how would you look at your leverage profile.
Would you look to go above 4.5 times temporarily if there was something that was attractive or would that be kind of the governor that you wouldn't want to take feed that from the very beginning.
Yeah listen we.
When we look at these various transactions whether it be on you know a company sad or whether it be an asset acquisition either one of them. We always evaluate how the connectivity is to our current assets and some of it can be moving maybe a little bit further downstream.
With with value add but a lot of it we always evaluate as to the connectivity. So that we can get more commercial synergies with the with the footprint, we have and when you start looking at this across all the commodities natural gas natural gas liquids in and the crude all you can see how.
Now how we built the the franchise here that we have.
And being able to take product from well had all the way through export facility. So we're gonna continue to look at him on that basis as to where the value comes in.
So let's go to the matrix, which is the second part, which really relates to the first part of my question to answer.
To answer that I that I, just gave you on that piece of it and that is the accretion piece of it and that's how we were able to be able to go in with a lot of these and get the accretion is because of the connectivity and what we're able to do with the product all the way downstream and so when we when we will have what kind of walk through these.
And evaluate them work.
We're careful were disciplined and how we look at these various commercial synergies, but we have a great team better that is able to extract a lot at but the other components. Besides just accretion to it Ah D. C. F per unit basis is the leverage.
Other piece of it and you will see with the transactions were doing we will always evaluate these things as to what is the combination of.
Equity in cash that we use so we don't have intention of going back going back above from our leverage standpoint, and we think we've got a great currency to be able to to be able to work with here, but most importantly, we've got a great team. That's April to go in and extract the value.
As we walk through the integration of our acquisitions.
Okay, great. Thank you very much.
This concludes our question and answer session I would like to turn the conference back over to Tom long for any closing remarks.
I. This is Matthew real quick before Tom clubs that I did.
That will meet with Bill, Oregon, our team kind of preparation for this and.
It makes some great points is that everybody knows this I believe but.
Oh I mentioned this earlier, we believe we have the best team running any midstream in the United States stop on a lot of them are sitting in this room.
We think we have the best base a base of business very strong base with record volumes.
Several segments every quarter, we're delivering all of the projects that we're building with golf run and Gray Wolf at the end of last year and then of course, we just brought on bear we're having.
Once again with Chris hefty use great efforts around M&A, we've got a lotus really kind of kick in and and then we've got the Franklin on that combined with strong cashflow stability.
Or just eliminate strategy, we are incredibly well positioned for growth. So if you can't tell our voices, we're very excited about where we fit assets that we have throughout the country and what the future holds for our partnership it really far industry. So we're pretty excited you can't tell on our voices.
No I think that's a wrap mackie. Thank you I appreciate it [laughter].
Conferences now concluded. Thank you for attending today's presentation you may now disconnect.
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