Q3 2023 ONEOK Inc Earnings Call

Yes.

Good day and welcome to the <unk> third quarter 2023 earnings conference call and webcast.

All participants will be in listen only mode.

Should you need assistance. Please suddenly conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Please note today's event is being recorded.

I would now like to turn the conference over to Andrew Zaghawa, Vice President Investor Relations. Please go ahead Sir.

Thank you Rocco and welcome to <unk> third quarter 2023 earnings call, we issued our earnings release and presentation. After the markets closed yesterday and those materials are on our website.

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

Statements made during this call that might include one of the expectations or predictions should be considered forward looking statements and are covered by the safe Harbor provision of the securities acts of 1933 in 1934.

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.

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.

With that I'll turn the call over to Pierce Norton, President and Chief Executive Officer.

Thanks, Andrew.

Good morning, everyone and thank you for joining us on today's call is Walt Hulse, Chief Financial Officer, Treasurer, and Executive Vice President Investor Relations and corporate development as Sheridan Swords executive Vice President commercial liquids and natural gas gathering and processing, which includes our commercial responsibility for.

NGL business refined products and crude businesses.

Also available to answer your questions are Chuck Kelly Senior Vice President commercial of natural gas pipelines and Kevin Burdick, who has assumed the newly created position of executive Vice President Chief Enterprise services officers with responsibilities for cyber security information technology enterprise.

Ms optimization innovation and integration activities.

His position will be vital as we continue to integrate systems technologies and Workforces. Following the acquisition of Magellan, Kevin is uniquely qualified for his experience in integration processes information technology commercial and corporate operations to lead the company as we continue to identify.

Prioritize realize the value of the synergies as one company.

We completed the acquisition just over a month ago and since then we've been fully focused on integration activities, maintaining the reliable and responsible operations, our customers and stakeholders expect from us.

And at the same time exploring optimization and integrated opportunities by engaging the combined commercial operational and engineering teams.

What has become evident at this point.

Based on the number of commercial synergies and opportunities is the importance of prioritization.

<unk>, combining our companies the potential commercial synergies and the opportunities going forward are significant more to come on this in the coming months, but after September 25th and getting full access to both companies.

I can say that the collaboration of our employees is already presenting additional possibilities.

One hopes increased scale scope and diversified operations are already enabling us to create exceptional value for our stakeholders. We have added primarily fee based earnings and expect a significant free cash flow through the new refined products and crude businesses and expected tax synergies.

Which combined with the <unk> legacy operations is setting up a strong finish to 2023 and a solid foundation for 2024 performance yesterday, we announced third quarter 2023 earnings and increased our full year 2023 financial guidance on a pre acquisition.

<unk> for the second time. This year. We also provided new consolidated guidance that includes the impact of the Magellan acquisition, Walt will provide more detail in our guidance a little bit later, which is underscored by our strong volumes across our systems and favorable market conditions continuing to drive <unk>.

<unk> and our expectations we.

We saw double digit growth in NGL and natural gas processing volumes for the third quarter and continued to see robust producer activity across our operations with North Dakota natural gas production, reaching a new all time high in August.

The industry landscape is healthy and now with a more diversified portfolio of assets, we're even better positioned to make the most of opportunities across our operations. So with that I'll turn the call over to Walt for the financial performance and our guidance update.

You peers.

I'll start with a brief overview of our third quarter financial performance.

One on <unk> third quarter, 2023, net income totaled $454 million or <unk> 99 per share.

Third quarter, adjusted EBITDA totaled more than $1 billion, an 11% increase year over year.

Adjusted EBIT would have exceeded one $1 billion for the third quarter 2023, excluding $123 million of transaction costs $35 million of third party fractionation costs and.

And partial earnings from the refined products and crude segments.

Refined products and crude segment earnings totaled $40 million of adjusted EBITDA from the six days following the close of the Magellan acquisition.

Which includes a $9 million mark to market gain on <unk>.

<unk> drilled a derivative positions settling in the fourth quarter 2023.

It is worth noting those six days of earnings arent necessarily an indicator of full third quarter segment earnings in.

Part due to the uptick in our seasonal butane blending business.

As of September 30th we had no borrowings outstanding under our $2 5 billion credit agreement.

And had more than $280 million of cash on hand.

As we look ahead, we expect fourth quarter 2023, net debt to adjusted EBITDA, excluding transaction costs to be approximately three seven times on an annualized run rate basis.

Moving on to our increased guidance.

On a pre acquisition basis, we now expect 2023 net income midpoint of $2.61 billion and adjusted EBITDA midpoint of $4 8 billion, which is a $125 million higher than our last guidance increase in August.

These mid points are specific to legacy one oak operations and exclude impacts from the Magellan acquisition in order to provide a more accurate comparison with our original guidance 2023 guidance.

Since that original guidance announcement in February we've increased our adjusted EBITDA midpoint by $225 million.

Are higher or were higher guidance expectations are driven by volume strength across our operations higher average fee rates lower than expected third party NGL fractionation costs and sustained strength in our natural gas pipeline segment.

Moving onto our newly announced 2023 consolidated financial guidance, which includes impacts from the Magellan acquisition.

We expect a consolidated net income midpoint of $2 $6 billion, and adjusted EBITDA midpoint of $5 $1 billion Consol.

Consolidated guidance includes earnings from the refined products and crude segment. Following the close of the acquisition on September 25th and also includes $175 million of transaction costs.

Earnings assumptions for the refined products and crude segment also include an approximately $40 million unfavorable earnings impact in 2023 related to commodity inventory balances being valued higher at the time of the acquisition than pre acquisition value.

As these inventories are sold we will recognize a smaller margin than we would've rockier than would've been recognized at the pre acquisition value of the inventory and additional $10 million unfavorable impact is expected in 2024 related to the same inventory valuation adjustment.

Unknown Executive: Good day, and welcome to the 1-0-3rd quarter of 2023 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please singly conference specialists by pressing the star key followed by zero.

Unknown Executive: Good day, and welcome to the 1-0-3rd quarter of 2023 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please singly conference specialists by pressing the star key followed by zero.

The refined products and crude segment is expected to perform in line with its previously increased expectations, which reflects solid segment fundamentals. Despite the impact of the inventory valuation.

After today's presentation there will be an opportunity to ask questions. To ask a question you might press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note today's event is being recorded.

Unknown Executive: After today's presentation there will be an opportunity to ask questions. To ask a question you might press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note today's event is being recorded.

We continue to expect total capital expenditures, including growth and maintenance capital and excluding legacy Magellan Capex of approximately 1.5 dollars $75 billion in 2023.

Andrew Ziola: I would now like to turn the conference over to Andrew Ziola, Vice President and Investor Relations. Please go ahead, sir. Thank you, Rocco, and welcome to 1-0-3rd quarter 2023 earnings call. We issued our earnings release and presentation after the market's closed yesterday and those materials are on our website. After our prepared remarks, management will be available to take your questions. Save it's made during this call that might include 1-0-6th expectations or predictions.

This includes assumptions for continued strong producer activity and initial activities related to the expansion of Elk Creek pipeline and fully looping the west, Texas NGL pipeline.

As we look ahead, our financial outlook remains strong.

Andrew Ziola: Should be considered forward-looking statements and are covered by the safe harbor provision of the securities acts of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements. For discussion of factors that could cause actual results to differ, please refer to our SEC filings. Just a reminder, for Q&A, we ask that you submit yourself to one question and a follow-up in order to fit in as many of you as we can.

When we announced the acquisition in May we expected total combined adjusted EBITDA to approach $6 billion in 2024.

Supported by stable and growing volumes across our operations as we stand today, our confidence in that outlook has only increased further and.

And we believe there is a potential to exceed those expectations.

I'll now turn the call over to Sharon for a commercial update.

Pierce Norton: 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. On today's call is Walt Pulse, the Chief Financial Officer, Treasurer and Executive Vice-President Investor Relations and Corporate Development, and Sheridan Swartz, Executive Vice-President, Commercial Liquids, and Natural Gas Gathering and Processing, which includes our commercial responsibility for our NGO business, refined products, and crude businesses. Also available to answer your questions or chuck Kelly, Senior Vice-President, Commercial of Natural Gas Pipelines, and Kevin Burtick, who has assumed the newly created position of Executive Vice-President, Chief Enterprise Services officers with responsibilities for cyber security, information technology, enterprise optimization, innovation, and integration activities.

Thank you wall, let's start with our natural gas liquids segment.

Third quarter 2023, NGL volumes increased 11% year over year with all regions were one oak operates seeing increases compared with the third quarter 2022.

Compared with the second quarter 2023, both Rocky Mountain and mid continent, NGL raw feed throughput increased 5%.

Driven by continued strong production activity in these basins, resulting in higher propane plus volumes and slightly higher ethane recovery levels levels.

The Rocky Mountain region volumes averaged more than 400000 barrels per day in September.

The continued growth in volume from the Rocky Mountain region provides momentum into 2024 and.

And further supports why we have started initial long lead time activities for an Elk Creek pipeline expansion.

Pierce Norton: This position will be vital as we continue to integrate systems, technologies, and workforces following the acquisition of Magellan. Kevin is uniquely qualified for his experience in integration processes, information technology, commercial and corporate operations to lead the company as we continue to identify, prioritize and realize the value of the synergies as one company. We completed the acquisition just over a month ago, and since then we've been fully focused on integration activities, maintaining the reliable and responsible operations our customers and stakeholders expect from us.

We continue to maintain our ethane recovery assumptions for the remainder of the year with the Permian and near full recovery, the mid continent, and partial recovery and opportunities do you incent recovery in the Williston.

And the natural gas gathering and processing segment third quarter <unk> processed volumes averaged more than $2 3 billion cubic feet per day, a 12% increase year over year.

As Pierce mentioned North Dakota gas volumes have reached record production levels at more than $3 3 billion cubic feet per day in August.

Our Rocky Mountain region processed volumes averaged more than $1 5 billion cubic feet per day during the third quarter.

Pierce Norton: And at the same time, exploring optimization and integrated opportunities by engaging the combined commercial, operational, and engineering teams. What has become evident at this point. Based on the number of commercial synergies and opportunities is the importance of prioritization. The value of combining our companies, the potential commercial synergies and the opportunities going forward are significant. More to come on this in the coming months. But after September 25th and getting full access to both companies, I can say that the collaboration of our employees is already presenting additional possibilities.

And reached more than one six Bcf per day in September.

We've connected 450 wells in the region for the through the first nine months of the year compared with approximately 245 connections during the same period last year and more than 80% increase.

We've also increased our well connect guidance for 2023 due to the strong pace of completions and now expect to connect 525 to 575 wells compared with our previous guidance of 475 to 525 wells.

Currently there are approximately 37 rigs and approximately 15 completion crews operating in the basin with 20 rigs and approximately half of the completion crews on our dedicated acreage, which remains more than enough activity to grow production.

Pierce Norton: One-oaks increased scale, scope and diversified operations are already enabling us to create exceptional value for our stakeholders. We've added primarily fee-based earnings and expect a significant free cash flow through the new refined products and crew businesses and expected tax synergies, which combined with one-oaks legacy operations is setting up a strong finish to 2023 and a solid foundation for 2024. Yesterday, we announced third quarter 2023 earnings and increased our full year 2023 financial guidance on a pre-acquisition basis for the second time this year.

In the mid continent region third party process volumes increased 10% year over year and increased 3% compared with the second quarter 2023.

We continue to see producers focused on higher crude producing areas and currently have three rigs on our dedicated acreage in the region.

We have connected 446 wells in the region through the first nine months of the year compared with 40 in the same period last year.

I expect to be at the high end of our mid continent, well connect guidance at 45 to 55 wells in 2023.

Pierce Norton: We also provided new consolidated guidance that includes the impact of the Magellan acquisition. Walt will provide more detail in our guidance a little bit later, which is underscored by our strong volumes across our systems and favorable market conditions continuing to drive confidence in our expectations. We saw double-digit growth in NGL and natural gas processing volumes in the third quarter and continued to see robust producer activity across our operations with North Dakota natural gas production reaching a new all-time high in August. The industry landscape is healthy and now with a more diversified portfolio of assets we are even better positioned to make the most of opportunities across our operations.

Moving onto their volume product and crude segment.

We only have six days of operation from this new segment in the third quarter due to the timing of the acquisition closing, but the segment continues to perform in line with expectations that were already increased earlier this year.

Healthy business fundamentals continue to drive consistent performance and we're currently seeing strong seasonal butane blending margins.

Looking ahead, we see a growing list of opportunities, which will continue to drive growth in this segment through synergies the more time, we spend with the assets and with the legacy Magellan employees, we're seeing even more opportunities.

In the natural gas pipeline segment strong year to date results continued to benefit from demand from natural gas storage and transportation services and.

Walter Hulse: So with that, I'll turn the call over to Walt for the financial performance and a guidance update. Thank you, beers. I'll start with a brief overview of our third quarter financial performance. One ounce third quarter 2023 net income totaled $454 million or 99 cents per share. Third quarter adjusted EBITDA totaled more than $1 billion and 11% increase year over year. Adjusted EBITDA would have exceeded $1.1 billion for the third quarter 2023, excluding $123 million of transaction costs, $35 million of third-party fractionation costs and partial earnings from the refined products and crude segment.

And we saw increased demand for interruptible services during the third quarter as extreme heat in Texas drove increased electric generation demand and pricing.

We're seeing opportunities for additional expansion in Oklahoma and Texas.

With additional storage expansion in Oklahoma, and Texas and demand for long term storage capacity remaining strong.

We continue to work toward F D and the <unk> connector pipeline and expect to receive the presidential permit before the end of the fourth quarter.

There has been significant interest from producers in the Permian basin relative to shipping gas west to the potential LNG export facility and reported support from both a large well known customers anchoring the export project.

Pearce This concludes my remarks.

Thank you Sharon and wall for adding color.

Walter Hulse: Refined products and crude segment earnings totaled $40 million of adjusted EBITDA from the six days following the close of the Magellan acquisition, which includes a $9 million mark to market gain and commodity derivative positions settling in the fourth quarter 2023. It is worth noting those six days of earnings aren't necessarily an indicator of full third quarter segment earnings. As of September 30th, we had no borrowings outstanding under our $2.5 billion credit agreement, and had more than $280 million of cash on hand. As we look ahead, we expect fourth quarter 2023 net debt to adjusted EBITDA, excluding transaction costs to be approximately 3.7 times on an annualized run rate basis.

What was a very strong quarter.

With only two months left in 2023, there's still time for progress to be made and a lot to be excited about.

Since closing I've had the privilege of visiting many of our field and office locations and we will continue to visit additional sites.

I'm energized by the enthusiasm and the collaboration that I've already seen between both the legacy one oak employees and the Magellan employees.

I can say with certainty.

That we have an incredible teams in place thank.

Thank you to all of our employees for what Youre doing to continue our high level of service through safe and reliable operations.

And thank you to our investors for your support and trust in our vision for the future of one of our future is.

Bright and the long term value of bringing our companies together will play out in the years ahead.

With that operator, we're now ready for questions.

Walter Hulse: Moving on to our increased guidance. On a pre-acquisition basis, we now expect 2023 net income midpoint of $2.61 billion, and adjusted EBITDA midpoint of $4.8 billion, which is $125 million higher than our last guidance increase in August. These midpoints are specific to legacy 1.0 operations and exclude impacts from the Magellan acquisition in order to provide a more accurate comparison with our original 2023 guidance. Since that original guidance announcement in February, we've increased our adjusted EBITDA midpoint by $225 million. Our higher guidance expectations are driven by volume strength across our operations, higher average fee rates, lower than expected third-party NGL fractionation costs, and sustained strength in our natural gas pipeline segment.

Thank you. Thank you I'd like to ask a question. Please press Star then one on your telephone keypad.

To remove yourself from queue. Please press Star then two.

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

<unk>.

Hi, good morning, everyone, maybe to start off on synergies I know that you've only had four weeks into the pro forma one oak in the larger growth Capex projects will likely take some time to commercialize to talk about so curious if you can just talk about some of the smaller low hanging fruit synergies that you've seen over the last few weeks, particularly around his commercial discussions around batching and blending and bundling now have you seen some of that.

Commercial success and when can we see some realizations there. Thanks.

So I'll start off and then I'm going to kick it over to Cabot on this I'm going to.

Start with part of your question as you know kind of what have you seen immediately with some of the kind of smaller things.

You know after closing we do have immediate synergies that have been realized basically from day one.

Which our board costs credit facility.

Renewals.

<unk> insurance audit fees and in the executive organizational design that was put in place so.

Walter Hulse: Moving on to our newly announced 2023 consolidated financial guidance, which includes impacts from the Magellan acquisition. We expect a consolidated net income midpoint of $2.6 billion, and adjusted EBITDA midpoint of $5.1 billion. Consolidated guidance includes earnings from the refined products and crude segment following the close of the acquisition on September 25th, and also includes $175 million of transaction costs. Earnings assumptions for the refined products and crude segment also include an approximately $40 million unfavorable earnings impact in 2023 related to commodity inventory balances being valued higher at the time of the acquisition than pre-acquisition value.

All of those kinds of things added up to some immediate savings that will be annualized.

Early in next year I'm going to turn it over to Kevin to kind of talk a little bit more about the process. Both on the small things in the large things.

Yeah, Brian as we think about kind of how we went through the process and how we're tracking if you go back to really the announcement back in May.

We immediately started kind of documenting all the synergy opportunities through the integration planning work we were doing.

Walter Hulse: As these inventories are sold, we will recognize a smaller margin than we would have been recognized at the pre-acquisition value of the inventory. An additional $10 million unfavorable impact is expected in 2024 related to the same inventory valuation adjustment. The refined products and crude segment is expected to perform in line with its previously increased expectations, which reflects solid segment fundamentals, despite the impact of the inventory valuation. We continue to expect total capital expenditures, including growth and maintenance capital, and excluding legacy Magellan capex of approximately $1.575 billion in 2023. This includes assumptions for continued strong producer activity and initial activities related to the expansion of El Creek Pipeline and fully looping the West Texas NGL pipeline.

Once we got closed then we had access to a lot more information a lot more data we continue to refine those those estimates of existing opportunities and we found new ones as well as the company has got to talk more more closely at this point, we've got around 250 different opportunities.

That we've identified them and now we're going through and prioritizing those based on value our time to achieve.

Is there capital required things like that in many cases like Pierce mentioned some of it had been captured.

Several others are being worked right now as we speak and then others still we've got teams in place that are identifying developing plans to go capture I think the key is for each of these opportunities we have owners identify.

That are held accountable.

For the results.

And we've got tracking mechanisms in place that were tracking status, what's been captured how that relates to the forecast in our estimates as we go forward. So that's kind of a general kind of overview of the process as it relates to some of the commercial synergies you asked about yes. Some of those may be a little.

Longer longer lead time, but Sheridan and his team have.

Walter Hulse: As we look ahead, our financial outlook remains strong. When we announce the acquisition in May, we expected total combined adjusted EBITDA to approach $6 billion in 2024. Supported by stable and growing volumes across our operations, as we stand today, our confidence in that outlook has only increased further. And we believe there is a potential to exceed those expectations.

<unk> teams in place that are working these high priority items that are that have the opportunity to drive the most value.

And then I will just kind of close the question with.

All this will be factored in as we think about our guidance and go out with 24 guidance probably in February of next year.

This will all be factored in and will be included in that guidance as we move forward.

Sheridan Swartz: I'll now turn the call over to Sheridan for a commercial update. Thank you, Walt. Let's start with our natural gas liquid segment. Third quarter, 2023, NGL volumes increased 11% year over year, with all regions where ONEOK operates seeing increases compared with the third quarter, 2022. Compared with the second quarter, 2023, both Rocky Mountain and Mid-Continent NGL Rolfi throughput increased 5%. Driven by continued strong production activity in these basins, resulting in higher propane plus volumes and slightly higher ethane recovery levels.

Great. Thanks, I appreciate all that maybe to pivot just towards the forward growth capex outlook relative to the initial S. Four it seems like one oak has pulled forward some capex related to the West, Texas LPG in Elk Creek expansion and it seems like some wireless trending towards more of a JV type relationship, which could defer capital for.

So perhaps could you just update us on kind of a for capex outlook, maybe for 'twenty four and beyond just given some of these recent trends and does it imply that one could be trading closer to a 10% free cash flow yield is capex trends lower thanks.

Well, Brian we are we aren't going to give you a 'twenty 'twenty four capex guidance today.

Sheridan Swartz: Rocky Mountain region volumes averaged more than 400,000 barrels per day in September. The continued growth in volume from the Rocky Mountain region provides momentum into 2024. And further supports why we have started initial long lead time activities for an El Creek Pipeline expansion. We continue to maintain our ethane recovery assumptions for the remainder of the year, with a Permian in near full recovery, the Mid-Continent in partial recovery, and opportunities to incident recovery in the willows.

I think that all of the material projects have been disclosed at this point and you know as we look towards 2024 and the opportunities that we have we see.

A bit of opportunity without any significant material capital projects that were ready to announce.

So we think we're set up very well for 2024, but it will give you the guidance in February to firm that number up.

Sheridan Swartz: In the natural gas gathering and processing segment, third quarter process volumes averaged more than 2.3 billion cubic feet per day, a 12% increase year over year. As Pierce mentioned, North Dakota gas volumes have reached record production levels of more than 3.3 billion cubic feet per day in August. Our Rocky Mountain region processed volumes averaged more than 1.5 billion cubic feet per day during the third quarter, and reached more than 1.6 BCF per day in September.

Great Fair enough I'll leave it there how great good morning.

Okay.

Thank you and our next question today comes from Jeremy Tonet with Jpmorgan. Please go ahead.

Hi, good morning.

Good morning, Jeremy.

Just maybe wanted to pick up on the last question a little bit and fully appreciate noggin 24 guidance today, but just trying to get a state of affairs as it stands right now and I think you know.

Wanted to be clear I guess on the guidance and if I'm looking at this the right way if Bob what's implied for remainder of the year for fourth quarter about I think just over $1 4 billion, but then.

Sheridan Swartz: We've connected 450 wells in the region through the first nine months of the year, compared with approximately 245 connections during the same period last year, a more than 80% increase. We've also increased our well-connect guidance for 2023 due to the strong pace of completions. And now expect to connect 525 to 575 wells, compared with our previous guidance to 475 to 525 wells. Currently, there are approximately 37 rigs and approximately 15 completion crews operating in the basin, with 20 rigs and approximately half of the completion crews on our dedicated acreage, which remains more than enough activity to grow production.

On a normalized basis, you back out most of that $50 million inventory adjustment and then theres, just a $40 million or so of transaction costs. So it seems like the run rate for the business might be close to 1.5 billion looking at for Q now granted there's seasonality that can impact that at different points throughout the year, but then you also have $200 million.

Synergies from Magellan that should be realized and you have to do you have an increasing G O R and there's other.

Projects set to come on over time in 'twenty, four and just wondering moving pieces wise is that encapsulate.

What we should be thinking about is that a good base to work off of or any other color on these pieces would be helpful.

Sheridan Swartz: In the mid-continent region, third-cordy process volumes increased 10% year over year, and increased 3% compared with the second quarter of 2020. 33. We continue to see producers focused on higher crude producing areas and currently have three rigs on our dedicated acreage in the region. We have connected 46 wells in the region through the first nine months of the year compared with 40 in the same period last year. We expect to be at the high end or a midcontinent well-connected guidance of 45 to 55 wells in 2023.

Well, Jeremy I think you've done a good job of summarizing some of the moving parts there and.

Those at this point I would say are all moving in a favorable direction.

As in my prepared remarks, I mentioned that on a.

Run rate basis. After you take out the merger expenses and the like that we are expected to be approximately at three seven times.

Debt to EBITDA in the fourth quarter, which is ahead of the expectations that we had when we announced the transaction.

Sheridan Swartz: Moving on to the Vine Product and Crude segment, we only have six days of operation from this new segment in the third quarter due to the timing of the acquisition closing. But the segment continues to perform in line with expectations that were already increased earlier this year. Healthy business fundamentals continue to drive consistent performance and we're currently seeing strong seasonal butane blending margins. Looking ahead, we see a growing list of opportunities which will continue to drive growth in this segment through synergies.

And that's obviously showing that we've got a favorable free cash flow.

Materializing, and that's going to give us even more flexibility as it relates to capital allocation as we go into 2024, and we will update you on that as we.

I'll get into the 2024.

Susan.

Got it.

That's very helpful and I guess wouldn't be a wall Street analyst if I wasn't asking now that the anchors dry on the Magellan agreement.

Sheridan Swartz: The more time we spend with the assets and with the legacy Magellan employees we're seeing even more opportunities. In the natural gas pipeline segment, strong year-to-date results continue to benefit from demand from natural gas storage and transportation services. And we saw increased demand for interruptible services during the third quarter as extreme heat in Texas drove increased electric generation demand and pricing. We're seeing opportunities for additional expansion in Oklahoma and Texas with additional storage expansion in Oklahoma and Texas and demand for long-term storage capacity remaining strong.

Anything you can share on what you're working on now going forward.

Okay.

Jeremy this fierce.

We do the same thing we've always done which is we continue to.

Looking at different things out there and like <unk> said you know what.

The capital allocation.

Strategy that would have.

It's just a lot more flexible going forward post magellan, and especially with our debt to EBITDA metrics coming down quicker.

And what we expected so that's <unk>.

Probably about as much color as I can get.

Sheridan Swartz: We continue to work toward FID and the Cigaro connector pipeline and expect to receive the presidential permit before the end of the fourth quarter. There has been significant interest from producers in the Permian Basin relative to shipping gas west to the potential LNG export facility and reported support from multi-large well-known customers anchoring the export project.

Got it that's helpful I'll leave it there thanks.

Thank you and our next question today comes from Michael Blum with Wells Fargo. Please go ahead.

Thanks, Good morning, everyone.

Wanted to ask on the on the West, Texas NGL pipeline expansion.

In the slides you mentioned optionality to use.

Pierce Norton: Pierce, this concludes my remarks. Thank you Sheridan and Walt for adding color to Walt was a very strong quarter. With only too much left in 2023, there's still time for progress to be made and a lot to be excited about. Since closing, I've had the privilege of visiting many of our field and office locations and will continue to visit additional sites. I'm energized by the enthusiasm and the collaboration that I've already seen between both the legacy one oak employees and the Magellan employees.

The old legacy system for Ngls refined products or crude I'm wondering if you could just expand on that or is there any way to get a sense of how you think that will kind of split overtime.

Michael This is Sheridan I think what we're talking about there is that as we explained before the legacy system that we bought from Chevron, we'd been looping that system.

West, Texas, all the way into the Fort worth area, where we tie into the Arbuckle II pipeline when that loop is completed which is in our west Texas project. We can segregate all out the legacy system assistant we bought from from Chevron and used it for a different product and that is in one of the things we're looking at in synergies and we will.

Pierce Norton: I can say with certainly that we have an incredible teams in place. Thank you to all of our employees for what you're doing to continue our high level of service through safe and reliable operations. And thank you to our investors for your support and trust in our vision for the future of one oak. Our future is bright and the long-term value of bringing our companies together will play out in the years ahead.

<unk> to evaluate as we go forward, but that gives us an opportunity to be able to move more product back into the Permian whether that be.

Refined products, where it gives us the opportunity to move crude out of the Permian into the Gulf coast or leave it in NGL service, that's probably more of a longer term type synergies that we have right now as we continue to look at that but we do think that is the opportunity going forward to be able to leverage our three liquid pipelines streams in that pie in that pipeline, what we use.

Unknown Executive: With that operator, we're now ready for questions. Thank you. If you would like to ask a question, please press star than one on your telephone keypad. To remove yourself from Q, please press star than two.

Paul.

Okay got it thanks for that.

Brian Reynolds: Today's first question comes from Brian Reynolds with UBS. Please go ahead. Hi, good morning, everyone. Maybe to start off on Synergies, I know that you only had four weeks into the Performer One Oak and those larger growth capex projects will likely take some time to commercialize and talk about. So curious if we can just talk about some of the smaller low hanging fruit synergies that you've seen over the last few weeks, particularly around this commercial discussions around batching, blending and bundling.

And then just one question on the Bakken.

Sure seems like the price of an express pipeline project.

Ted.

So wanted to just get your thoughts on that project does this reduce ethane recoveries volumes for you or ultimately should we think of this is.

Sort of a tailwind because ultimately it opens up.

Brian Reynolds: Have you seen some initial commercial success and when can we see some realizations there? Thanks. So I'll start off and then I'm going to kick it over. To Kevin on this, I'm going to start with part of your question is kind of what have you seen immediately was some of the kind of the smaller things. You know, as you know, after closing, we do have immediate synergies that have been realized basically from day one, which are board costs, credit facility, renewals, cyber insurance, audit fees, and then the executive organizational design that was put in place.

Potential for more natural gas production in the basin, which obviously would lead to more associated NGL production.

Michael I think what this project does is make sure that we have enough natural gas takeaway out of the basin, we wouldnt want that to be a constraint on the producers up there well I do not think it has a big impact on our incentivize ethane for a program that we've had going on there because today, there's enough natural gas production coming out of the basin.

So I think it's going to allow the producers continue to grow and have a surety of natural gas takeaway without hurting our ethane recovery.

Benefits that we have today.

Brian Reynolds: So all of those kind of things added up to some immediate savings that will be annualized, you know, primarily next year. I'm going to turn it over to Kevin to kind of talk a little bit more about the process, both on the small things and the large things. Yeah, Brian, as we think about kind of how we went through the process and how we're tracking, if you go back to really the announcement back in May, as we immediately started kind of documenting all the synergy opportunities through the integration planning work we were doing.

Great. Thank you.

Thank you and our next question today comes from Spiro <unk> with Citi. Please go ahead.

Thanks, operator, and it came first.

First question just on the export opportunity.

Synergy necessarily when you announced the deal, but something you may be better positioned to do post Magellan just curious where that stands now and is expanding into exports is just kind of high on the priority list of things to do post close.

Brian Reynolds: Once we got closed, then we had access to a lot more information, a lot more data. We continue to refine those estimates of existing opportunities, and we found new ones as well as the companies got to talk more, more closely. At this point, we've got around 250 different opportunities that we've identified, and now we're going through and prioritizing those based on value, time to achieve. Is there capital required? Things like that.

Sure. This is pierce and I'll let.

Sheridan kind of fill in some of the.

The details here, but.

<unk> said, all along that what Magellan brings to US is the expertise to operate docs and to build docs.

And to just really understand the dynamics of marketing across docs, we don't expect to.

Necessarily turn any of those docks into anything other than what they're currently doing but we do believe that global demand will continue to grow both in crude and both and probably refine products and.

Brian Reynolds: In many cases, like Pierce mentioned, some of it have been captured. Several others are being worked right now as we speak, and then others still we've got teams in place that are identifying, developing plans to go capture. I think the key is for each of these opportunities, we have owners identified that are held accountable for the results, and we've got tracking mechanisms in place that we're tracking status. What's been captured, how that relates to the forecast and our estimates as we go forward.

<unk>.

Petroleum.

Gas.

And propane.

So we're going to continue to look at that and as the market dictates and as we learn more and if we get some customers that.

Neither on the producing side or the takeaway side that wants to take space across stock then we're going to continue to look at that so Sheridan you got anything to add only thing I would add to that Pearce is that with the addition of the Magellan employees, we have much more confidence in both our engineering and operations capabilities since that is what they bring to the table.

You are already operating marine docks and have built marine docks.

Brian Reynolds: That's kind of a general overview of the process, as it relates to some of the commercial synergies you ask about. Yes, some of those may be a little longer lead time, but Sheridan and his team have teams in place that are working these high priority items that have the opportunity to drive the most value. Then I'll just kind of close the question with all of this will be factored in as we think about our guidance and go out with 24 guidance probably in February of next year.

Got it.

Great color thanks for that guys.

Second question, just going on to the Bakken.

I guess, we're hearing increased talk appears maybe looking to develop LNG infrastructure in the region to you've obviously got a pretty good stronghold there, but just curious how youre assessing that the risk of kind of new competition in the basin you're going forward.

What I. This is shared it again, what I would say on competition coming in the basin is what we've said for many times is that on the G&P side, we have 60% of the market share and that feeds our NGL pipelines. So we're very feel very secure about that volume and then on the third party.

Brian Reynolds: This will all be factored in and will be included in that guidance as we move forward. Great, thanks, appreciate all that. Maybe to pivot just towards the Ford Growth CapEx Outlook, relative to the initial S4, it seems like ONEOK has pulled forward some CapEx related to West Texas LPG and El Creek expansions. And it seems like Suhoiro is trending towards more of a JV type relationship, which could defer a capital further.

NGL customers, we have long term contracts with them and that also gives us a surety that we will be able to maintain our volume coming out of the Bakken and be able to capture the growth going forward.

Yeah.

Great. That's all I had today.

Thank you.

Thank you and our next question today comes from Tristan Richardson with Scotia Bank. Please go ahead.

Brian Reynolds: So perhaps could you just update us on kind of a Ford CapEx Outlook, maybe for 24 and beyond, just given some of these recent trends, and does it imply that ONEOK could be trading closer to a 10% free cash so you'll get CapEx trend further. Thanks. Well, Brian, we aren't going to give you a 2024 CapEx guidance today. I think that all of the material projects have been disclosed at this point.

Hey, good morning, guys I appreciate the comments on what Youre seeing so far early in the merger just curious.

We've replaced the concentric circle with a telescope, but isn't that telescope you talk about.

You know mid to high single digit dividend growth curious about capital allocation now that the merger is closed and thinking about balancing project opportunities with.

Allocating free cash towards repurchases and dividend growth to be competitive with peers.

Brian Reynolds: And as we look towards 2024 and the opportunities that we have, we see quite a bit of opportunity without any significant material capital projects that we're ready to announce. So we think we're set up very well for 2024, but we'll give you the guidance in February to firm that number up. Great. Fair enough. I'll leave it there. Have a great extra morning. Thank you.

Yes.

Hum.

As I just mentioned our debt metrics are coming in line, even quicker than we had expected.

We continue we think that the direction will continue and.

And that's going to give us a significantly greater flexibility as we move forward to think about capital allocation.

It is going to give us plenty of capital to take advantage of high return projects as they become available and think about ways of returning value to shareholders and we're going to weigh that out as.

Jeremy Tonet: And our next question today comes from Jeremy Tunei with J.P. Morgan. Please go ahead. Hi. Good morning. Hi, Jeremy. Just maybe want to pick up on the last question a little bit and fully appreciate not getting 24 guidance today, but just trying to get a state of affairs as it stands right now. And I think, you know, I wanted to be kind of clear, I guess, on the guidance. And if I'm looking at this the right way, if what's implied for remainder of the year for fourth quarter about, I think, just over 1.4 billion, but then on a normalized basis, you back out most of that 50 million inventory adjustment.

Jeremy Tonet: And then there's just a 40 million or so transaction cost. So it seems like the run rate for the business might be close to 1.5 billion looking at 4Q. Now, granted, there's seasonality that can impact that at different points throughout the year. But then you also have 200 million of synergies from a challenge that should be realized and you have do have an increasing G.O.R, and there's other projects that come on over time in 24.

As we get into 'twenty four.

As we see forward, where our debt metrics are headed and we'll give you more clarity as we get into February.

I appreciate it Walter and then maybe Sheridan.

Where do you see sort of this <unk> theme, particularly in the Bakken going long term.

Particularly as producers consolidate.

Operator consolidation drives pretty sure efficiency, but just.

What's the end game or in terms of where do we top out from a <unk> perspective long term.

Tristan that's a good question and we've had we've had that talk to our producers about that as well and they don't know where the top end of it is what we do know is as wells continue to age the <unk> continues to grow up grow.

Jeremy Tonet: And just wondering, moving pieces wise, is that encapsulate what we should be thinking about? Is that a good base to work off of or any other color on these pieces would be helpful? Well, Jeremy, I think you've done a good job of summarizing some of the moving parts there. And at this point, I would say, are all moving in a favorable direction. In my prepared remarks, I mentioned that on a run rate basis, after you take out the merger expenses and the like, that we expect to be approximately at 3.7 times debt to EBITDA in the fourth quarter, which is ahead of the expectations that we have when we announce the transaction.

Now, we do see some up and down in the Geo are overall for the basin, because as new rigs come on depending on where they come on they may have a starting point of a lower or higher <unk>. So overall it makes it move around but every well up there as it continues to decline the <unk> continue to rise and so that gives us a lot of confidence.

Even in a flat crude environment, which crude is growing right now, but in a flat crude environment. We are still going to see some pretty good growth in the gas volume in block in the basin.

Appreciate it thank you gentlemen.

Thank you and our next question today comes from Jean Ann Salisbury with Bernstein. Please go ahead hi.

Good morning, you referenced and contracting in the Permian on nine plants to kind of underpin West, Texas, LPG and the leaping can you give any more detail on the duration of those contracts, even qualitatively as I'm sure you're aware, we seem to be heading towards severe Permian NGL pipe overbuild in 2025, so having long term contracts.

Jeremy Tonet: So that's obviously showing that we've got favorable free cash flow materializing and that's going to give us even more flexibility as it relates to capital allocation as we go into 2024. And we'll update y'all on that as we get into the 2024.

It seems important.

I would say that we have long term contracts.

Pierce Norton: Good, that's very helpful, and I guess wouldn't be a Wall Street analyst if I wasn't asking now that the Inc is dry in the Magellan agreement. Anything you can share in what you're working on now going forward? Jeremy, this fierce, you know, we do the same thing we've always done, which is we continue to look at different things out there. And like Walt said, you know, with the cap allocation. And strategy that we have, you know, it's just a lot more flexible going forward, post Magellan, and especially with our debt to even metrics coming down quicker than what we expected. So it's probably about as much color as I can get. Got it. That's helpful. I'll leave it there. Thanks. Thank you.

That's the people that we have contracted with both now and for the LPG expansion or the NGL expansion or long term contracts. So we feel comfortable that we have the volume behind to be you have a.

Very favorable return on that project and with a lot of upside as we continue to grow we think it's a very cost effective way to do it that we can be able to compete going forward, even as new pipelines come online.

Thanks, that's helpful.

And you May have said this before but can you remind us roughly what portion of the liquids pipelines for the combined company do you think you can generally take default PPI indexation.

Okay.

On the liquids pipelines on the NGL pipeline and a lot of it is more driven by individual contracts as we do is not as much on the tariff itself and then there's a larger portion of that on our new refined product system that contain that but about 70% of our tariffs on the refined product system or a market.

Michael Blum: Our next question today comes from Michael Bloom with Wells Fargo. Please go ahead. Thanks.

Sheridan Swartz: Good morning, everyone. I wanted to ask on the West Texas NGL pipeline expansion in the slide. You mentioned optionality to use the legacy system for NGLs or foreign products or crude. And one of you just expand on that as any way to get a sense of how you think that will kind of split. Over time. Michael, this shirt and I think what we're talking about there is that as we explained before, the legacy system that we bought from Chevron, we've been looping that system from West Texas all the way into the Fort Worth area where we tie into the Arbuckle to pipeline.

Right that we can move as we want to and so 30% would be more on FERC tariff rate.

Great. Thanks, so much.

Yeah.

Thank you and our next question today comes from Harry Mateer with Barclays. Please go ahead.

Hey, good morning.

You mentioned the three seven times annualized run rate leverage number for <unk> X transaction costs I guess.

Blowing up on Jeremy's question a bit.

Curious how much seasonality in that number and can you just confirm your goal is still to bring leverage to three five times level that you've previously laid out and it sounds like more quickly than you previously thought.

Sheridan Swartz: When that loop is completed, which is in our West Texas project, we can segregate all out the legacy system. The system we bought from Chevron and used it for a different product. And that is in one of the things we're looking at in Cinderdeez and we'll continue to evaluate as we go forward. But that gives us an opportunity to be able to move more product back into the Permian, whether that be, you know, refined products.

Okay.

Well, Harry we're pretty positive on 24, and where things are headed so I think that we expect to continue to make progress.

On our leverage metrics as we go throughout 2024.

We've set aspirational, we all along that the three and a half is a good good spot to be we don't care. If we go below it a little bit.

Sheridan Swartz: That's where it gives us opportunity to move crude out of the Permian into the Gulf Coast or leave it in NGL service. That's probably more of a longer term type synergy that we have right now as we continue to look at that. But we do think that is an opportunity going forward to be able to leverage our three liquid pipeline streams in that pipeline, what we use at Fort Worth. Okay, got it. Thanks for that.

That's fine.

Yes.

[noise] significant earnings and it drives our debt to EBITDA below three five.

Good good problem to have.

So we're.

Very pleased with the trajectory of that.

Our credit metrics.

Sheridan Swartz: And then just one question on the back end. It seems like the Bison Express pipeline project is leaving ahead. So want to get your thoughts on that project. Does this reduce ethane recoveries volumes for you or ultimately, should we think of this as a sort of a tailwind? Because ultimately, it opens up the potential for more natural gas production in the basin, which obviously lead to more associated NGL production. Mike, I think what this project does is make sure that we have enough natural gas takeaway out of the basin.

Eric and Oh, No reason to think it's going to change in the direction.

Okay. Thanks, and then my follow up was when you're thinking about that target.

How do you go about the balance between EBITDA growth and debt reduction maybe put differently you should should we think about one of them being in the barn bond market refinancing you have some small maturities next year or do you think it's more likelihood free cash will take care of that and maybe that puts one okay out of the bond market for a while as things currently stand.

Well I'm not going to say, we will or we won't be in the bond market, but I would just say that the last several maturities that we've had we've called for cash we're generating a lot of cash.

Sheridan Swartz: We wouldn't want that to be a constraint on the producers up there. Well, I do not think it has a big impact on our incentivized ethane program that we've had going on there because today there's enough natural gas production coming out of the basin. So I think it's going to allow the producers continue to grow and have a surety of natural gas takeaway without hurting our ethane recovery. Thank you.

So I think we've got the flexibility to.

To manage our debt portfolio.

And I'm very comfortable manner.

But we're going to keep our flexibility if the market if it makes sense for us to go to the credit markets for a reason where are we.

We may or may not do that but.

You can see what we've done in the last several in the.

Spiro Dounis: And our next question today comes from Spiro Dounis with the city. Please go ahead. Thanks, operator, and team. First question just to move on the export opportunity. I don't think that was a synergy necessarily when you announced the deal, but something you'd maybe been better positioned to do post Magellan. Just curious where that stand now and expanding into exports is kind of high on the prairie list of things to do post close.

Given the size.

Probably going to maintain that flexibility.

Okay understood. Thank you.

Thank you and our next question today comes from Neal Dingmann with <unk> Securities. Please go ahead.

Good morning, all thanks for the time My first question just around the synergy ops that you talked about on slide eight specifically.

I don't know if you all could comment yet maybe it's too early but I'm. Just wondering if you could comment on how quickly you all are thinking about the potential for start realizing some of that batching upside which looks quite interesting.

Pierce Norton: Here, this is Pierce Nullet. Sheridan kind of fill in some of the details here, but we've said all along that what Magellan brings to us is the expertise to operate docs and to build docs and to just really understand the dynamics of marketing across docs. We don't expect to necessarily turn any of those docs into anything other than what they're currently doing, but we do believe that global demand will continue to grow both in crude and both in probably refined products and look for petroleum gas and protein.

Yeah.

I mean, just in general as we look at the synergies, obviously theyre going to there's going to be a variety of scenarios that play out. Some some will get very quickly potentially by the end of the year. There may be others that are going to take some you know some capital and some effort to.

Put things in the pipeline in the ground or or other activities like that that may that may span out of ways. So it'll be a blend but.

But I think again the focus here is that our confidence level in achieving these things continues to grow as we get more information.

Pierce Norton: So, you know, we're going to continue to look at that and as the market dictates and as we learn more and if we get some customers that either on the producing side or the takeaway side, it wants to take space across docs and we're going to continue to look at that.

That makes sense and then go ahead go ahead I'm sorry.

So this is this here's what I can tell you is that.

Sheridan Swartz: So, Sheridan, you got anything to add? The only thing I would add to that Pierce is that with the addition of the Magellan employees, we have much more confidence in both our engineering and operation capability since that is what they bring to the table. So, they are already operating marine docs and have it built marine docs. Got it. That's great color. Thanks for that guys.

Kind of a tagging onto what Kevin is saying is that we are confident that these opportunities are there.

Just a matter of the timing of when they come in and we'll let you know that as we give our guidance from year to year.

Okay. Thanks for that and then just you touched upon this a little bit earlier and my second question is just on Rockies and mid con activity seemed like last quarter was solid you talked about.

Sheridan Swartz: The second question just going to the Bakken. I guess we're hearing increased talk of Pierce maybe looking to develop LNG infrastructure in the region too. You've obviously got a pretty good stronghold there, but I'm curious how you're assessing that the risk of kind of new competition in the basin and going forward. What I, this is Sheridan again, what I would say on competition coming in the basin is what we said for many times is that on the GMP side, we have 60% of the market share and that feeds our NGL pipeline.

A number of connects there, especially in the Rockies I'm. Just wondering are you currently seeing sort of similar type activities are sending any color you could add there. Thank you.

This shared Neil this shared and yet we still are seeing.

Seeing good activity in the Bakken, we've increased our well count activity and that just to show you. What we're seeing and then we can we think thats going to continue.

No thats going to continue into 2024 and the Balkans. So we're very excited about that.

Sheridan Swartz: So, we're very, very secure about that volume. And then on the third party in NGL customers, we have long-term contracts with them. And that also gives the security that we will be able to maintain our volume coming out of the Bakken and be able to capture the growth going forward.

That's why we continue to continue moving on long lead time items with Elk Creek expansion and then the mid continent. As we said multiple times is really been surprising us to the upside that more producer activity out there, especially with the oil driven rigs that are producing high GPM or high liquid content gas, that's really don't really producing more gas in.

Unknown Executive: Great.

Unknown Executive: That's all I had today guys.

Unknown Executive: Thank you.

The region, but also more liquids for the NGL pipeline. So we continue to see growth being very <unk>, we're very optimistic about growth going through the <unk>.

Tristan Richardson: And our next question today comes from Tristan Richardson.

Walter Hulse: Let's go to the bank. Please go ahead. Hey, good morning guys. Appreciate the comments on what you're seeing so far early in the merger. Just curious. Like we've replaced the concentric circle with a telescope, but in that telescope, you talk about mid to high single digit dividend growth. It's curious about capital allocation now with the mergers closed and thinking about, you know, balancing project opportunities with allocating free cash for repurchases and dividend growth to be competitive with beer.

<unk> fourth quarter and into 2024.

Great details thanks, guys.

Thank you and our next question today comes from Theresa Chen with Barclays. Please go ahead.

Okay.

Okay.

Related to the line of commentary around the synergies can you just help us think about how much on commercial synergies are in that $4 50 to 472.

Walter Hulse: Well, Tristan, as I just mentioned, our debt metrics are coming in line even quicker than we had expected. We think that direction will continue, and that's going to give us significantly greater flexibility as we move forward to think about capital allocation. It's going to give us plenty of capital to take advantage of high return projects as they become available and think about ways of returning value to shareholders. We're going to weigh that out as we get into 24, as we see forward where our debt metrics are headed and we'll give you more clarity as we get into February. Appreciate it, Walter.

2023, refined products and crude and EBITDA guidance for the year and specifically are there incremental butane blending opportunities. During this winter on <unk> outside of what <unk> had locked in during this past summer just in light of still elevated octane spreads versus historical levels and your natural.

And contained coupled with your marketing and optimization capability.

Teresa Yeah, we do think Theres, a little bit this quarter as you said, that's a lot of it has been locked down or been hedged, but we do have some above that and we are seeing wider spreads at this time. So red availability is there and also with our position legacy normal butane position there's.

There, we will have the butane available and we can work a little bit on logistics cost. We think most of that is really going to come as we come into next year, where we'll see a much bigger opportunity for synergies in the butane blending in the 2024 time frame.

Sheridan Swartz: And then maybe Sheridan, where do you see sort of this GOR theme, particularly in the back and going long-term? The particular is, it's a producer's consolidate, operator consolidation drives producer efficiency, but what's the end game or in terms of where do we top out from a GOR perspective long-term? You know Tristan, that's a good question and we've had that talk to our producers about that as well, and they don't know where the top end of it is.

Thank you.

Thank you and our next question today comes from Keith Stanley at Wolfe Research. Please go ahead.

Hi, good morning.

First just a follow up on West, Texas, LPG, its a big step up in capacity from 300, a day to 740 <unk>.

Sheridan Swartz: What we do know is as well as continue to age the GOR continues to grow up. Now we do see some up and down in the GOR overall for the basin because as new rigs come on depending on where they come on, they may have a starting point of a lower or higher GOR, so overall it makes it move around, but everywhere up there as it continues to decline, the GORs continue to rise.

You see any strategic rationale to to building or buying Permian plants to bolster your long term NGL supply position. It would seem like you'd have a lot of synergies doing that in a lot of operating leverage as you fill the pipeline.

Keith we continue to look at that and we've looked at a lot of different opportunities out there. What I can tell you is just by US expanding we started off at about 140000 barrels a day now we're going up to 700000 barrels a day. It has not been an impediment for us to be able to contact contract Ngls.

Sheridan Swartz: And so that gives us a lot of confidence that even in a flat crude environment, which crude is growing right now, but in a flat crude environment, we are still going to see some pretty good growth in the gas volume in the back in the basin. Appreciate it.

On that pipeline, but we will continue to look at as opportunities come if we need to get into the GMP space and if it makes sense, we will get into it and do that but so far we've been able to.

Unknown Executive: Thank you, gentlemen.

Jean Salisbury: Thank you, and our next question today comes from Janine Salisbury with Burstein.

Sheridan Swartz: Good morning. Hi, good morning. E-reference contracting in the Permian on nine plants to kind of underpin West Texas LPG and the looping. Can you give any more detail on the duration of those contracts even qualitatively? As I'm sure you're aware, we seem to be heading towards severe Permian-injil pipe overbilled in 2025, so having long-term contracts seems important. I would say that we have long-term contracts. The people that we have contracted with both now and for the LPG expansion or the Injil expansion or long-term contracts, so we feel comfortable that we have the volume behind to have a very favorable return on that project. And with a lot of upside as we continue to grow, we think it's a very cost-effective way to do it that we can be able to compete going forward even as new pipelines come online.

To contract and expand that pipeline without having a G&P presence and a lot of that is as you think about it we have a very integrated value chain and touch.

A lot of the producers out there in many different areas that way, if we look holistically across our system, we can create and offer a very attractive.

Program to them to incentivize barrels coming onto our West Texas system.

Hey, Keith this is pierce.

Think this is the point in the call where I tell you that we're going to be intentional and disciplined about any future M&A opportunities.

Got it thanks for that.

Second question on <unk>, and sorry, if I missed this but.

Can you say are you in discussions we're looking at working with potential partners on the project or do you think it's more likely you would move forward on that by yourself.

Sheridan Swartz: Thanks a couple. And you may have said this before, but can you remind us roughly what portion of the liquids pipelines for the combined company do you think you can generally take the full PPI indexation on? On the liquids pipelines, on the NGO pipeline, a lot of that is more driven by individual contracts as we do as not as much on the tariff itself. And then there's a larger portion of that on our new Refineproduct system that contains that about 70% of our tariffs on the Refineproduct system are a market rate that we can move as we want to, and so 30% would be more on that for tariff rate. Great, thanks so much.

We're in a position right now where we're working towards.

<unk> D and expecting the presidential permit.

Uh huh.

By the end of the year and are well lay out.

The full program, if and when we get to that.

The point in time.

Okay. Thank you.

Thank you and our next question comes from Shneur <unk> with Seaport Global Securities. Please go ahead.

Yes, hi, good morning, everybody and thanks for taking my questions. So my first question was.

Related to the West, Texas, LPG and I apologize if I missed this could you indicate what is that system running at right now it seems like in.

Harry Mateer: Thank you, and our next question today comes from Harry Mateer with Barclays, please go ahead. Hey, good morning. You know, while you mentioned the 3.7 times annualized one rate leverage number for 4QX transaction costs, you know, I guess following up on Jeremy's question a bit, just curious how much seasonalities in that number and can you just confirm your goal still to bring leverage to the 3.5 times level that you previously laid out, and it sounds like more quickly than you previously thought.

<unk> had a little bit of a step down in volumes.

Sure.

Okay.

Our west, Texas, LPG throughput, yes, we can.

I am sorry, as soon as your question about how what our volumes looking at like on the West Texas throughput today.

Yes.

Buck.

Yeah.

Yeah, our volumes continue to we continue to grow that volume, especially as we bring some of these plants online, but right now we're running about.

Harry Mateer: Well, Harry, we're pretty positive on 24 and we're things are headed. So I think that, you know, we expect to continue to make progress on our leverage metrics as we go throughout 2024. You know, we've said aspirationally all along that that 3.5 is a good good spot to be. We don't care if we go below it a little bit. That's fine. If we've got significant earnings and it drives our debt to even 0035, you know, that's a good problem to have. So we're very pleased with the trajectory of that credit metric and have no reason to think it's going to change any direction.

400.

430000 barrels a day is coming through a whole Gulf coast, Permian and Gulf Coast system on the LPG side.

And we have capacity and when we get this completed we will have capacity for over 740000 barrels a day.

Okay. Thanks for that.

And then my second question was a little bit more broader.

<unk> seen a number of E&P deals announced over the course of last few months.

And I was curious you know if you had any.

Dialogues with your E&P customers with regard to that and how is that impacting your dialogue with the producer customers.

So I'll kind of take.

Walter Hulse: Okay, thanks. And then my follow-up was when you think about that target, how do you go about, you know, the balance between you with dog growth and deproduction and, you know, maybe put differently. Should we think about 1.0 being in the bond market refinancing, you know, you have some small materies next year. Do you think it's more likely that free cash will take care of that and maybe that puts 1.0 out of the bond market for a while as things currently stand?

<unk>.

Big Picture question first of all I think with the.

Go all the way back to oxy.

What they did with Anadarko and then fast forward to what Exxon has done in the most recently chevron.

We actually view that as very positive because.

Most of those companies are kind of reinvesting in domestic.

Production.

Walter Hulse: Well, I'm not going to say we will or we won't be in the bond market, but I would just say that the last several majorities that we've had, we've called for cash, we're generating a lot of cash. So I think we've got the flexibility to manage our debt portfolio in a very comfortable manner. But we're going to keep our flexibility if it makes sense for us to go to the credit markets for a reason where, you know, we may or may not do that. But, you know, you can see what we've done the last several and given the size we would probably going to maintain that flexibility.

A very large company says that we see that as a positive.

Our domestic production here in the United States. So that's the first thing I'd say.

Second thing was as we do business with all of those people and now that we are not only in gathering and processing and natural gas pipelines.

Walter Hulse: Okay. I understand.

On the NGL business refined products and crude that goes into this bundling concept where.

Neil Dingley: Thank you.

When you have that as a producer what are your areas you've added a different businesses.

Going forward, we just feel like there's even going to be more opportunities.

To bundle different deals together.

Get more and more businesses with these larger companies.

Okay. Thanks, Thanks, guys.

Thank you and our next question today comes from Neel Mitra with Bank of America. Please go ahead.

Neil Dingley: And our next question today comes from Neil Dingley. We're true securities. Please have a have.

Neil Dingley: Bonneville, thanks for the time. My first question just around the synergy ops that you talked about on slide 8. Specifically, I don't know if you all could come at yet. Maybe it's too early, but I'm just wondering if you could comment on how quickly you all are thinking about the potential first start realizing some of that batching upside, which looks quite interesting. I mean, just in general, as we look at the synergies, obviously, they're going to, there's going to be a variety of scenarios that play out some, you know, some will get very quickly, potentially by the end of the year.

Hey, good morning, Thanks for taking my question so it seems like.

Everything is going well.

Below four times leverage easily for 2024 and $6 billion in guidance is pretty conservative how are you looking at shareholder returns right now.

A repurchase program in 2024 on the table.

Just as we look for how to return cash to share.

Shareholders. After this.

This merger and when we can think about.

Neil Dingley: There may be others that are going to take some, you know, some capital and some effort to put things in the, you know, pipeline in the ground or other activities like that that may, that may span out of ways. So, it'll be a blend, but I think again, the focus here is that, you know, our confidence level and achieving these things continues to grow as we get more information. Yeah, basically, and then go ahead, I'm sorry.

How are we going to do that.

Well I would say clearly our financial flexibility is is increasing and the all of the capital allocation tools that are available are available to us and will be considered.

Going forward so.

Plenty of flexibility and stay tuned.

Okay, Great and then second question on.

Neil Dingley: Well, so this is, this is what I'm going to tell you is that kind of a tagging on to what Kevin has said is that we are confident that these opportunities are there. It's just a matter of the timing of when they come in and we'll, we'll let you know that as we give our guidance for year to year. Okay, thanks for that ad. And then just, you touched on this a little bit earlier.

Building an LPG.

Terminal on the Gulf Coast.

Some of your peers have talked about holiday initially priced at Greenfield and now they will price everything at brownfield to try to combat new entrant does.

Does this make <unk>.

<unk> exports are in your terminal kind of lower on the priority list than the batching bundling et cetera, when you.

Neil Dingley: My second question is just on Rockies and Midcon activity. See my last quarter was solid. You talked about a number of connects there, especially in the Rockies. I'm just wondering, are you currently seeing sort of similar type activities are sending any clarity to that there? Thank you. Yeah, we still are seeing good activity in the Balkan. You know, we've increased our well count activity. And that's to show you what we're seeing.

Consider the barriers to entry just with pricing.

For existing players that are in the space right now.

Neil This is Sheridan.

Neil Dingley: And then we can, we think that's going to continue or know that's going to continue into 2024 in the Balkan. So we're very excited about that. And that's why we continue to continue moving on long lead time items for the Elk Creek expansion. And then the midcontinent is we said multiple times. It's really been surprising us to the upside that more producer activity out there, especially with old driven rigs that are sprucing high GPM or high liquid content gas.

We still have aspirational to have the LPG export terminal.

Not going to do a project that's uneconomical.

But we do have one of the only person that has the amount of volume.

At our disposal to be able to support a new dock and we do have customers that are interested in seeing a new dock being built so we think theres an opportunity there as well as it relates to how we prioritize that with our other opportunities we're going to as Kevin said, we're going to look at things now on capital how quickly we can get it to market and how much.

Neil Dingley: It's really not only producing more gas in the region, but also more liquids for the NGL pipeline. So we continue to see growth be in very often. We're very optimistic about growth going through the fourth quarter and into 2024. Great details. Thanks, guys. Thank you.

Money, we're going to make on that to determine which projects. We have our resources work on but I don't think that the LPG export dock has moved down in the list from where it is before we still are continuing to look at and still have conversations but it is a much longer term.

Project and some of the other ones that we have in the synergy category.

Theresa Saatenwood: And our next question today comes from Teresa Saatenwood Barclays. Please go ahead. Hi, I wanted to say related to the line of commentary around the synergies. Can you just help us think about how much commercial synergies are in that 450 to 470. 2023 refined products and crew the duck items for the year and specifically are there incremental beauty blending opportunities during this winter and 4Q outside of what MNP had locked in during this past summer.

Got it I appreciate the commentary thank you.

Thank you and our final question today comes from Craig Shere with Tuohy Brothers. Please go ahead.

Hi, congratulations on the closing in quarter and thanks for taking the question.

Just one for me and you've kind of talked around this a little bit or kind of responded to some Q&A on it but.

<unk>, you mentioned prioritizing incremental commercial opportunities identified post close at the start of this call.

Theresa Saatenwood: Just in light of still elevated octane spreads versus historical levels and your natural length and beauty coupled with your marketing and optimization capability. Teresa, yeah, we do think there's a little bit this quarter. You said it best. A lot of it has been locked down or been hedged, but we do have some above that. And we are seeing wider spreads at this time, to see normal butane position. If there's opportunity there, we'll have the butane available and we can work on a little bit on logistics cost.

And I'm, a little unclear given all the commentary.

It was mostly about shopping word and management bandwidth or despite better than expected deleveraging are you starting to see more accretive capital deployment opportunities in your prepared to pursue all at once.

Theresa Saatenwood: We think most of that's really going to come as we come into next year, we'll see a much bigger opportunity for synergies in the butane blending in the 2024 time frame. Thank you.

Well, what we are seeing is as we have put these two.

As a reminder.

Higher to September the 25th.

You are limited in how much discussion and how far you can go with some of these discussions both on the with people contracts commercial opportunities. So what we're seeing is as we have gotten access to all the information all the contracts and the people and our people are working together.

We're just seeing more and more opportunities.

Keith Stanley: Thank you and our next question today comes on Keith Stanley at Wolf Research. Please go ahead. Hi, good morning.

And so we're going to we're going to prioritize that it's hard to tell right now if we've overrun.

Some of those kind of things, but thats something that were.

Keith Stanley: First just a follow up on West Texas LPG. It's a big step up in capacity from 300 a data 740. Do you see any strategic rationale to the building or buying Permian plants, the bolster your long term NGL supply position? It would seem like you'd have a lot of synergies doing that and a lot of operating leverage as you filled the pipeline. Keith, we continue to look at that and we've looked at a lot of different opportunities out there.

We definitely have enough that we can prioritize the things that are going to make the highest impact in the shortest amount of time.

So those are the ones that were focusing on and we're managing managing through the rest of it but we're not going to we're not going to lose an opportunity because we feel like we are.

We don't have resources will get resources to deal with us.

Fair enough. Thank you.

Thank you and ladies and gentlemen. This concludes our question and answer session I would like to turn the conference back over to Andrew for closing remarks.

Keith Stanley: What I can tell you is just by us expanding, we started off at about 140,000 barrels a day. Now we're going up to 700,000 barrels a day. It has not been an impediment for us to be able to contact contract NGLs on that pipeline, but we will continue to look at as opportunities come if we need to get into the GNP space and if it makes sense, we will get into it and do that.

Alright, Thank you everybody our quiet period for the fourth quarter starts when we close our books in January and extends until we release earnings in late February we'll provide details for that conference call. At a later date. Thank you for joining us and have a good day.

Thank you Sir This concludes today's conference call Conference. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Keith Stanley: But so far, we've been able to contract and expand that pipeline without having a GNP presence. And a lot of that is, as you think about, we have a very integrated value chain in touch. A lot of the producers out there in many different areas. So if we look holistically across our system, we can create and offer a very attractive program to them to incentivize barrels coming on to our West Texas system.

Pierce Norton: And Keith, this is Pearson. I think this is the point in the call where I tell you that we're going to be intentional and disciplined about any future M&A opportunities. Got it. Thanks for that.

Sheridan Swartz: Second question on Swaro, and sorry if I missed this, but can you say, are you and discussions are looking at working with potential partners on the project, or do you think it's more likely you would move forward on that by yourself? Yeah, we're in a position right now where we're working towards FID and expecting the presidential permit here by the end of the year, and we'll lay out the full program if and when we get to that FID point in time. Okay. Thank you.

Unknown Executive: And our next question comes from Seville for all with C4 Global Security. Please go ahead. Yeah, hi. Good morning, everybody. And thanks for taking my questions. So my first question was related to the West Texas LPG and Apologize. If I missed this, could you indicate, you know, what is that system running at right now seems like, you know, three years had a little bit of step down in volumes. All right. Oh, West Texas LPG throughput.

Unknown Executive: Yeah, we can. I'm sorry, as soon as you're question about what, what are our volumes looking at like on the West Texas throughput today? Yeah. We continue to grow that volume species, we bring some of these plants online, but right now we're running about, you know, 400 and 430,000 barrels a day is coming through a whole Gulf Coast, Permian Gulf Coast system on the LPG system. And we have capacities when we get this completed, we'll have capacity for over 740,000 barrels a day.

Pierce Norton: Okay, thanks for that. And then my second question was a little bit broader, you know, we've seen a number of ENP deals announced over the course of last few months. And I was curious, you know, if you had any dialogues with your ENP customers with regard to that and how is that impacting your dialogue with the producer customers. So I'll kind of take, I think it's a big picture question. First of all, I think with, you know, go all the way back to the oxy, you know, with what they did with Anadarko, then fast forward to what X-Con has done in the most recently Chevron.

Pierce Norton: We actually do that as very positive because most of those companies are kind of reinvesting in domestic production. Very large companies. So we see that as a positive for domestic production here in the United States. That's the first thing I'd say. The second thing was as we do business with all of those people. And now that we are not only in gathering a processing, but in natural gas pipelines in the NGO business for fine products and crude, that goes into this bundling concept where when you have that as a producer, one of your areas, you've added a different businesses going forward. We just feel like there's even going to be more opportunities to bundle different deals together to get more and more businesses with these larger companies.

Unknown Executive: Okay. Thanks. Thanks, Bruce.

Unknown Executive: Thank you.

Neil Mitchell: And our next question today comes from Neil Mitchell with Bank of America. Please go ahead. Hey, good morning. Thanks for taking my questions. So it seems like, you know, everything's going well. You're going to be able to four times leverage easily for 2024 and the fixed billing and guidance is pretty conservative.

Walter Hulse: How are you looking at shareholder returns right now is a repurchase program in 2024 on the table. Just as we look for how to return cash to share shareholders after, you know, this merger and when we can think about how we're going to do that. Well, I would take clearly our financial flexibility is increasing and all of the capital allocation tools that are available are available to us and will be considered going forward. So plenty of flexibility and stay tuned.

Unknown Executive: Okay. Great.

Sheridan Swartz: And then second question on, you know, building an LPG terminal on the Gulf Coast. Some of your peers have talked about how they initially priced at Greenfield and now they will price everything at Brownfield to try to combat new entrance. Does this make LPG exports or a new terminal kind of lower on the priority list than the batching, bundling, et cetera, when you consider the bearers fanatry just with pricing for existing players that are in the space right now.

Sheridan Swartz: Neil, this Sheridan, we still have aspirational to have LPG export terminal. We're not going to do a project that's uneconomical, but we do have one of the only person that has the amount of volume at our disposal to be able to support a new dock and we do have customers that are interested in seeing a new dock being built. So we think there's an opportunity there as well. As it relates to how we prioritize that with our other opportunities, we're going to, as Kevin said, we're going to look at things on capital, how quick that we can get it to market and how much money we're going to make on that to determine which projects we have our resources work on, but I don't think that the LPG export dock has moved down in the list from where it is before. We still are continuing to look at and still have conversations, but it is a much longer term project than some of the other ones that we have in the synergies category.

Unknown Executive: God, I appreciate the commentary. Thank you.

Pierce Norton: And our final question today, how shall we share with two e-brothers? Please go ahead. Hi, congratulations on the closing and quarter and thanks for taking the question. Just one for me, and you kind of talked around this a little bit or kind of presented some Q&A on it, but you mentioned prioritizing incremental commercial opportunities identified post-close at the start of this call. And in a little unclear given all the commentary, if this is mostly about shopping wood and managing bandwidth, or despite better than expected deleverging, are you starting to see more creative capital deployment opportunities than you're prepared to pursue all at once?

Pierce Norton: Well, what we are seeing is as we have put these two, you know, just as a reminder, you know, prior to September the 25th, you are limited in how much discussion and how far you can go with some of these discussions both on with people, contracts, commercial opportunities. So what we're seeing is as we have gotten access to all the information, all the contracts, and the people, and our people are working together, we're just seeing more and more opportunities.

Pierce Norton: You know, and so we're going to, we're going to prioritize it. It's hard to tell right now if we've overrun some of those kind of things, but that's something that we're, you know, we definitely have enough that we can prioritize the things that are going to make the highest impact in the shortest amount of time. So those are the ones that we're focusing on, and we're managing through the rest of it, but we're not going to, we're not going to lose an opportunity because we feel like we're, you know, we don't have resources, we'll get resources to deal with us.

Unknown Executive: Fair enough, thank you. Thank you.

Andrew Ziola: Emily, do you want to include your question and answer session? I'd like to turn the conference back over to Andrew Zileau for those new marks. All right, thank you everybody.

Unknown Executive: Our quiet period for the fourth quarter starts when we close our books in January and extends until we release earnings in late February. We'll provide details for that conference call at a later date. Thank you for joining us and have a good day. Thank you, sir.

Unknown Executive: This includes today's conference. Yes, conference. We thank you all for attending today's presentation.

Unknown Executive: You may not have to select your lines and have a wonderful day.