Q3 2023 Plains GP Holdings LP Earnings Call

November 3, 2023

Okay.

Speaker 1: Good day and thank you for standing by. Welcome to Plains All America's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.

Good day, and thank you for standing by and welcome to Plains, All American <unk> third quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an audit.

Message advisor in your hand, it's race to withdraw your question. Please press star one again, please be advised that today's call is being recorded I would now like to hand, the conference over to your speaker today, Blake Fernandez, Vice President Investor Relations. Please go ahead Sir.

Speaker 1: To withdraw your question, please press star 1-1 again. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker today, Blake Fernandez, Vice President, and VES relations. Please go ahead, sir.

Speaker 2: Thank you, Norma. Good morning and welcome to Plains All-American third quarter 23 earnings call. Today's slide presentation is posted on the investor relations website under the news and events section at Plains.com. An audio replay will also be available following today's call.

Thank you Norma good morning, and welcome to Plains, All American third quarter 23 earnings call. Today's slide presentation is posted on the Investor Relations website under the news and events section of claims Dot Com an audio replay will also be available following today's call.

Speaker 2: Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide two. An overview of today's call is provided on slide three. A condensed consolidating balance sheet for PAGP and other reference materials are in the appendix.

Gordon disclosures regarding forward looking statements and non-GAAP financial measures provided on slide two and overview of today's call is provided on slide three a condensed consolidating balance sheet for PAGP and other reference materials are in the appendix.

Speaker 2: Today's call will be hosted by Willie Chang, our Chairman and CEO , and Al Swanson, Executive Vice President and CFO , as well as other members of our management.

Today's call will be hosted by Willie Chang, our chairman and CEO.

Ill Swanson executive Vice President and CFO as well as other members of our management team with that I will turn the call over to Willy. Thanks, Blake Happy Friday, everyone and thank you for joining us this morning.

Speaker 3: With that, I will turn the call over to Willie. Thanks, Blake. Happy Friday, everyone, and thank you for joining us this morning. Today, we reported strong third quarter results along with the closing of two Permian gathering bull town acquisitions and the continued execution of our multiyear capital allocation framework, which is focused on lowering leverage and increasing the return of capital to our unit.

We reported strong third quarter results, along with the closing of two Permian gathering bolt on acquisitions and the continued execution of our multi year capital allocation framework, which is focused on lowering leverage and increasing the return of capital to our unit holders.

Speaker 3: As a result of our year-to-date performance and the partial year contributions of our recent Volt On acquisitions, we are raising our full year 2023 adjusted EBITDA guidance to a range of $2.6 to $2.65 billion.

As a result of our.

Year to date performance and the partial year contributions of our recent bolt on acquisitions, we are raising our full year 2023, adjusted EBITDA guidance to a range of two six to $2 65 billion. This reflects an increase of $50 million to $100 million from the high end of our previous guidance range of high level one.

Speaker 3: This reflects an increase of 50 to 100 million from the high end of our previous guidance range. A high level overview of our updated 2023 guidance is located on slide 4. Al will share additional details in his portion of the call.

A review of our updated 2023 guidance is located on slide four and al will share additional detail in his portion of the call.

Speaker 3: As summarized on slide five, our Permian JV acquired Rattler midstreams southern Delaware Basin crew gathering system and LIM energies northern Delaware Basin touchdown crew gathering system for an aggregate cash consideration of approximately 205 million or approximately 135 million net to plane.

As summarized on slide five our Permian JV acquired Rattler midstream Southern Delaware Basin crude gathering system, and <unk> Energy's Northern Delaware basin touchdown crude gathering system for an aggregate cash consideration of approximately $205 million or approximately $135 million net to <unk>.

Speaker 3: These bolt-on acquisitions are expected to generate unlevered returns in line with our return thresholds of approximately 300 to 500 basis points above our weighted average cost of capital in addition to enhancing our position in the Delaware Basin.

These bolt on acquisitions are expected to generate Unlevered returns in line with our return thresholds of approximately three to 500 basis points above our weighted average cost of capital. In addition to enhancing our position in the Delaware Basin.

Speaker 3: The assets will further position the Permian JV to expand its service and offerings and extend commercial relationships with both new and existing customers.

The assets will further position the Permian JV expanded service and offerings and extend commercial relationships with both new and existing customers.

Speaker 3: Regarding today's capital allocation update, we continue to make meaningful progress towards our goal of lower absolute debt and maintaining a strong balance sheet that can withstand various commodity cycles.

Regarding todays capital allocation update we continue to make meaningful progress towards our goal of lower absolute debt and maintaining a strong balance sheet that can withstand various commodity cycles.

Speaker 3: As highlighted on slide six, we are lowering our long-term leverage ratio target range to 3.25x to 3.75x. This is intended to be a long-term leverage ratio target range.

As highlighted on slide six we are lowering our long term leverage ratio target range to $3 two five X to 375 times.

This was intended to be a long term range target.

Speaker 3: target range where we may operate below the low range, below the range during certain periods or temporarily above the top end of the range in the event of strategic transactions with a goal of moving back into the target range on a long term basis.

Target range, where we may operate below the low range low end of the range during certain periods are temporarily above the top end of the range and the advent of strategic transactions with a goal of moving back into the target range on a long term basis.

Speaker 3: We expect the eggs of the year below three and a half times due to a reduction in net debt of approximately 450 million, which is underpinned by the repayment of 1.1 billion of senior notes in 2020.

We expect to exit the year below three five times due to a reduction in net debt of approximately $450 million, which is underpinned by the repayment of $1 1 billion of senior notes in 2023.

Speaker 3: In further support of our capital allocation framework laid out in November of 2022, we intend to recommend to our board a 20 cent per unit annualized increase in our quarterly distribution payable in February of 2024 as seen on slide 7.

And further support of our capital allocation framework laid out in November of 'twenty, two we intend to recommend to our board a 20 per unit annualized increase in our quarterly distribution payable in February of 2024 as seen on slide seven.

Speaker 3: On an annualized basis, the distribution would increase from $1.07 per unit currently to $1.27 per unit, representing a 19% increase.

On an annualized basis, the distribution would increase from $1 seven per unit currently to a $1 27 per unit, representing a 19% increase.

Speaker 3: I would also note the proposed acceleration and timing of our annual distribution increase, which would pull the increase forward from our May timing to February .

I would also note the proposed acceleration and timing of our annual distribution increase which would pull the increased forward from our may timing to February.

Speaker 3: This is all consistent with our objective of increasing returns to our unit holders and it reflects our continued confidence in our business, which is bolstered by the benefits from the recent bolt on acquisition.

This is all consistent with our objective of increasing returns to our unit holders and it reflects our continued confidence in our business, which is bolstered by the benefits from the recent bolt on acquisitions.

Speaker 3: Long-term, our free cash flow generation continues to support our multi-year capital allocation framework, which continues to target annualized distribution increases of approximately 15 cent per unit each year until reaching a target, common unit distribution coverage of approximately 160%. With that,

Long term, our free cash flow generation continues to support our multi year capital allocation framework framework, which continues to target annualized distribution increases of approximately <unk> 15 per unit each year until reaching a target common unit distribution coverage of approximately 160% with that I'll turn the.

Call over to Hap.

Speaker 4: Thanks, Willie. We reported third quarter adjusted EBITDA attributed to PAA of $662 million.

Thanks, Willie we reported third quarter adjusted EBITDA attributable to PAA of $662 million. This reflects the benefit of annual tariff escalators higher volumes in regions outside of the Permian contribution from recent bolt on acquisitions and the benefit of market based opportunities.

Speaker 4: This reflects the benefit of annual escalators, higher volumes in regions outside of the Permian, contribution from recent bolt-on acquisitions, and the benefit of market based off.

Speaker 4: These were partially offset by lower than expected Permian volumes due to weather related impacts on gas processing capacity and field compression issues that ultimately impacted oil production and extended into the middle of.

These were partially offset by lower than expected Permian volumes due to weather related impact on gas processing capacity and field compression issues that ultimately impacted oil production and extended into the middle of August the.

Speaker 4: The NGL segment benefited from stronger regional basis differential and additional spot opportunities on both propane and butane, resulting in higher

The NGL segment benefited from stronger regional basis differentials and additional spot opportunities on both propane and butane resulted in higher realized frac spread slides 12 and 13 in today's appendix include walks, which provide more detail on our third quarter performance a summary of our updated.

Speaker 4: slides 12 and 13 in today's appendix include walks which provide more detail on our third quarter performance.

Speaker 4: of our updated 2023 guidance is located on slide.

2023 guidance is located on slide eight.

Speaker 4: As a result of strong year-to-date business performance in both our crew and NGL segments and the contributions from our recently announced both on acquisitions, we are raising our full year 2023 Adjusted EBITDA guidance to 2.6 to 2.65 billion dollars.

As a result of strong year to date business performance in both our crude and NGL segments and the contributions from our recently announced bolt on acquisitions, we are raising our full year 2023, adjusted EBITDA guidance to two six to $2 $65 billion, our updated outlook factors in lower than expected Permian.

Speaker 4: Our updated outlook factors in lower than expected Permian production predominantly driven by the weather related.

Reduction for non predominantly driven by the weather related impacts we continue to expect year over year growth in our crude oil segment driven by a tariff volume increases in tariff escalations for the NGL segment, we remain highly hedged and expect a typical seasonal step up in sales as we enter the winter months.

Speaker 4: We continue to expect year-over-year growth in our crude oil segment driven by tariff volume increases and tariff escalation.

Speaker 4: For the NGL segments, we remain highly hedged and expect a typical seasonal step up and sales as we enter the...

Yes.

Speaker 4: Shifting to capital allocation is illustrated on slide nine. For 2023, we expect to generate $2.45 billion in cash flow from operations in $1.45 billion of pre-cash flow, which takes into account the cash outlay for our recently announced both on acquisition.

Shifting to capital allocation is illustrated on slide nine for 2023, we expect to generate $2 $45 billion in cash.

Cash flow from operations and $1 $45 billion.

A free cash flow, which takes into account the cash outlay for our recently announced bolt on acquisition.

Speaker 4: This results in $450 million of free cash flow after distribution available for net debt.

This resulted in $450 million of free cash flow after distributions available for net debt reduction.

Speaker 4: We continue to sell fund 325 million of investment capital net to PAA, which is consistent with previous guys.

We continue to self fund $325 million of investment capital net to PAA, which is consistent with previous guidance. We have increased our maintenance capital budget by $15 million to $210 million net to PAA for 2023. This reflects additional maintenance capital for recent bolt on acquisitions and <unk>.

Speaker 4: We have increased our maintenance capital budget by $15 million to $210 million net to PAA for 2023. This reflects additional maintenance capital for recent bolt-on acquisitions and higher integrity maintenance activity for the year.

Higher integrity maintenance activity for the year before turning the call back to Willie I wanted to share a few directional comments on 2024 with formal guidance to come early next year. We continue to expect growth in our crude oil business, primarily driven by operating leverage continued Permian growth era.

Speaker 4: Before turning the call back to Willie, I wanted to share a few directional compliments in 2024 with formal guidance to come early next year. We continue to expect growth in our crude oil business, primarily driven by operating leverage, continued Permian growth, parapeticalation, and full-year contributions from both on acquisition.

The duration and full year contributions from bolt on acquisitions in.

Speaker 4: In our NGL segment, we have seen volatility in pracksprap but have made meaningful progress in hedging over two thirds of our expected 2024 frack exposed volumes had a spread above 60 cents per gallon. Additionally, we should benefit from the abs.

In our NGL segment, we have seen volatility in frac spreads, but have made meaningful progress in hedging over two thirds of our expected 2024, frac exposed volumes at a spread above 60 per gallon. Additionally, we should benefit from the absence of planned turnaround activity next year, which negative.

Speaker 4: plan turnaround activity next year, which negatively impacted commodity exposed volumes in 2023. With that, I'll turn the call back.

<unk> impacted commodity exposed volumes in 2023 with that I will turn the call back to Willy.

Speaker 3: Thanks Alan, before finishing today's call, I want to reiterate a few key messages.

Thanks, Al and before finishing today's call I want to reiterate a few key messages first current global events have highlighted and reaffirmed the importance of hydrocarbons in everyday life planes remains very well positioned as north American supply will continue to be critical to global energy security affordability and reliability.

Speaker 3: First, current global events have highlighted in reaffirmed the importance of hydrocarbons in everyday life. Plains remains very well positioned as North American supply will continue to be critical to global energy security, affordability, and reliability.

Speaker 3: Secondly and importantly, our business remains strong. We continue to execute our strategy of generating meaningful cash flow, maintaining capital discipline, reducing leverage and increasing return of capital to our unit holders. And lastly, we continue to have confidence in our business, which is built on an integrated flexible asset base with operating leverage across our

Secondly, and importantly, our business remains strong we continue to execute our strategy of generating meaningful cash flow maintaining capital discipline, reducing leverage and increasing return of capital to our unit holders and lastly, we continue to have confidence in our business, which is built on an integrated flex.

Well asset base with operating leverage across our system. We appreciate your continued interest and support and we look forward to fielding your questions as well as giving you further formal updates on our earnings call for 2024% in February with that I'll turn the call over to Blake to lead us into Q&A. Thanks, Willie as we enter the Q&A session. Please limit your.

Speaker 3: We appreciate your continued interest and support, and we look forward to fielding your questions, as well as giving you further formal updates on our earnings call for 2024 in February .

Speaker 2: With that, I'll turn the call over to Blake to lead us into Q&A. Thanks, Willie. As we enter the Q&A session, please limit yourself to one question and one follow-up. For those with additional questions, please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time this morning. Additionally, the IR team will be available to address any additional questions you may have. Norma, I believe we're ready to open up the call to questions.

Self to one question and one follow up.

Those with additional questions. Please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time. This morning. Additionally, the IR team will be available to address any additional questions. You may have normal I believe we're ready to open up the call to questions. Thank you as a reminder to ask a question you will need to press star one.

Speaker 1: Thank you. As a reminder to ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced. When momentary first question, please.

One on your telephone to withdraw your question. Please press Star one again, please wait for your name to be announced when ma'am. Our first question. Please.

Speaker 1: Our first question comes from the line of Michael Bloom with Wells Fargo. Your line is now open.

Our first question comes from the line of Michael Blum with Wells Fargo. Your line is now open.

Thanks, Michael.

Speaker 5: Good morning. I wanted to first ask just about the bolt-on acquisitions of the Permian. Do you expect this to be kind of normal course? Do you see more opportunities to consolidate in the Permian? And then kind of second part of that is, do you see, should we expect to see any kind of any of this type of activity outside of the Permian?

Hi, good morning.

I wanted to first ask just about the bolt on.

Acquisitions in the Permian do you expect this to be kind of normal course, do you see more opportunities to consolidate in the Permian.

And then kind of second part of that is do you see.

Should we expect to see any kind of any type of back to the outside of the Permian.

Speaker 3: Yeah, let me speak to the Bolt-On's, Michael. It's a good question. As you know, we've got a great footprint that allows us to capture synergies in opportunities that are out there. We do think there are more opportunities. We're going to be very, very disciplined on how we approach it. The valuations are going to be key.

Yes, let me, let me speak to the bolt ons Michael.

Good question as you know, we've got a great footprint that allows us to capture synergies and opportunities that are out there.

We do think there are more opportunities.

We're going to be very very disciplined on how we approach it the valuations are going to be key.

Speaker 3: And I think you'll see continued focus on that. We look at all opportunities because our interests are in the best interest of our unit holders. But I think you'll see both bolt-on opportunities in both the Permian and outside of the Permian.

And I think.

Youll see Youll see continued focus on that we look at all opportunities because our interests are in the best unit are best interest of our unit holders, but I think youll see both bolt on opportunities in both the Permian and outside of the Permian.

Speaker 5: Okay, great. And then my second question is really probably related to the first. The rationale for reducing the leverage target, maybe you could just walk through that and is that in any way related?

Okay, Great and then my.

Second question is really around probably related to the first.

So now for reducing the leverage target.

Maybe you could just walk us through that.

Is that in any way related to <unk>.

Speaker 5: you know, what you see down the road in terms of M&A and having the flexibility.

What you see down the road in terms of M&A and having flex.

Flexibility.

Sure.

Speaker 4: Michael, this is out. Our view was we intended to be running the company at a lower leverage than what we had been historically. Part of the reason for committing to it publicly, like we have is our intent was to do it too. We believe the broader energy sector is and will be running with lower.

Michael This is al.

Our view was as we intended to be running the company at a lower leverage than what we had been historically.

Part of the reason for committing to publicly like like we have is our intent was to do it to we believe the broader energy sector is and will be running with lower leverage and we want to actually complete and get our upgrades to mid triple B and we think these this ray.

Speaker 4: And we want to actually complete and get our upgrades to mid-triple B and we think this range that we've established.

<unk> that we've established puts us solidly in that with some flexibility for them.

Speaker 4: puts us solidly in that, with some flexibility for that, and recognizing, again, that our intent is to run the company a little bit more conservatively with the balance sheet.

And recognizing.

Again, our intent is to run the company a little bit more conservative with the balance sheet.

Got it thank you.

One moment for our next question please.

Speaker 1: Our next question comes from the line of Brian Reynolds with UBS. Your line is now open.

Our next question comes from the line of Brian <unk> with UBS. Your line is now open.

Speaker 3: Hi, good morning, everyone. Thanks for prepared remarks on the impacts on volumes in the premiums quarter related to whether it sounds like.

Hi, good morning, everyone. Thanks for the prepared remarks on the impacts on volumes in the Permian this quarter related to weather it sounds like.

Speaker 3: I just wanted to follow up on the Permian outlook here. First part of the question is, are you seeing any recent crew gathering acquisitions in the basin kind of adding volumes to the quarter or going forward? And then second part, maybe a little more longer dated question. We've heard some very constructive Permian growth expectations into 24, into 25. I'm just kind of curious if you can kind of give us an early look of what you've seen for Permian activity as we look.

I just wanted to follow up on the Permian outlook here first part of the question is are you seeing any recent crude gathering acquisitions in the basin.

Volumes for the quarter or going forward and then second part maybe a little more longer dated question, we've heard some very constructive Permian growth expectations.

And the 24% to 25% I'm just kind of curious if you could kind of give us an early look of what you've seen for Permian activity. As we look ahead to next year.

Speaker 3: Brian , I'm glad you asked the question. This is Willie. First off, we'll give you a formal guidance in February on 2024 in the Permian, but I'll give you some snapshots here. This has been a little bit of a strange year in that we had some weather issues in the summer that really impacted both second and third quarter.

Brian I'm glad you asked the question this is Willie.

We will give first off we'll give you a formal guidance in February on 2024 in the Permian, but I'll give you. Some snapshots here. This has been a it's been a little bit of a strange year in that we had some some weather issues in the summer that really impacted both second and third quarter.

Speaker 3: You know, our original guidance for the year was 500,000 barrels a day, growth, exit to exit.

Our original guidance for the year was 500000 barrels a day growth exit to exit we updated on our last call that we thought it was going to be a little bit below that and our views now is it's probably in that $3 50 to 400 range for the year, but the thing I wanted to share with you is if you look at our October volumes in gathering this may address.

Speaker 3: We updated on our last call and we thought it was gonna be a little bit below that.

Speaker 3: In our views now, it's probably in that 350 to 400 range.

Speaker 3: for the year, but the thing I wanted to share with you is if you look at our October volumes and gathering, this may address your question.

To your question, we're actually a 175000 barrels a day higher than October than we were for the third quarter. So it really gives us confidence in the fourth quarter and never can't perfectly predict the future, but we are seeing increased volumes as we start the fourth quarter off and then certainly a lot of the recent announcements, particularly with one <unk>.

Speaker 3: We're actually 175,000 barrels that they hire in October then we were for the third quarter.

Speaker 3: So it really gives us confidence in the fourth order. It never can.

Speaker 3: perfectly predict the future, but that we are seeing increased volumes as we start the fourth quarter off. And then certainly a lot of the recent announcements, particularly with one of the large transactions and one of the very large super majors, really lens of support and aligns our view of the permeant going to be around for a long, long time as we go forward.

The large transactions in and one of the very large super majors.

Lynch of support and aligns our view of the Permian going to be around for a long long time as we go forward.

Okay.

Speaker 3: Great, thanks, appreciate that. And maybe to touch on the distribution, seems to come up in a little bit above expectations from last year's capital allocation update. So kind of curious if you can refresh us. Are there any structural changes that we'd be thinking about or is kind of targeting that one six coverage over and multi your framework still the right way to think about it and how ultimately some of these acquisitions impact that distribution outlook on?

Great. Thanks, appreciate that and maybe to touch on the distribution seems to come up a little bit above expectations.

Last year's capital allocation updates so kind of curious if you can refresh us are there any structural changes that we'd be thinking about or is kind of targeting that one six coverage over a multiyear framework is still the right way to think about it.

Ultimately some of these acquisitions impact that distribution network going forward. Thanks.

Speaker 4: Yeah, this is now. We still are committed in the future for the 15-cent annual increase in the 160% coverage at the common level. Part of the reason for moving it up and the extra nickel list is related to the acquisitions that we've completed. They're creative. Again, we've targeted.

Yes. This is al.

Still we still are committed.

In the future for the 15th annual increase in the 160% coverage at the common level.

Part of the reason for moving it up in the extra nickel. This is related to the to the acquisitions that we've completed they are accretive.

We've targeted.

Yes.

Speaker 4: hurdle rates that will bring good accretion for these bolt-on transactions and we also have seen strong performance out of our business.

Hurdle rates that will bring good accretion for these bolt on transactions and we also have seen strong performance out of our business, but once we complete this we're back to the 15 and 160% coverage. We think the 160% coverage allows us to basically fund.

Speaker 4: But once we complete this, we're back to the 15 cents and 160% coverage. We think the 160% coverage allows us to basically fund investment capital going forward and a number of small bolt-ons in the future without actually needing to raise extra money. So kind of live within our own cash flow means.

Investment capital going forward.

A number of small bolt ons in the future without actually needing to raise external money, so kind of live within our own cash flow.

Great all makes sense I'll leave it there and enjoy the rest of the morning.

Speaker 1: Thanks, Brian . Thank you. One moment for our next question, please.

Thanks, Brian. Thank you one moment for our next question. Please.

Speaker 1: Our next question comes from the line of Gabriel Noreen with Miseso, Your Line is now open.

Our next question comes from the line of Gabriel <unk>.

<unk> with Mizuho. Your line is now open.

Speaker 6: Thank you. Good morning, everyone. Maybe really if I can just ask a follow up on Michael's question about

Thank you good morning, everyone, maybe really if I can just ask a follow up on Michael's question about.

Speaker 6: recurring bolt on M&A. You mentioned looking at things outside the Permian. Can you maybe elaborate on which basins you might think about as far as?

Recurring bolt on M&A, you mentioned looking at things outside the Permian can you maybe elaborate on which basins you might think about as far as.

Speaker 6: Doing those bolt-ons and is doing something like the Orish JV structure, appealing to you and other basins outside the Permian as well.

During those bolt ons and is doing something like the oryx JV structure appealing to you in other basins outside the Permian as well.

Speaker 7: I gave realises during the global path. I would say we're structured agnostic. We're just trying to...

Gabriel This is Jeremy Goebel I would say, we're structured agnostic, we're just trying to.

Speaker 7: basically, gardener, the most synergies in a way that works for us in the counter party.

Basically garner the most synergies in a way that works for us and the counterparty, where we would focus that's where we have strength.

Speaker 7: Where we would focus, it's where we have strength. I'd say for our vantage point, we have gathering assets and all the core basins, where we have a strength in our marketing business, our pipeline business, and our terminals, and we can add value to assets. We'll continue to look there. So you look across our footprint, where we have strength as an area, where we think we can add value and extract synergies and do a creative field. And the amount of that Al just mentioned, that's where we're gonna.

For our vantage point, we have gathering assets in all the core basins, where we have a strength at our marketing business our pipeline business in our terminals and we can add value to assets will continue to look there. So if you look across our footprint, where we have strength is an area, where we think we can add value and extract synergies into accretive deals and the amount of that al just met.

And that's where we're going to target.

Speaker 6: Thanks, Jeremy. And then maybe if I can ask about sort of the hedging of the Fract spread exposure heading into 24.

Thanks, Jeremy and then maybe if I can ask about sort of the hedging.

<unk> spread exposure heading into 'twenty four.

Speaker 6: This you mentioned you, you had put a lot of the spread exposure to, to that at this point, are you close to that 80% level that you're targeting, do you see yourself getting there, your term, are you kind of leaving some stuff open in a dissipation of some strength?

You mentioned you had to put a lot of those spread exposure. So bad at this point are you close to that 80% level that you're targeting do you see yourself getting there near term or are you kind of leaving some stuff open and anticipation of some strength.

Speaker 3: Yeah, Gabe, we're not going to disclose the exact number, but I'll comments on well over 60% hedged, I was really indicative of that we've got a good portion of this hedge that good values, and that we'll get the further update when we get into February . Thanks, boys.

Yes, Gabe, we're not going to disclose the exact number but.

Al's comments on well over 60% hedged.

That was really indicative of that we've got a good portion of this hedged at good values and we will give a further update when we get into February.

Okay. Thanks, a lot.

Thanks, Gabe one moment for our next question.

Speaker 1: The next question comes from the line of Keith Stanley with Wolf Research. Drill line is now open.

Our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

Hi, good morning.

Speaker 8: Follow up on the, sorry again on the Frex spread.

Follow up on the sorry, again on the Frac spread I just want make sure I understand this right. So the 60% is hedged above <unk> 60, a gallon can.

Speaker 8: and this right so the 60% is hedged above

Speaker 8: Can you say directionally, I think 2023 was a little higher than that when you did your plan, just trying to think directionally where that...

Can you say Directionally I think 2023 was a little higher than that when you did your plan just trying to think directionally, where where that sits on the 60.

Speaker 3: Yeah Keith, this is Willey again. You know, for 2023 we were very well-heged. We actually put these hedges on proactively in late 2022. So if you think about the weighted average value of that hedge is a little bit over to 70 cents.

Yes, Keith this is Willie again.

2023, we were very well hedged we actually put these hedges on proactively in late 2022. So if you think about the weighted average value of that hedge is little bit over 70.

Speaker 3: So if you compare it to what we actually hedged in 2023, you know, circa a dime lower than that.

So if you compare it to what we actually hedged in 2023 circa a dime lower than that.

Speaker 8: If you think about the impact of that, that's roughly plus or minus $70 million. And as Al pointed out, we also have a turnaround. We had a turnaround this year, that next year that we won't be having so that may give a little better indication of where the NGO business is. That's very helpful. Thanks for that. The second one, I know the company's talked about.

If you think about the impact of that that's roughly.

Plus or minus $70 million and as al pointed out. We also have a turnaround we had a turnaround this year that next year that we won't be having so that may give you a little better indication of where the NGL businesses.

That's very helpful. Thanks for that.

The second one.

I know the company has talked about the preferreds not being a near term priority.

Speaker 8: I'm truly curious with the official leverage target now, at three and a quarter to three and a three quarter.

Just curious what the with the official leverage target now at three and a quarter to three and three quarters.

Speaker 8: So under certain circumstances would you consider going above the leverage target in order to repurchase the preferred or if you were to take out the preferred at some point down the road would you need to?

Under certain circumstances would you consider going above the leverage target in order to repurchase the preferreds or if you were to take out the preferred at some point down the road would you need to still stay within that that new leverage band.

Speaker 4: This is out. There's been no change in our thinking around the around the preferred debt markets are are fairly high. You know are like an issue in a new tenure would be six and a half six and three quarters.

This is al.

Theres been no change in our thinking around the around the preferreds.

Debt markets are are fairly high.

Issuing a new 10 year would be 656, and three quarters is a long way of saying that the rates on the preferreds are still fairly attractive in our view relative to our weighted average cost of capital.

Speaker 4: a long way of saying that the rates on the preferred are still fairly attractive. In our view, relative to our weighted average cost of capital.

Speaker 4: our intent would not be to meaningfully increase leverage to take those preferred out. So it's hard to say hypothetically what you might do a few years down the road, but no, we want sacrifice our financial flexibility to reduce them again because...

Our intent would not be to meaningfully.

Increased leverage to take those preferreds out.

So it's hard to say hypothetically, what you might do a few years down the road, but no we won't sacrifice, our our financial flexibility to reduce them again, because they are not that high relative to our cost of capital.

Speaker 4: They're not that high relative to our cost of cash.

Think our weighted average cost of capital today is in the 11% to 12% range and the preferred on the same weighting.

Our 200 plus basis points less so so again there'll be one day, where maybe we will be able to take them out.

We don't want to sacrifice financial flexibility.

Thank you.

Thank you one moment for our next question. Please.

Yeah.

Speaker 1: The next question comes from a line of Neil Mietro with Bank of America. Your line is now up.

Our next question comes from the line of Neel Mitra with Bank of America. Your line is now open.

Speaker 2: Hi, thanks for taking my questions. I wanted to touch on the Permian Long Hall volumes. It seems like they fell a little bit more disproportionately relative to gathering in intrabassion in the quarter versus the second quarter. And also, how did basin perform, just given the low-cushing inventory of this quarter?

Hi, Thanks for taking my questions I wanted to touch on the Permian long haul volumes. It seems like they fell a little bit more disproportionately relative to.

Gathering and intra basin in the quarter.

The second quarter and also how did basic performed just given the low Cushing inventories this quarter.

Speaker 7: Neil, hi, I'm Sierra McGoval. What I would say is on the Long Hall volumes, that was just some market dynamics in Corpus. It was cheaper for the shippers to buy at Corpus than it was to ship the barrel from Midland. So it was just an election by some of the shippers on the pipeline, but it's transitory. The pipeline is going into the fourth quarter or in line with where they've historically been and demand this robust longer term for the ship.

Hi, it's Jeremy Goebel.

What I would say is on the long haul volumes that was just some market dynamics in corpus. It was cheaper for the shippers to buy at corpus to that was to ship the barrel from Midland. So it was just an election by some of the shippers on the pipeline, but it's transitory the pipelines going into the fourth quarter in line with where they've historically been and demand is.

Robust longer term for the shipments basically is a similar story there was as the inventories came down there was less need for movements in that direction, but directionally as those inventories go down there's more pull on basin.

Speaker 7: Basin is a similar story. There was, as the inventories came down, there was less need for movements in that direction, but directionally, as those inventories go down, there's more coal on basin. Malellen Soreng Speaking

Got it perfect and then.

Speaker 8: If I could ask generally what you're seeing in the basin on

If I could ask generally.

What youre seeing in the basin.

Speaker 8: on growth dynamics. I know most of the gas processors had flat volumes from May to August just to flick yourselves, but...

The dynamics I know most of the gas processors had flat volumes from May through August just just like yourselves, but can you touch upon which regions got affected the most with the new Mexico, Delaware that was <unk>.

Speaker 8: Can you touch upon which regions got affected the most? You know, was it the New Mexico Delaware that was impacted the most versus the other basins? And then also what you're seeing from the producers during the heat that would have impacted their side versus the infrastructure side. Understanding that you guys are up and running again and not cover with strong volumes.

Impacted the most versus the other basins and then also what youre seeing from producers during the heat that would have impacted their side versus the infrastructure side.

Understanding that you guys are are up and running again in October with strong volumes.

Yes.

Speaker 7: Thanks, Neil. It was that state line area north into New Mexico. I think the other dynamic there was the, uh, some of the issues around, uh, flaring and stopping and flaring. So it all hit it once and it was within a three month period.

Thanks Neil.

That state line area North ended in Mexico, I think the other dynamic there was the.

Some of the issues around flaring and staffing of flaring. So it all hit at once and it was within a three month period.

Speaker 7: But the big surgeon volume is coming from those same regions and part of the Northern Bithub Basin. So I'd say it's recovering and then some and we see that momentum carrying based on the connections we have made in November and will make this month and next month and in next year that that momentum.

But the big surge in volume is coming from those same regions and part of the northern Midland Basin. So I'd say, it's recovering and then seven we see that momentum carrying baseline connections. We have made in November and we will make this month and next month into next year that that momentum should continue.

Speaker 5: And Jeremy, I don't know if I got a response on basin, how that was running during the quarter. If you don't mind commenting on that.

And Jeremy I don't know if I got response on basin, how that was running during the quarter.

I don't mind, commenting on that.

Speaker 7: Sure, it was in line with expectations and the inventory's range. We would expect the volumes to increase. Okay, great. Thank you.

Sure. It was in line with expectations of those inventories range, we would expect the volumes to increase.

Okay, great. Thank you.

Thank you one moment for our next question.

Speaker 1: And next question comes from the line of Doug Irwin with City. The line is now up.

Our next question comes from the line of Doug <unk> with Citi. Your line is now open.

Speaker 5: Hey, thanks for the question. Just a couple of follow-ups on guidance. So maybe I'll ask them both at once.

Alright. Thanks for the question just a couple of follow ups on guidance, So maybe I'll ask them both at once.

Speaker 5: First, I'm just wondering if he can kind of help bridge the facts that the EBITDA guidance moved higher, but then we sell cash from operations and free cash flow and move a bit lower. I'm sure that physicians have an impact on that. Are there any other kind of bigger moving pieces? He can point to there.

First I was just wondering if you can kind of help bridge the facts that the EBITDA guidance moved higher but then we saw cash from operations and free cash flow move a bit lower.

Sure the acquisition, having impact on that are there any other kind of bigger moving pieces you can point to there.

Speaker 5: And then again, kind of on the implied for key guns, the midpoint implied to step down versus this quarter. Just wondering if he can kind of help reconcile that step down versus some of the tail ones in the mirror and fight these acquisitions and probably pertain growth re-bounding at that.

And then again kind of on the implied <unk> guidance, the midpoint implies a step down versus this quarter.

Just wondering if you can kind of help reconcile that step down versus some of the tail on some of the year and quite these acquisitions.

Permian growth rebounding.

Speaker 4: This is all, I'll take a shot at the first one. Yeah, the between the free cash flow and the cash from operations, effectively the acquisitions reduce cash flow from the free cash flow number, by roughly the 135 million that we described.

This is al I'll take a shot at the first one yes.

Between the free cash flow and the cash from operations effectively the acquisitions reduce cash flow from the free cash flow number by roughly the $135 million that we described.

Speaker 4: The other two higher higher EBITDA has been in our in our forecast is offset by higher taxes as well as our assumed working capital and merchant needs

The other two higher higher EBITDA has been.

Our forecast is offset by higher taxes as well as our assumed working capital on merchant needs again, which is all timing related.

Speaker 4: again, which is all kind of timing related. Those were really the three things.

Those were really the three things I would point to.

Speaker 4: You know it's as to kind of guidance, you know, third quarter to fourth quarter. Again, we feel like the midpoint of our range, we do see quarterly flux between them. It would probably better to take offline with the IR team, kind of any more micro detailing type of discussion.

Yeah.

As to as to kind of guidance.

Third quarter to fourth quarter.

Again, we feel like the midpoint of our range, we do see quarterly flux between them.

It would probably be better to take offline with the IR team kind of any more micro detailing type of discussion.

Okay understood I appreciate it.

Thank you one moment for our next question. Please.

Speaker 1: question comes from the line of Jeremy today with JP Morgan's securities. The line is now

Next question comes from the line of Jeremy Tonet with JP Morgan Securities. Your line is now open.

Speaker 5: Hey guys, this is Ralph and Ready on for Jeremy. I think it's been hit on a couple of times in the call already, but just to clarify, are you guys able to disclose what part of the guidance raises the attributable to the base business strength given that you guys had already pointed the high on last quarter versus the incremental contribution for the proton acquisition? Thanks.

Hey, guys. This is rough and ready on for Jeremy I think it's been hit on a couple of times on the call already but.

Just to clarify are you guys disclose what part of the guidance range that is attributable to the base business strength.

Given the you guys had already pointing to the high end last quarter.

First is the incremental contribution from the proton acquisitions. Thanks.

Speaker 7: Sure, this is Jeremy. It's roughly 10 to 15 million dollars from that.

Sure. This is Jeremy it's roughly $10 million to $15 million.

From the acquisitions.

Speaker 2: Okay, perfect, thank you. And then for the second one, last quarter talked about Canadian optimization opportunities and maybe utilizing some of that underutilized capacity at Tharnia. So curious to hear your updated thoughts here and what you guys are seeing in terms of low capital, smaller growth optimization opportunities, thanks.

Okay perfect. Thank you and then for the second one last quarter, you talked about Canadian optimization opportunities.

And maybe utilizing some of that underutilized capacity at Sarnia, So curious to hear updated thoughts here and.

What you guys are seeing in terms of low capital a smaller growth optimization opportunities. Thanks.

Speaker 3: Yeah, I'll take a stab at that. I mean, I think as we shared last call, our East West system together has been, it gives us an advantage because we've got spare capacity in the East.

Yeah, I'll take a stab at that I mean, I think as we shared last call.

Our east West.

System together has been it gives us an advantage because we've got skip spare capacity in the east and that was a key part of our ability to be able to move quickly on our de bottleneck in the west. So we continue to work on a lot of neat opportunities around optimization, both of our Empress complex for SaaS and Sarnia.

Speaker 3: And that was a key part of our ability to be able to move quickly on our debatenech in the West.

Speaker 3: So we continue to work on a lot of neat opportunities around optimization both of our Empress Complex, Fort Sass, and Sarnia. And I think the thing to take away from it is no big announcements on projects other than what we've already announced, but there's clearly capacity there that we can continue to optimize and utilize without having to put, you know, Greenfield projects in. Perfect, thanks, Alder.

And I think the thing to take away from it is no big announcements on projects other than what we've already announced but theres clearly capacity there that we can continue to optimize and utilize without having to put greenfield projects in.

Perfect. Thanks for all the color.

Thank you.

One moment for our next question.

Speaker 1: And next question comes from the line of Neil Dingman with two securities. The line is now...

Our next question comes from the line of Neal Dingmann with two Securities. Your line is now open.

Speaker 8: Morning all. Thanks for the time. One first quick one. Could you all just give an update? I think you've talked about this in the past, just on the minimum volume commitments where you stand there and kind of as you enter 24, how those sit.

Good morning, all thanks for the time.

First quick one could you just give an update I think you've talked about this in the past just on the minimum volume commitments, where do you stand there in kind of as you enter 'twenty for carbo.

Okay.

Speaker 3: That's not sure I understand the question. You can you repeat it? Minutes long. Oh, no, long hauler. Here's the S.

I'm not sure I understand the question can you repeat it.

It is volatile and amendment on long haul or.

Yes, just on the long haul you Sir.

Speaker 7: Oh, sure. What I would say is we continue to have constructive dialogues with the customers. Nothing to highlight at this point. Enterprise announcements obviously added to that equation. And market dynamics are such that...

Sure what I would.

Say as we continue to have constructive dialogues with the customers nothing to highlight at this point enterprises announcements obviously.

Additive to that equation and market dynamics are such that.

Speaker 7: With the continued acquisitions enhancing relationships with customers, we feel we're in a good place and we'll give you guys an update when it's appropriate. We do believe in the base and long term in these acquisitions and improved recoveries should all support that ongoing growth through the decade and continue contracting.

With the continued acquisitions enhancing relationships with customers, we feel we're in a good place and we'll give you guys an update when it's appropriate we do believe in the base and long term in these acquisitions and improve recoveries should all support that ongoing growth through the decade and continued contracting in the pipelines.

Speaker 7: Great and then just on a second could you give the latest on the continued Canadian opportunities such as the adventiner Ontario you know around like that angel extraction plant site or some other things you have.

Great and then just on a second could you give the latest on the continued Canadian opportunities such as admin Tinder, Ontario around like that NGL extraction plant site or some other things you have.

Speaker 7: Sure, I broadly in Canada around the NGL system, I think the opportunities you're gonna see is the foretask is constrained the opportunity for East-West movements at higher margins and other things to purchase additional NGLs. There's opportunities throughout next year that we'll see, I don't know if that's what you're asking for, but it seems to me that there are margin enhancement opportunities around the system and we'll look to use our own.

Sure broadly in Canada around the NGL system, I think the opportunities youre going to see us.

<unk> SaaS is constrained the opportunity for east west movements at higher margins and other things to purchase additional Ngls theres opportunities throughout next year that we'll see.

I don't know if thats, what youre asking for but it seemed to me that there are margin enhancement opportunities around the system and we'll look to use our system to catch it.

Speaker 3: Yeah, Neil, the other thing I would add is, is we think about our Canadian footprint. We're very bullish on Western Canadian gas production. So if that increases and there's additional takeaway to the West Coast, we think it encourages additional production. And that gives us the opportunity to be able to capture more NGOs out of a West dream. Great detail. That's exactly what was looking for.

Yes, Neal and the other thing I would add is as we think about our Canadian footprint.

We're very bullish on western Canadian gas production, so as that increases and Theres additional takeaway to the west coast. We think it encourages additional production and that gives us the opportunity to be able to capture more ngls out of a workstream.

Great detail Thats exactly I was looking for thanks guys.

Thank you one moment for our next question.

Speaker 1: Our next question comes from Senel Zibal with C-Port Global, your line is down.

Our next question comes from Sunil Sibal with Seaport Global Your line is now open.

Speaker 9: Yeah, hi, good morning everybody. And thanks for all the clarity in the call. So just wanted to understand from the dynamics on the EBITDA guidance increase. So seems like from what you indicated, 10 to 15 million impact of bolt-on acquisitions and at the same time you're reducing your volume expectation. So that fair to resume your unit margins are going up.

Yes, hi, good morning, everybody and thanks for all the clarity on the call.

Just wanted to understand some of the dynamics on the.

The guidance increase so it seems like from what you indicated $10 million to $15 million impact.

Bolt on acquisitions.

And at the same time as reducing your volume expectation. So is it fair to assume your unit margins are going up.

Speaker 9: And then any significant driver of that, obviously, you know, tariffs are increasing, but that was probably well known.

And then any significant driver of that obviously tactics that increasing but that does probably well known.

Speaker 4: I'll take a shot at this is out. In the current side, we've seen half-seen and are expecting more favorable market-based opportunities.

Yes, I'll take I'll take a shot at it this is al.

In the crude side, we've seen have seen and are expecting more favorable market based opportunities we have.

Speaker 4: We've seen over the year higher movements into and out of cushion our non-permeant assets have performed well and then clearly the contribution from the acquisition in the NGL segment we've

Scene over the year higher movements into and out of Cushing.

Our non Permian assets have performed well and then clearly the contribution from the acquisition.

In the NGL segment, we've seen benefit from higher better improved NGL yields this is likely temporary.

Speaker 4: benefit from higher, better improved NGL yields. This is likely temporary in the ACO gas stream as well as more attractive differentials West East as Jeremy mentioned. So those are really...

In the gas stream as well as more attractive differentials.

The east as Jeremy mentioned.

Those are really the things that are kind of driving that.

Speaker 7: One thing to note though, with you that Permian reduction is transitory. This is building momentum into the fourth quarter and in the next year. So the view that it slowed down our expectations long term and slowed down if not. This is a function of...

One thing to note, though on the.

We view the Permian reduction as transitory. This is building momentum into the fourth quarter and into next year. So the view that it slowed down our expectations long term, it's slowed down it not as a function of transitory Tyler.

Speaker 9: understood. And then on the pipeline laws along with all the recent acquisition that you've done could you remind us what is your total expo year on crude with the past.

Understood.

And then.

On the pipeline loss allowance.

Since the acquisition you've done could you remind us what is your total <unk>.

<unk> with the pipeline loss allowance.

Speaker 2: Hey, Sunil is Blake. You know, historically what we've said is two to three million barrels and we haven't provided an update to that. I think it's correct to think it's more volumes ultimately make their way onto the system that could increase over time and we'll give an update when appropriate. Understood. Thanks.

Hey, Neil it's Blake.

Historically, what we've said is two to 3 million barrels and we haven't provided an update to that I think it's correct to think as more volumes ultimately make their way onto the system that could increase over time, and we will give an update when appropriate.

Understood. Thanks.

Thank you.

And for our next question.

Speaker 1: Our next question comes from the line of John McCay with Goldman Sachs. The line is not...

Our next question comes from the line of John Mccain with Goldman Sachs. Your line is now open hey.

Speaker 8: Hey everyone, thank you for the time. I wanted to touch on kind of broader picture for Permian Longhull. We've had some...

Good morning, everyone and thank you for the time I wanted to touch on kind of broader picture for Permian long haul we've had some.

Speaker 2: you know changes in the market recently seminal coming out of service uh... the gray oak open season seems like it's about to go forward i guess i'd just be curious to hear from your side where you see kind of overall balances for the market of the next couple years and um... you know whether or not you expect we could see more conversions out of crude service into something else

Changes in the market recently seminal coming out of service.

The Gray Oak open season, it seems like it's about to go forward I guess I'd just be curious to hear from your side, where you see kind of overall balances for the market in the next couple of years.

And.

Whether or not you expect we could see more conversions out of crude service and then something else. Thanks.

Speaker 3: Yeah, John , this is Willie. You know, there's a lot of puts in take to this. You know, when I think about the moves that were proposed.

Yes, John this is Willie.

There's a lot of puts and take to this when I think about the moves that were proposed possible projects. These are what I would call smaller increases maybe a 100 200000 barrels a day.

Speaker 3: possible projects. These are what I would call smaller increases, maybe 100, 200,000 barrels a day. You know, when you we think longer term with the growth of the Permian, we just we're consistent with our with our views that.

We think longer term with the growth of the Permian, We just were consistent with our with our views that capacity is going to get tight I don't think new build long haul lines youre going to get built.

Speaker 3: Fasties gonna get tight. I don't think new build long haul lines are gonna get built

Speaker 3: With the seminole announcement, it's taken a little bit out, so there's a lot of puts and takes against it, but long-term, our views have not changed. It's still gonna be tight in capacity in a market that's gonna be harder and harder to build a long-haul line.

With the with the seminal announcement, it's taken a little bit out so theres a lot of puts and takes again against it but long term. Our views are have not changed it's still going to be tightening capacity.

In a market, that's going to be harder and harder to build long haul lines.

Speaker 8: that's that's fair maybe um... shifting gears you touched the working capital a little bit in the quarter um... and i know it's transitory should come back it was just larger than we've it looks like we've seen in a couple quarters is there a you know when we're thinking about capital returns next year potentially by back

Alright.

Maybe shifting gears you touched on the working capital a little bit in the quarter.

And I know, it's transitory and should come back I was just larger than it looks like we've seen in a couple of quarters is there a when we're thinking about capital returns next year potentially buybacks is there a kind of a minimum level of cash you would want to see on on the balance sheet and.

Speaker 10: is there a kind of minimum level of cash you'd want to see on on the balance sheet and uh... you know does this quarter's kind of larger working capital draw effect that uh... that matter

Does this quarter's kind of larger working capital draw affect that.

That math at all.

Speaker 4: This is Al. We do see fairly significant quarter of record or working capital fluxes. And we use the word working capital as if we're building inventory and we're borrowing short term on our credit facilities. It's a working capital use, although technically they're both in working capital. So it's kind of working capital and merchant requirements.

This is al we do see fairly significant quarter over quarter working capital flexes and we use the word working capital.

If we're building inventory and we're borrowing short term on our credit facilities.

It's a working capital use although technically they are both in working capital. So it's kind of working capital and merchant requirements. We.

Speaker 4: We do see a quarter to quarter of fairly significant moves.

We do see quarter to quarter fairly significant moves generally over a 12 month period, all those normalize out.

Speaker 4: Generally over 12 month period, all those normalize out.

Speaker 4: We normal we normally model assuming lower cash balances than what

We normal.

Normally model assuming.

Lower cash balances and what what.

Speaker 4: What we've been running and we'll be showing that when we show you the year in balance sheet because the cash balances will have been consumed with the note we just paid down here in October .

We've been running at.

We will be showing that when we show you the year end balance sheet, because the cash balances will have been.

Assumed with the note we just paid down here in October.

Speaker 4: But normally we would model about 100 million cash on the balance sheet and we use our credit facilities and the commercial paper markets to balance this out. And it is timing we end up reverted back to more of a normalized balance over the course of a few quarters. All right, very clear.

But normally we would model about $100 million of cash on the balance sheet, and we use our credit facilities and the commercial paper markets.

Balanced this out and it is timing.

End up.

Reverting back to more of a normalized balance over over the course of a few quarters.

Alright, very clear I appreciate the time.

Thank you for your questions.

Speaker 1: This concludes today's conference call. Thank you for participating in today's call. You may now disconnect. Everyone have a wonderful day.

This concludes today's conference call. Thank you for participating in today's call. You may now disconnect everyone have a wonderful day.

Speaker 11: You You

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Speaker 1: Good day and thank you for standing by. Welcome to Plains All-America's Sir Quarter 2023 Ernie's conference call. At this time, all participants are in a listen only mode. After the speakers presentation, there'll be a question and answer session to ask a question doing the session. You'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Good day, and thank you for standing by and welcome to Plains, All American <unk> third quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advisor in your hand, it's race to withdraw your question. Please press star. One again, please be advised that today's call is being recorded I would now like to hand, the conference over to your speaker today Blake Fernandez.

Speaker 1: To withdraw your question, please first start one one again. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speech today. Like Fernandez, Vice President and Vest Relations, please go ahead sir.

Vice President Investor Relations. Please go ahead Sir.

Speaker 2: Thank you, Norma. Good morning, and welcome to Plains All-American Third Quarter 23 earnings call. Today's slide presentation is posted on the Investor Relations website under the news and events section at Plains.com. An audio replay will also be available following today's call.

Thank you Nova good morning, and welcome to Plains, All American third quarter 23 earnings call. Today's slide presentation is posted on the Investor Relations website under the news and events section of <unk> Dot Com an audio replay will also be available following today's call.

Speaker 2: Important disclosures regarding forward looking statements and non- GAAP financial measures are provided on slide two. An overview of today's call is provided on slide three. A condensed consolidating balance sheet for PAGP and other reference materials are in the append.

Important disclosures regarding forward looking statements and non-GAAP financial measures provided on slide two and overview of today's call is provided on slide three a condensed consolidating balance sheet for PAGP and other reference materials are in the appendix.

Speaker 2: Today's call will be hosted by Willie Chang, our chairman and CEO , and Al Swanton Executive Vice President and CFO , as well as other members of our management.

Today's call will be hosted by Willie Chang, our chairman and CEO.

And Al Swanson, Executive Vice President and CFO as well as other members of our management team with that I will turn the call over to Willy. Thanks, Blake Happy Friday, everyone and thank you for joining US. This morning today, we reported strong third quarter results along with the closing of two Permian gathering bolt on acquisitions and to continue.

Speaker 3: With that, I will turn the call over to Willie. Thanks Blake, happy Friday everyone, and thank you for joining us this morning. Today, we reported strong third quarter results along with the closing of two Permian gathering bull-town acquisitions and the continued execution of our multi-year capital allocation framework, which is focused on lowering leverage and increasing the return of capital to our unit.

The execution of our multi year capital allocation framework, which is focused on lowering leverage and increasing the return of capital to our unit holders.

Speaker 3: As a result of our year-to-day performance in the partial year contributions of our recent bolt-on acquisitions, we're raising our full year 2023 adjusted EBITDA guidance to a range of 2.6 to 2.65 billion.

As a result of our year to date performance and the partial year contributions of our recent bolt on acquisitions, we are raising our full year 2023, adjusted EBITDA guidance to a range of two six to $2 65 billion. This reflects an increase of $50 million to $100 million from the high end of our previous guidance range.

Speaker 3: This reflects an increase of 50 to 100 million from the high end of our previous guidance range. A high level overview of our updated 2023 guidance is located on slide four, and now we'll share additional detail in his portion of the call.

A high level overview of our updated 2023 guidance is located on slide four and al will share additional detail in his portion of the call.

Speaker 3: At sunrise on slide five, our Permian JV acquired Rattler midstreams, Southern Delaware Basin Crew Gathering System, and L.I. energies, Northern Delaware Basin, touchdown crew gathering system for an aggregate cash consideration of approximately 205 million or approximately 135 million net to plane.

As summarized on slide five our Permian JV acquired Rattler midstream Southern Delaware Basin crude gathering system and L. M Energy's Northern Delaware basin touchdown crude gathering system for an aggregate cash consideration of approximately $205 million or approximately $135 million net to <unk>.

Speaker 3: These bolt-on acquisitions are expected to generate unlearned returns in line with our return thresholds of approximately three to 500 basis points above our way to the average cost of capital, in addition to enhancing our position in the Delaware base.

Speaker 3: The assets will further position the Permian JV to expand its service and offerings and extend commercial relationships with both new and existing customers.

The assets will further position the Permian JV expanded service and offerings and extend commercial relationships with both new and existing customers.

Speaker 3: Regarding today's Capitol allocation update, we continue to make meaningful progress towards our goal of lower absolute debt and maintaining a strong balance sheet that can withstand various commodities.

Speaker 3: As highlighted on slide six, we are lowering our long term leverage racial target range to 3.25x to 3.75x. This is intended to be a long...

As highlighted on slide six we are lowering our long term leverage ratio target range to $3 two five X to 375 times.

This was intended to be a long term range target.

Speaker 3: target range where we may operate below the low range, below into the range during certain periods or temporarily above the top end of the range in the event of strategic transactions, with a goal of moving back into the target range on a long-term basis.

We expect to exit the year below three five times due to a reduction in net debt of approximately $450 million, which is underpinned by the repayment of $1 1 billion of senior notes in 2023.

Speaker 3: In further support of our capital allocation framework laid out in November of 22, we intend to recommend to our board a 20 cent per unit annualized increase in our quarterly distribution, payable in February of 2024 at seeing on slide set.

Speaker 3: On an annualized basis, the distribution would increase from $1.7 per unit currently to $1.27 per unit, representing a 19% increase.

On an annualized basis, the distribution would increase from $1 seven per unit currently to a $1 27 per unit, representing a 19% increase.

Speaker 3: I would also note the proposed acceleration and timing of our annual distribution increase, which would pull the increase forward from our May timing to February .

I would also note the proposed acceleration and timing of our annual distribution increase which would pull the increased forward from our may timing to February this.

Speaker 3: Long-term, our free cash flow generation continues to support our multi-year capital allocation framework, which continues to target annualized distribution increases of approximately 15 cent per unit each year until reaching a target common unit distribution coverage of approximately 160%.

Turn the call over to al.

Speaker 4: Thanks, Willie. We reported third quarter adjusted e, but a tribute to PAA of $662 million.

Thanks, Willie we reported third quarter, adjusted EBITDA attributable to PAA of $662 million.

Speaker 4: This reflects the benefit of annual escalators, higher volumes in regions outside of the Permian, contribution from recent bolt-on acquisitions, and the benefit of market based off.

This reflects the benefit of annual tariff escalators higher volumes in regions outside of the Permian contribution from recent bolt on acquisitions and the benefit of market based opportunities.

Speaker 4: These were partially offset by lower than expected Permian volumes due to weather related impact on gas processing capacity and field compression issues that ultimately impacted oil production and extended into the middle of our...

Were partially offset by lower than expected Permian volumes due to weather related impacts on gas processing capacity and field compression issues that ultimately impacted oil production and extended into the middle of August the.

Speaker 4: The NGL segment benefited from stronger regional basis differential and additional spot opportunities on both propane and butane, resulting in higher

Speaker 4: slides 12 and 13 in today's appendix include walks which provide more detail on our third quarter performance.

Speaker 4: of our updated 2023 guidance is located on slide.

2023 guidance is located on slide eight.

Speaker 4: As a result of strong year-to-date business performance in both our crude and NGL segments and the contributions from our recently announced bolt-on acquisitions, we are raising our full year 2023 Adjusted EBITDA guidance to 2.6 to 2.65 billion dollars.

Speaker 4: Our updated outlook factors in lower than expected Permian production predominantly driven by the weather related.

Speaker 4: We continue to expect year-over-year growth in our crude oil segment, driven by tariff volume increases and tariff escalation.

Speaker 4: For the NGL segments, we remain highly hedged and expect a typical seasonal step up in sales as we enter the

Yes.

Shifting to capital allocation is illustrated on slide nine for 2023, we expect to generate $2 $45 billion in cash flow from operations and $1 $45 billion of.

A free cash flow, which takes into account the cash outlay for our recently announced bolt on acquisitions. This resulted in $450 million of free cash flow after distributions available for net debt reduction.

Speaker 4: This results in $450 million of free cash flow after distribution available for net debt.

Speaker 4: We continue to sell fun 325 million of investment capital net to PAA, which is consistent with previous guys.

Speaker 4: We have increased our maintenance capital budget by $15 million.

Speaker 4: $210 million net to PAAA for 2023. This reflects additional maintenance capital for recent bolt-on acquisitions and higher integrity maintenance activity for the year.

Speaker 4: Before turning the call back to Willie, I wanted to share a few directional comments in 2024 with formal guidance to come early next year. We continue to expect growth in our crude oil business, primarily driven by operating leverage, continued Permian growth, parapeticalation, and full-year contributions from both on acquisition.

Duration and full year contributions from bolt on acquisitions in our NGL segment, we have seen volatility in frac spreads, but have made meaningful progress in hedging over two thirds of our expected 2024, frac exposed volumes at a spread above 60 per gallon. Additionally, we should benefit.

Speaker 4: In our NGL segment, we have seen volatility in prackspred, but have made meaningful progress in hedging over two-thirds of our expected 2024 frack exposed volumes at a spread above 60 cents per gallon. Additionally, we should benefit.

From the absence of planned turnaround activity next year, which negatively impacted commodity exposed volumes in 2023 and with that I'll turn the call back to Willy.

Speaker 4: planned turnaround activity next year, which negatively impacted commodity exposed volumes in 2023. With that, I'll turn the call back.

Speaker 3: Thanks out, before finishing today's call, I want to reiterate a few key myths.

Thanks Al before finishing today's call I want to reiterate a few key messages first current global events have highlighted and reaffirmed the importance of hydrocarbons in everyday life planes remains very well positioned as north American supply will continue to be critical to global energy security affordability and reliability.

Speaker 3: First, current global events have highlighted in reaffirming the importance of hydrocarbons in everyday life. Plains remains very well positioned as North American supply will continue to be critical to global energy security, affordability, and reliability.

Speaker 3: Secondly, and importantly, our business remains strong. We continue to execute our strategy of generating meaningful cash flow, maintaining capital discipline, reducing leverage, and increasing return of capital to our unit holders. And lastly, we continue to have confidence in our business, which is built on an integrated, flexible asset base, with operating leverage across our.

Italy.

With operating leverage across our system. We appreciate your continued interest and support and we look forward to fielding your questions as well as giving you further formal updates on our earnings call for 2024 in February with that I'll turn the call over to Blake to lead us into Q&A. Thanks, Willie as we enter the Q&A session. Please limit yourself to one question and.

Speaker 3: We appreciate your continued interest and support, and we look forward to fielding your questions, as well as giving you further formal updates on our earnings call for 2024 and FIB.

Speaker 2: With that, I'll turn the call over to Blake, the lead us into Q&A. Thanks, Willie. As we enter the Q&A session, please limit yourself to one question and one follow-up. For those with additional questions, please feel free to return to the Q. This will allow us to address questions from as many participants as possible in our available time this morning. Additionally, the IR team will be available to address any additional questions you may have. Norma, I believe we're ready to open up the call to questions.

One follow up for those with additional questions. Please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time. This morning. Additionally, the IR team will be available to address any additional questions. You may have normal I believe we're ready to open up the call to questions. Thank you as a reminder to ask a.

Speaker 1: Thank you. As a reminder to ask a question, you'll need to press star 1-1 on your telephone. To withdraw your question, please press star 1-1 again. Please wait for your name to be announced. One moment for our first question, please.

A question you will need to press star one on your telephone to withdraw your question. Please press Star one again, please wait for your name to be announced one moment for your first question. Please.

Speaker 1: Our first question comes from the line of Michael Bloom with Wells Fargo. Your line is now open.

Our first question comes from the line of Michael Blum with Wells Fargo. Your line is now open.

Thanks, Michael.

Hi, good morning.

I wanted to first ask just about the bolt on.

Acquisitions in the Permian do you expect this to be kind of normal course did you see more opportunities to consolidate in the Permian.

And then kind of second part of that is do you see.

Should we expect to see any kind of any type of activity outside of the Permian.

Speaker 3: Yeah, let me speak to the Bolt-On's, Michael. It's a good question. As you know, we've got a great footprint that allows us to capture synergies and opportunities that are out there. We do think there are more opportunities. We're going to be very, very disciplined on how we approach it. The valuations are going to be key.

Yes, let me, let me speak to the bolt ons, Michael It's a good question as you know we've got a great footprint that allows us to capture synergies and opportunities that are out there.

We do think there are more opportunities.

We're going to be very very disciplined on how we approach it the valuations are going to be key.

Speaker 3: And I think you'll see continued focus on that. We look at all opportunities because our interests are in the best unit of, best interests of our unit holders. But I think you'll see both both on opportunities and both the Permian and outside of the Permian.

And I think youll.

Speaker 5: And then my second question is really probably related to the first. The rationale for reducing the leverage target, maybe you could just walk through that and is that in any way related?

Okay, Great and then my second question is probably related to the first.

Rationale for reducing the leverage target.

If you could just walk through that and is that in any way related to what you see down the road in terms of M&A and having flexibility.

Speaker 5: you know what you see down the road in terms of M&A and having flexibility.

Flexibility to act there.

Speaker 4: Michael, this is now our view was as we intended to be running the company at a lower leverage than what we had been historically Part of the reason for committing to it publicly like we like we have is our intent was to do it too We believe the broader energy sector is and will be running with lower

Michael This is al.

Our view was as we intended to be running the company at a lower leverage than what we had been historically.

Speaker 4: And we want to actually complete and get our upgrades to mid-triple B and we think this range that we've established.

<unk> that we've established puts us solidly in that with some flexibility for them.

Speaker 4: puts us solidly in that, with some flexibility for that, and recognizing it, again, that are intent is to run the company a little bit more conservatively with the balance sheet.

And recognizing.

Again that our intent is to run the company a little bit more conservative with the balance sheet.

Got it thank you.

One moment for our next question please.

Speaker 1: And next question comes from the line of Ryan Reynolds with UBS. She'll line us now with...

Our next question comes from the line of Brian <unk> with UBS. Your line is now open.

Thanks.

Speaker 8: Hi, good morning, everyone. Thanks for preparing marks on the impacts on volumes and the permeance quarterly related to weather. It sounds like.

Hi, good morning, everyone. Thanks for the prepared remarks on the impacts on volumes in the Permian this quarter related to weather it sounds like.

Speaker 3: I just wanted to follow up on the Permian Outlook here. First part of the question is, are you seeing any recent crew gathering acquisitions in the basin kind of adding volume to the quarter or going forward? And then second part, maybe a little more longer-dated question. We've heard some very constructive Permian growth expectations into 24 and to 25. I'm just kind of curious if you can kind of give us an early look at what you've seen for Permian activity as we look.

I just wanted to follow up on the Permian outlook here first part of the question is are you seeing any recent crude gathering acquisitions by basin kind of back volumes for the quarter or going forward and then second part maybe a little more longer dated question. We've heard some very constructive Permian growth expectations.

24% to 25, I'm just kind of curious if you can kind of give us an early look of what you've seen for Permian activity. As we look ahead to next year.

Speaker 3: Brian , I'm glad you asked the question. This is Willie. We'll give first off, we'll give you a formal guidance in February on 2024 in the Permian, but I'll give you some snapshots here. This has been a little bit of a strange year in that we had some weather issues in the summer that really impacted both second and third quarter.

Brian I'm glad you asked the question this is Willie.

Speaker 3: You know, our original guidance for the year was 500,000 barrels a day growth exit to exit.

Speaker 3: We updated on our last call, and we thought it was gonna be a little bit below that. You know, our views now is probably in that 350 to 400 range for the year, but the thing I wanted to share with you is if you look at our October volumes and gathering, this may address your question. We're actually 175,000 barrels that they hire in October than we were for the third quarter. So it really gives us confidence in the fourth order that never can...

Your question, we're actually 175000 barrels a day higher than October than we were for the third quarter. So it really gives us confidence in the fourth quarter and never can't perfectly predict the future, but we are seeing increased volumes as we start the fourth quarter off and then certainly a lot of the recent announcements, particularly with one of them.

Speaker 3: perfectly predict the future, but that we are seeing increased volumes as we start the fourth quarter off. And then certainly a lot of the recent announcements, particularly with one of the large transactions and one of the very large supermajors, really lens of support and aligns our view of the permeant going to be around for a long, long time as we go forward.

Large transactions in and one of the very large super majors really lends support and aligns our view of the Permian going to be around for a long long time as we go forward.

Okay.

Speaker 3: Great, thanks, appreciate that. And maybe to touch on the distribution, seems to come up in a little bit above expectations from last year's capital allocation update. So kind of curious if you can refresh us. Are there any structural changes that we'd be thinking about or is kind of targeting that one six coverage over a multi-year framework? Still the right way to think about it and how ultimately some of these acquisitions impact that distribution outlook on.

Great. Thanks, I appreciate that and maybe to touch on the distribution seems to come up a little bit above expectations from last year's capital allocation updates. So kind of curious if you can refresh us are there any structural changes that we'd be thinking about or is.

Kind of targeting that one six coverage over a multiyear framework is still the right way to think about it.

Ultimately some of these acquisitions impact that distribution network going forward. Thanks.

Yes. This is al.

Still we still are committed.

In the future for the 15th annual increase in the 160% coverage at the common level.

Part of the reason for moving it up in the extra nickel. This is related to the to the acquisitions that we've completed they are accretive.

We've targeted.

Yes.

Speaker 4: hurdle rates that will bring good accretion for these bolt-on transactions. And we also have seen strong performance out of our business.

Hurdle rates that will bring good accretion for these bolt on transactions and we also have seen strong performance out of our business but.

Once we complete this we're back to the 15 and 160% coverage, we think the 160% coverage allows us to basically fund.

Investment capital going forward.

Number of small bolt ons in the future without actually needing to raise external money, so kind of live within our own cash flow means.

Great all makes sense I'll leave it there and enjoy the rest of the morning.

Thanks, Brian. Thank you one moment for our next question. Please.

Our next question comes from the line of Gabe.

Moreen with Mizuho. Your line is now open.

Speaker 6: Thank you. Good morning, everyone. Maybe really if I can just ask a follow up on Michael's question about

Thank you good morning, everyone, maybe if I can just ask a follow up on Michael's question about.

Recurring bolt on M&A, you mentioned looking at things outside the Permian can you maybe elaborate on which basins you might think about as far as.

Speaker 6: Doing those bolt-ons and is doing something like the Orish JV structure appealing to you and other basins outside the Permian as well.

During those bolt ons and is doing something like the oryx JV structure appealing to you in other basins outside the Permian as well.

Speaker 7: I gave realises during the Goal Bowl. I would say we're structured agnostic. We're just trying to...

Gabriel This is Jeremy Goebel I would say, we're structured agnostic, we're just trying to.

Speaker 7: basically, guard the most synergies in a way that works for us in the counter party.

Basically garner the most synergies in a way that works for us and the counterparty, where we would focus that's where we have strength.

Speaker 7: Where we would focus, it's where we have strength. That's for our vantage point, we have gathering assets and all the core basins, where we have a strength in our marketing business, our pipeline business, and our terminals, and we can add value to assets. We'll continue to look there. So you look across our footprint, where we have strength as an area, where we think we can add value and extract synergies and do a creative field. And the amount of that Al just mentioned, that's where we're gonna.

For our vantage point.

We have gathering assets in all of our basins, where we have a strength at our marketing business our pipeline business in our terminals and we can add value to assets will continue to look there. So if you look across our footprint, where we have strength is an area, where we think we can add value and extract synergies into accretive deals and the amount of that al just mentioned, that's where we're going to target.

Speaker 6: Thanks Jeremy, and then maybe if I can ask about sort of the hedging of the Fract spread exposure heading into 24

Thanks, Jeremy and then maybe if I can ask about sort of the hedging.

<unk> spread exposure heading into 'twenty four.

Speaker 6: This you mentioned you two had put a lot of the spread exposure to bed at this point. Are you close to that 80% level that you're targeting? Do you see yourself getting there with your term? Are you kind of leaving some stuff open in a dissipation of some strength?

You mentioned that you had put a lot of those spread exposure to bad at this point are you close to that 80% level that you're targeting do you see yourself getting there near term or are you kind of leaving some stuff open and anticipation of some strength.

Speaker 3: Yeah, Gabe, we're not going to disclose exact number, but, uh, uh, ask comments on, uh, well over 60% hedged, um, was really indicative of that we've got a good portion of this hedge that good values, and that we'll get the further update when we get into February . Okay. Thanks, boys.

Yes, Gabe, we're not going to disclose the exact number but.

Al's comments on well over 60% hedged.

I was really indicative of that we've got a good portion of this hedged at good values and we will give a further update when we get into February.

Okay. Thanks, a lot.

Thanks, Gabe one moment for our next question.

Speaker 1: Our next question comes from the line of teeth stand weight with wolf research. Drill line is now open.

Our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

Hi, good morning.

Speaker 8: Follow up on the, sorry again on the freck spread.

Follow up on the.

Sorry, again on the Frac spread I just want make sure I understand this right. So the 60% is hedged above <unk> 60, a gallon can.

Speaker 8: right so this 60% is hedged above

Speaker 8: Can you say directionally, I think 2023 was a little higher than that when you did your plan, just trying to think directionally where that...

Can you say Directionally I think 2023 was a little higher than that when you did your plan just trying to think directionally, where where that sits on the <unk>.

Speaker 3: Yeah Keith, this is Willie again. You know, for 2023 we were very well-heged. We actually put these hedges on proactively in late 2022. So if you think about the weighted average value of that hedge is a little bit over to 70 cents.

Yes, Keith this is Willie again.

2023, we were very well hedged we actually put these hedges on proactively in late 2022. So if you think about the weighted average value of that hedge is little bit over 70.

Speaker 3: So if you compare it to what we actually hedged in 2023, you know, it's circa a dime lower than that.

So if you compare it to what we actually hedged in 2023 circa <unk> lower than that.

Speaker 8: If you think about the impact of that, that's roughly plus or minus $70 million. And as Al pointed out, we also have a turnaround. We had a turnaround this year, that next year that we won't be having. So that may give you a little better indication of where the NGO business is. That's very helpful. Thanks for that. The second one, I know the company's talked about.

If you think about the impact of that that's roughly.

That's very helpful. Thanks for that.

The second one.

I know the company has talked about the preferreds not being a near term priority.

Speaker 8: I'm curious with the official leverage target. Now at three and a quarter to three and uh, three quarters.

Just curious what the with the official leverage target now at three and a quarter to three and three quarters.

Speaker 8: under certain circumstances would you consider going above the leverage target in order to repurchase the preferreds or if you were to take out the preferreds at some point down the road would you need to

Under certain circumstances would you consider going above the leverage target in order to repurchase the preferreds or if you were to take out the preferreds at some point down the road would you need to still stay within that that new leverage band.

Speaker 4: This is out. There's been no change in our thinking around the around the preferred debt markets are are fairly high. You know, are like an issue in a new tenure would be six and a half six and three quarters.

This is al.

Theres been no change in our thinking around the around the preferreds.

Debt markets are are fairly high.

And issuing a new 10 year would be 656% and three quarters long way of saying that the rates on the preferreds are still fairly attractive in our view relative to our weighted average cost of capital.

Speaker 4: a long way of saying that the rates on the preferred are still fairly attractive. In our view, relative to our weighted average cost of capital.

Speaker 4: our intent would not be to meaningfully increase leverage to take those preferred out. So it's hard to say hypothetically what you might do a few years down the road. No, we want sacrifice our financial flexibility to reduce them again because...

Our intent would not be to meaningfully.

Increased leverage to take those preferreds out.

So it's hard to say hypothetically, what you might do a few years down the road, but no we wouldn't we won't sacrifice, our our financial flexibility to reduce them again, because they are not that high relative to our cost of capital.

Speaker 4: They're not that high relative to our cost to cash.

Speaker 4: We think our weighted average cost to capital today is in the 11 to 12% range and the preferred on the same weighting are 200 plus basis points last. So again, but there will be one day where maybe we will bill to take them out, but we don't want to sacrifice financial flexibility.

Think our weighted average cost of capital today is in the 11% to 12% range and the preferred on the same weighting.

Our 200 plus basis points less so so again there'll be one day.

Maybe we will bill if they come out.

But we don't want to sacrifice financial flexibility.

Thank you.

Thank you one moment for our next question. Please.

Speaker 1: The next question comes from a line of Neil Mietro with Bank of America. Your line is now up.

Our next question comes from the line of Neel Mitra with Bank of America. Your line is now open.

Speaker 2: Hi, thanks for taking my questions. I wanted to touch on the Permian Long-Hall volumes. It seems like they fell a little bit more disproportionately relative to gathering in intrabassion in the quarter versus the second quarter. And also, how did basin perform, just given the low-cushing inventory of this quarter?

Hi, Thanks for taking my questions I wanted to touch on the Permian long haul volumes. It seems like they fell a little bit more disproportionately relative to.

Gathering and intra basin in the quarter.

The second quarter and also how did basic performed just given the low Cushing inventories this quarter.

Speaker 7: Neil, hi, I'm Sierra McGoval. What I would say is on the Long Hall volumes, that was just some market dynamics in Corpus. It was cheaper for the shippers to buy at Corpus than it was to ship the barrel from Midland. Though it was just an election by some of the shippers on the pipeline, but it's transitory. The pipeline is going into the fourth quarter or in line with where they've historically been and demand this robust longer term for the ship.

Neil highest Jeremy Goebel.

Robust longer term for the shipments based and there is a similar story there was as the inventories came down there was less need for movements in that direction, but directionally as a inventories go down there's more pull on basin.

Speaker 7: Based on this similar story, there was, as the inventories came down, there was less need for movements in that direction, but directionally as those inventories go down, there's more coal on basin.

Got it perfect and then.

Speaker 8: If I could ask generally what you're seeing in the basin on

If I could ask generally.

What youre seeing in the basin.

Speaker 8: on growth dynamics. I know most of the gas processors had flat volumes from May to August just to flick yourselves, but.

The dynamics I know most of the gas processors had flat volumes from May through August just just like yourselves, but can you touch upon which regions got affected the most.

Speaker 12: Can you touch upon which regions got affected the most? You know, was it the New Mexico, Delaware that was impacted the most versus the other basins? And then also what you're seeing from the producers during the heat that would have impacted.

The new Mexico, Delaware.

That was impacted the most versus the other basins and then also what youre seeing from the <unk>.

<unk> during the heat that would have impacted their side versus the infrastructure side.

Speaker 12: their side versus the infrastructure side. Understanding that you guys are up and running again in October with strong volumes.

Understanding that you guys are are up and running again in October with strong volumes.

Speaker 7: Thanks Neil. It was that state line area in North India, Mexico. I think the other dynamic there was the issues around flaring and stopping the flaring. So it all hit at once and it was within a three-month period.

Yes.

Thanks Neil.

That state line area North ended in Mexico, I think the other dynamic there was the.

Some of the issues around flaring and staffing of flaring. So it all hit at once and it was within a three month period.

Speaker 7: But the big surgeon volume is coming from those same regions and part of the Northern Middle Basin. So I'd say it's recovering and then some and we see that momentum carrying based on the connections we have made in November and will make this month and next month and in next year that that momentum.

Speaker 12: And Jeremy, I don't know if I got a response on basin, how that was running during the quarter. If you don't mind commenting on that.

And Jeremy I don't know if I got.

Lots on basin, how that was running during the quarter.

I don't mind, commenting on that.

Speaker 7: Sure, it was in line with expectations and the inventory's range, we would expect the volume to increase. Okay, great, thank you.

Sure. It was in line with expectations of those inventories range, we would expect the volumes to increase.

Okay, great. Thank you.

Thank you one moment for our next question.

Speaker 1: And next question comes from the line of Doug Irwin with City. The line is now...

Our next question comes from the line of Doug <unk> with Citi. Your line is now open.

Speaker 5: Hey, thanks for the question. Just a couple of follow-ups on guidance. So maybe I'll ask them both at once.

Alright. Thanks for the question just a couple of follow ups on guidance, So maybe I'll ask them both at once.

Speaker 5: First, I'm just wondering if he can kind of help bridge the facts that the EBITDA guidance moved higher, but then we saw cash from operations and free cash flow. I'm a little bit lower. I'm sure that physicians haven't impact on that. Are there any other kind of bigger moving pieces? She can point to there.

First I'm just wondering if you could kind of help bridge. The fact that the EBITDA guidance moved higher but then we saw cash from operations and free cash flow move a bit lower.

Sure the acquisition having impact on are there any other kind of bigger moving pieces you can point to there.

Speaker 5: And then again, kind of on the implied for key guns, the midpoint implied to step down versus this quarter. I'm just wondering if he can kind of help recognize that. Step down versus some of the tail ones in the mirror and fight these acquisitions and probably perfectly growth re-bounding it.

And then again kind of on the implied <unk> guidance, the midpoint implies a step down versus this quarter.

Just wondering if you can kind of help reconcile that step down versus some of the tail end of the year and quite these acquisitions.

Permian growth rebounding.

This is al I'll take a shot at the first one yes.

Between the free cash flow and the cash from operations effectively the acquisitions reduce cash flow from the free cash flow number, but roughly the $135 million that we described.

Speaker 4: The other two higher higher EBITDA is been in our in our forecast is offset by higher taxes as well as our assumed working capital and merchant needs

The other two higher higher EBITDA has been in our in our.

Our forecast is offset by higher taxes as well as our assumed working capital on merchant needs again, which is all timing related.

Speaker 4: again which is all kind of timing related. Those were really the three things.

Those were really the three things I would point to.

Speaker 4: You know, it's as to kind of guidance, you know, third quarter to fourth quarter. Again, we feel like the midpoint of our range, we do see quarterly flux between them. It would probably better to take offline with the IR team, kind of any more micro detailing type of discussion. updated.

As to as to kind of guidance.

Third quarter to fourth quarter.

Again, we feel like the midpoint of our range, we do see quarterly flux between them.

It would probably be better to take offline with the IR team kind of any more micro.

Detailing type of discussion.

Okay understood I appreciate it.

Thank you one moment for our next question. Please.

Speaker 1: The question comes from the line of Jeremy Deney with JP Morgan Securities. The line is now...

Next question comes from the line of Jeremy Tonet with JP Morgan Securities. Your line is now open.

Speaker 5: Hey, guys, this is Rapan Reddy on for Jeremy. I think it's been hit on a couple of times in the call already. But just to clarify, are you guys able to disclose what part of the guidance raises attributable to the base business strength, given that you guys had already pointed to the high on last quarter versus the incremental contribution for the proton acquisitions? Thanks.

Hey, guys. This is Ralph and ready on for Jeremy I think it's been hit on a couple of times on the call already but.

Just to clarify are you guys disclose what part of the guidance raise is attributable to the base business strength.

Given that you guys had already pointing to the high end last quarter.

First is the incremental contribution from the proton acquisitions. Thanks.

Speaker 7: Sure, this is Jeremy. It's roughly $10 to $15 million from that.

Sure. This is Jeremy it's roughly $10 million to $15 million.

From the acquisitions.

Speaker 10: Okay, perfect, thank you. And then for the second one, last quarter talked about Canadian optimization opportunities and maybe utilizing some of that underutilized capacity at Tharnia. So, curious to hear your updated thoughts here. And what you guys are seeing in terms of low capital, smaller growth, optimization opportunities, thanks.

Okay perfect. Thank you and then for the second one.

Last quarter, you talked about Canadian optimization opportunities.

And maybe utilizing some of that underutilized capacity at Sarnia, So curious to hear updated thoughts here and.

What you guys are seeing in terms of low capital a smaller growth optimization opportunities. Thanks.

Speaker 3: Yeah, I'll take a stab at that. I mean, I think as we shared last call, our East West system together has been, it gives us an advantage because we've got spare capacity in the East.

Yes, I'll take a stab at that I mean, I think as we shared last call.

Our east West.

Speaker 3: And that was a key part of our ability to be able to move quickly on our debateneck in the West.

Speaker 3: So we continue to work on a lot of neat opportunities around optimization, both of our Empress Complex, Fort Sass and Sarnia. And I think the thing to take away from it is no big announcements on projects other than what we've already announced, but there's clearly capacity there that we can continue to optimize and utilize without having to put, you know, greenfield projects in. Perfect. Thanks, Philip.

Perfect. Thanks for all the color.

Thank you.

One moment for our next question.

Speaker 1: And next question comes from the line of Neil Dingman with two securities. The line is now.

Our next question comes from the line of Neal Dingmann with <unk> Securities. Your line is now open good.

Speaker 7: Morning all thanks for the time. One first quick one. Can you all just give an update? I think you've talked about this in the past, just on the minimum volume commitments, where you stand there and kind of as you enter 24, how those sit.

Good morning, all thanks for the time just one first quick one could you just give an update I think you've talked about this in the past just on the minimum volume commitments, where do you stand there in kind of as you enter 'twenty for carbo.

Yes.

Speaker 3: I'm not sure I understand the question. Can you repeat it? Committed on long haul or? Yes.

Im not sure I understand the question can you repeat it.

And then it is volatile and dependent on long haul or.

Yes, just on the long haul you Sir.

Oh sure.

What I would say is we continue to have constructive dialogues with the customers nothing to highlight at this point enterprises announcements obviously.

Additive to that equation and market dynamics are such that.

Speaker 7: With the continued acquisitions enhancing relationships with customers, we feel we're in a good place and we'll give you guys an update when it's appropriate. We do believe in the base and long term in these acquisitions and improve recoveries, should all support that ongoing growth through the decade and continue contracting.

With the continued acquisitions enhancing relationships with customers, we feel we're in a good place and we'll give you guys an update when it's appropriate we do believe in the basin long term in these acquisitions and improve recoveries should all support that ongoing growth through the decade and continued contracting in the pipelines.

Speaker 7: Great. And then just on a second, could you give the latest on the continued Canadian opportunities such as in Edmonton or Ontario, you know, around like that angel extraction plant site or some other things you have?

Great and then.

And second could you give the latest on the continued Canadian opportunities such as admin Tinder, Ontario around like that NGL extraction plant site or some other things you have.

Speaker 7: Sure, I broadly and Canada around the NGL system, I think the opportunities you're gonna see is the Fort Sask is constrained the opportunity for East, West movements and higher margins and other things to purchase additional NGLs. There's opportunities throughout next year that we'll see, I don't know if that's what you're asking for, but it seems to me that there are margin enhancement opportunities around the system and we'll look to use our own.

Sure I broadly in Canada around the NGL system, I think the opportunities youre going to see is the forecast.

Our task is constrained the opportunity for east west movements at higher margins and other things to purchase additional NGL theres opportunities throughout next year that we'll see.

I don't know if thats, what youre asking for but it seem to me that there are margin enhancement opportunities around the system and we'll look to use our system to capture them.

Speaker 3: Yeah, Neil, the other thing I would add is, as we think about our Canadian footprint, we're very bullish on Western Canadian gas production. So if that increases and there's additional takeaway to the West Coast, we think it encourages additional production and that gives us the opportunity to be able to capture more NGLs out of a wet stream. Great detail. That's exactly what I was looking for.

Neil the other thing I would add is as we think about our Canadian footprint.

Great detail Thats exactly I was looking for thanks guys.

Thank you one moment for our next question.

Speaker 1: And next question comes from Senel Zibal with C-Port Global, your line is down.

Our next question comes from Sunil Sibal with Seaport Global Your line is now open.

Speaker 9: Yeah, hi, good morning, everybody, and thanks for all the clarity in the call. So, just wanted to understand some of the dynamics on the EBITDA guidance increase. So, it seems like from what you've indicated, 10 to 15 million impact of bolt-on acquisitions, and at the same time, you're reducing your volume expectation. So, is it fair to assume your unit margins are going up?

Yes, hi, good morning, everybody and thanks for all the clarity on the call.

Just wanted to understand some of the dynamics on the EBITDA guidance increase so it seems like from what you indicated $10 million to $15 million impact.

Bolt on acquisitions.

And at the same time as reducing your volume expectation. So is it fair to assume your unit margins are going up.

Speaker 9: And then any significant driver of that, obviously, you know, tariffs are increasing, but that was probably well known.

And then any significant driver of that obviously tonnage that increasing but that does probably malone.

Speaker 4: I'll take a shot at this is out. In the crude side, we've seen half-seen and are expecting more favorable market-based opportunities.

Yes, I'll take I'll take a shot at it this is now in the <unk>.

Crude side, we've seen.

<unk> seen and are expecting more favorable market based opportunities, we've seen over the year higher movements into and out of Cushing.

Speaker 4: We've seen over the year higher movements into and out of cushing our non-permean assets have performed well and then clearly the contribution from the acquisition.

Our non Permian assets have performed well and then clearly the contribution from the acquisition.

Speaker 4: In the NGL segment, we've seen.

In the NGL segment, we've seen benefit from higher better improved NGL yields this is likely temporary.

Speaker 4: benefit from higher, better improved NGL yields. This is likely temporary in the ACO gas stream as well as more attractive differentials west east as Jeremy mentioned. So those are really.

The eco gas stream as well as more attractive differentials west to east as Jeremy mentioned.

Those are really the things that are kind of driving it.

Speaker 7: One thing to note though, with you that Permian reduction is train victory. This is building momentum into the fourth quarter and in the next year, so the view that it slowed down our expectations long-term, it slowed down, if not, as is a function of

One thing to note, though on the.

We view the Permian reduction as transitory. This is building momentum into the fourth quarter and into next year. So the view that it slowed down our expectations long term has slowed down if not this is a function of transitory title.

Speaker 9: Understood. And then on the pipeline loss alarms, you know, with all the recent acquisitions that you've done, could you remind us, you know, what is your total exployer on crude with the

Understood and.

And then.

On the pipeline loss allowance.

The recent acquisitions that you've done could you remind us what is your total <unk>.

<unk> with the pipeline loss loans.

Speaker 2: A. Cinellus Blake, you know, historically what we've said is two to three million barrels and we haven't provided an update to that. I think it's correct to think it's more volumes ultimately make their way onto the system that could increase over time and we'll give an update when appropriate. So concerning the design, I will bring it over and give it a move.

Hey, Neil it's Blake.

Understood. Thanks.

Thank you.

And for our next question.

Speaker 1: Our next question comes from the line of John McKay with Goldman Sachs. The line is now open.

Our next question comes from the line of John Mccain with Goldman Sachs. Your line is now open hey.

Speaker 10: Hey, good morning, everyone. Thank you for the time. I wanted to touch on kind of broader picture for Permian long haul. We've had some.

Good morning, everyone. Thank you for the time I wanted to touch on kind of broader picture for Permian long haul we've had some.

Speaker 10: you know changes in the market recently seminal coming out of service uh... the gray oak open season seems like it's about to go forward i guess i'd just be curious to hear from your side where you see kind of overall balances for the market of the next couple years and uh... you know whether or not you expect we could see more conversions out of crude service into something else thanks

Changes in the market recently seminal coming out of service.

The Gray Oak open season, it seems like it's about to go forward I guess I'd just be curious to hear from your side, where you see kind of overall balances for the market in the next couple of years.

And.

Whether or not you expect we could see more conversions out of crude service into something else. Thanks.

Speaker 3: Yeah John , this is Willie. You know, there's a lot of puts in take to this. You know, when I think about the move that were proposed.

Yes, John this is Willie.

There's a lot of puts and take to this when I think about the moves that the proposed possible projects. These are what I would call smaller increases maybe 100 200000 barrels a day.

Speaker 3: possible projects. These are what I would call smaller increases, maybe 100, 200,000 barrels a day. You know, when we think longer term with the growth of the Permian, we just, we're consistent with our views.

Speaker 3: Fasties gonna get tight. I don't think you build long haul lines are gonna get built

Speaker 3: With the Seminole announcement, it's taken a little bit out. So there's a lot of puts and takes against it, but long-term, our views have not changed. It's still going to be tightening capacity in a market that's going to be harder and harder to build long-haul lines.

In a market, that's going to be harder and harder to build long haul lines.

Speaker 10: that's that's fair maybe um... shifting gears you touched the working capital a little bit in the quarter um... and i know it's transitory should come back it was just larger than we've it looks like we've seen in a couple quarters is there a you know when we're thinking about capital returns next year potentially by back

Alright.

Maybe shifting gears you touched on the working capital a little bit in the quarter.

And I know, it's transitory and should come back I was just larger than we've it looks like we've seen in a couple of quarters is there a when we're thinking about capital returns next year potentially buybacks is there a kind of a minimum level of cash you would want to see on on the balance sheet and.

Does this quarter's kind of larger working capital draw affect that.

That math at all.

This is al we do see fairly significant quarter over quarter working capital flexes and we use the word working capital is.

If we're building inventory and we're borrowing short term on our credit facilities.

It's a working capital use although technically they are both in working capital. So it's kind of working capital and merchant requirements. We.

Speaker 4: We do see a quarter to quarter of fairly significant moves.

We do see quarter to quarter fairly significant moves generally over a 12 month period, all those normalize out.

Speaker 4: Generally over a 12 month period, all those normalized out.

Speaker 4: We normal we normally model assuming lower cash balances than what

We normal we normally model assuming.

<unk> cash balances and what what.

Speaker 4: what we've been running and we'll be showing that when we show you the year-end balance sheet because the cash balances will have been consumed with the note we just paid down here in October .

We've been running and we'll be showing that when we show you the year end balance sheet, because the cash balances will have been.

<unk> with the note, we just paid down here in October.

Speaker 8: But normally we would model about 100 million cash on the balance sheet and we use our credit facilities in the commercial paper markets to balance this out. And it is timing we end up reverting back to more of a normalized balance over the course of a few quarters. All right, very clear.

But normally we would model about $100 million in cash on the balance sheet and we use our credit facilities and the commercial paper markets to balance this out and it is timing.

Reverting back to more of a normalized balance over over the course of a few quarters.

All right very clear I appreciate the time.

Thank you for your questions.

Speaker 1: This concludes today's conference call. Thank you for participating in today's call. You may now disconnect. Everyone have a wonderful day.

This concludes today's conference call. Thank you for participating in today's call. You may now disconnect everyone have a wonderful day.

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