Q4 2023 ONEOK Inc Earnings Call
Speaker Change: [music].
Operator: Good morning, and welcome to the ONEOK fourth quarter 2023 earnings conference call and webcast. All participants will be in listen-only mode.
Good morning, and welcome to the one oak fourth quarter 'twenty twenty-three earnings conference call and webcast. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
Operator: Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you can be press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Operator: Please note, this event is being recorded. I would now like to turn the conference over to Andrew Ziola, Vice President, Investor Relations. Please go ahead.
Please note this event is being recorded.
I would now like to turn the conference over to Andrew say, all up Vice President Investor Relations. Please go ahead.
Andrew Ziola: Thank you, Drew, and welcome to ONEOK's fourth quarter and year-end 2023 earnings call. We issued our earnings release and presentation after the markets closed yesterday, and those materials are on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include ONEOK's expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filing.
Andrew: Thank you drew and welcome to one offs fourth quarter and year end 2023 earnings call.
Andrew: We issued our earnings release and presentation. After the markets closed yesterday and those materials are on our website.
Speaker Change: After our prepared remarks management will be available to take your questions.
Andrew: Statements made during this call that might include one oak's expectations or predictions should be considered forward looking statements and are covered by the safe Harbor provision of the securities acts of 19 thirty-three of 1934.
Andrew: Actual results could differ materially from those projected in forward looking statements for a discussion of factors that could cause actual results to differ please refer to our SEC filings.
Andrew Ziola: Just a reminder for Q&A, we ask that you limit yourself to one question and a follow-up, in order to fit in as many of you as we can. With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer.
Andrew: Just a reminder for Q&A, we ask that you limit yourself to one question and a follow up in order to fit in as many of you as we can.
Andrew: With that I'll turn the call over to Pierce Norton, President and Chief Executive Officer peers. Thanks.
Pierce H. Norton: Thanks, Andrew. And good morning, everyone. And thank you for joining us this morning. On today's call is Walt Hulse, our Chief Financial Officer, Treasurer, and Executive Vice President, Investor Relations and Corporate Development, and Sheridan Swords, who's our Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing. Also available to answer your questions are Chuck Kelley, our Senior Vice President of Natural Gas Pipelines, and Kevin Burdick, who's the Executive Vice President of Chief Enterprise Services. Record volumes, strong financial performance, and the closing of the Magellan acquisitions solidified 2023 as a year of significant growth and transformation for ONEOK. Momentum from our operations in 2023 is setting the stage for additional growth in 2024. In our earnings release yesterday, we reported double-digit NGL and natural gas processing volume growth year-over-year and continued fee-based earnings growth in all three of our legacy business segments.
Pierce H. Norton: Thanks, Andrew and good morning, everyone and thank you for joining us this morning.
Pierce Norton: On today's call is Walt Hulse, Chief Financial Officer, Treasurer, and Executive Vice President Investor Relations and corporate development.
Pierce H. Norton: And Sheridan swords, who's our executive Vice President commercial liquids and natural gas gathering and processing also available to answer your questions are Chuck Kelley, our senior Vice President natural gas pipelines and Kevin Burdick, Who's the executive Vice President and Chief Enterprise services.
Pierce H. Norton: Record volumes strong financial performance and the closing of the Magellan acquisition solidified 'twenty twenty-three as a year of significant growth and transformation for one out.
Pierce H. Norton: Momentum from our operations in 2023 is setting the stage for additional growth in 2024.
Pierce H. Norton: With our earnings release yesterday, we reported double digit NGL and natural gas processing volume growth year over year and continued fee based earnings growth in all three of our legacy business segments. We also provided 2024 guidance along with some insight into 'twenty 'twenty five M b.
Pierce H. Norton: We also provided 2024 guidance along with some insight into 2025 and beyond, including an expectation for double-digit adjusted EBITDA growth in 2024. Walt will provide more detail on our guidance, which is underscored by Solid Business Fundamentals, Demand for the products that we deliver and a full year of earnings contribution from our refined products and crude oil segments, and The Initial Realization of Acquisition-Related Synergies. Before I turn the call over to Walt, I want to share a few data points that help sum up the exceptional growth ONEOK has experienced in recent years. While our business continues to transform and look to the future, it's still important to reflect on what has already been accomplished. I'll share just a handful of highlights, but there are many more.
Speaker Change: Got it.
Speaker Change: Including an expectation for double digit adjusted EBITDA growth in 2024.
Speaker Change: Al will provide more detail on our guidance, which is is underscored by solid business fundamentals demand for the products that we deliver in a full year of earnings contribution from our refined products and crude oil segments.
Speaker Change: In the initial realization of acquisition related synergies.
al: Before I turn the call over to Walt I want to share a few data points that helps some of the exceptional growth one oak has experienced in recent years.
al: Our business continues to transform and to look to the future. It's still important to reflect on what has already been accomplished.
Walter S. Hulse: I'll share just a handful of highlights but there are many more first 20 twenty-three mark one oak's 10th consecutive year of adjusted EBITDA growth throughout various commodity cycles over the same time period, we've increased dividends paid to $3 82 per share.
Pierce H. Norton: First, 2023 marked ONEOK's 10th consecutive year of adjusted EBITDA growth throughout various commodity cycles. Additionally, over the same time period, we increased dividends paid to $3.82 per share from $1.48 per share, a more than 150% increase. And in January, the board approved another increase. Our volumes out of the Rocky Mountain region have set numerous records over the last five years alone. NGO volumes from the region have grown at more than a 20% annual growth rate, and natural gas processing volumes have grown at a 10% annual growth rate.
Walter S. Hulse: From $1.48 per share and more than 150% increase and in January the board approved another increase.
Walter S. Hulse: Our volumes out of the Rocky Mountain region have set numerous records over the last five years alone NGL volumes from the region have grown at a more than 20% annual growth rate in natural gas processing volumes have grown at a 10% annual growth rate.
Pierce H. Norton: We've continued to expand our asset portfolio, increasing our extensive pipeline network to more than 50,000 miles from approximately 30,000 miles in 2013, and adding nearly two BCF per day of natural gas processing capacity and three fractionators. And finally, through all of this growth, both internally and by acquisition, we've continued to prioritize safety and our sustainability and ESG-related performance, consistently ranking toward the top of our industry peer group, including a triple-A rating from MSCI. We've achieved a great deal in recent years and over the course of our company's history, and now, with a more diversified portfolio of assets, we are even better positioned to make the most of future opportunities. With that, I'll turn the call over to Walt. Thank you, Pierce.
Walter S. Hulse: We've continued to expand our asset portfolio, increasing our extensive pipeline network to more than 50000 miles from approximately 30000 miles in 2013, and adding nearly two bcf per day of natural gas processing capacity and three fractionator.
Walter S. Hulse: And finally for all of this growth both internally.
Walter S. Hulse: And by acquisition, we've continued to prioritize safety and our sustainability in ESG related performance consistently ranking toward the top of our industry peer group, including a triple a rating from M. S. C I.
Walter S. Hulse: We've achieved a great deal in recent years and over the course of our company's history.
Walter S. Hulse: And now with a more diversified portfolio of assets, we are even better positioned to make the most of future opportunities with that I'll turn the call over to Walt thank.
Walter S. Hulse: Thank you Pearce.
Walter S. Hulse: Before I get to guidance, I'll start with a brief overview of our fourth quarter and full year financial performance. ONEOK's fourth quarter and full year 2023 net income totals $688 million and $2.7 billion, respectively. Adjusted EBITDA totaled more than $1.5 billion in the fourth quarter of 2023 and more than $5.2 billion for the full year. While there were a number of unique items contributing to the significant year-over-year increase in results, such as the Medford Settlement and the Magellan Acquisition, the strong performance from our legacy business segments continued. Even excluding these unique one-time items, ONEOK's adjusted EBITDA would have increased more than 15% year-over-year. As of December 31st, we had no borrowings outstanding under our $2.5 billion credit facility and had more than $335 million of cash on hand.
Walter S. Hulse: Before I get to guidance I'll start with a brief overview of our fourth quarter and full year financial performance.
Walter S. Hulse: One oak's fourth quarter and full year 2023, net income totaled $688 million and $2 $7 billion respectively.
Walter S. Hulse: Adjusted EBITDA totaled more than one 5 billion in the fourth quarter 2023, and more than $5.2 billion for the full year.
Walter S. Hulse: Well there were a number of unique items contributing to the significant year over year increase in results such as the Medford settlement and the Magellan acquisition the strong performance from our legacy business segments continue.
Walter S. Hulse: Even excluding these unique one time items, one oak's adjusted EBITDA would have increased more than 15% year over year.
Walter S. Hulse: As of December 31, we had no borrowings outstanding under our $2 5 billion dollar credit facility and had more than $335 million of cash on hand.
Walter S. Hulse: In 2023, ONEOK extinguished $1.3 billion of long-term debt, contributing to a fourth quarter 2023 run rate net debt to EBITDA ratio in line with our previously discussed target of 3.5 times. In January, we increased our quarterly dividend 3.7% to $0.99 per share or $3.96 per share on an annualized basis. Going forward, ONEOK expects to target an annual dividend growth rate ranging between 3 to 4 percent. We also announced a $2 billion share repurchase authorization, which we target to largely use over the next four years. This program is complementary to the dividend growth rate when thinking about shareholder return in the future. Over the next four years, ONEOK's combination of dividends and share repurchases is expected to trend towards a target of approximately 75% to 85% of forecasted cash flow.
Walter S. Hulse: In 2023, one oaky extinguished $1.3 billion of long term debt contributing to our fourth quarter 2023 run rate net debt to EBITDA ratio in line with our previously discussed target of three five times.
Walter S. Hulse: In January we increased our quarterly dividend, 3.7% to 99 cents per share or $3.96 per share on an annualized basis.
Walter S. Hulse: Going forward why don't you expect to target an annual dividend growth rate ranging between 3% to 4%.
Walter S. Hulse: We also announced a $2 billion share repurchase authorization, which we target to largely use over the next four years.
Walter S. Hulse: This program is complementary to the dividend growth rate when thinking about shareholder return in the future.
Over the next four years, one oak's combination of dividends and share repurchases is expected to trend towards a target of approximately 75% to 85% of forecasted cash flow from operations after identified capital expenditures.
Walter S. Hulse: Our commitment to maintaining our financial flexibility and taking advantage of attractive return capital growth opportunities that complement our now larger and more diverse operating footprint continues to be the highest priority in our capital allocation strategy.
Walter S. Hulse: This commitment will continue to create value for our investors and support one oak's position as one of the midstream leaders of return on invested capital now.
Walter S. Hulse: Now moving on to 'twenty 'twenty four guidance.
Walter S. Hulse: We provided a net income midpoint of more than $2.8 billion.
Walter S. Hulse: And EPS midpoint of $4.88 per diluted share and an adjusted EBITDA midpoint of $6 $1 billion. We also include in guidance related to the synergies we expect to realize over the next couple of years.
Walter S. Hulse: This guidance reflects higher earnings from all business segments, excluding the Medford insurance settlement and a full year contribution of the refined products and crude segment.
Walter S. Hulse: Sheridan will provide more detail on each of the operating segments in a moment.
Sheridan C. Swords: As for synergies.
Sheridan C. Swords: We've assumed a midpoint of $175 million of total realized annual cost and initial commercial synergies in 2024, followed by an additional $125 million in 2025.
We expect additional synergies in 2026 and beyond as capital expenditure projects to connect our NGL to the refined products and cruise crude businesses are completed.
Sheridan C. Swords: As it relates to capital expenditures.
Sheridan C. Swords: We've assumed a total of $1.85 billion, which includes growth and maintenance capital.
Sheridan C. Swords: This guidance reflects the investment necessary to keep up with the expected levels of producer activity and attractive return growth projects, including the M. B six fractionator and expansions of our West, Texas, NGL and Elk Creek NGL pipelines, all expected to be completed in the <unk>.
First quarter of 2025.
Sheridan C. Swords: Once these projects are completed in early 2025, we expect to be on a trend of decreasing capital expenditures over the near to medium term.
Sheridan C. Swords: Our expected 'twenty 'twenty four capital guidance.
Sheridan C. Swords: Guidance does not include the <unk> connector project or any other projects that have not yet reached financial investment decision.
Sheridan C. Swords: Now I'll turn the call over to Sharon for a commercial update.
Sharon: Thank you Walt we saw strong year over year volume growth in 2023.
Sharon: Natural gas processing volumes up, 14% and NGL volumes up 10% compared with 2022.
Sharon: Rocky Mountain region volumes were particularly strong with double digit growth in both NGL and natural gas processing volumes year over year.
Sharon: Higher producer activity levels increased well connects and continued strong gas to oil ratios drove record fourth quarter volumes totaling nearly 400000 barrels per day of Ngls.
Sharon: And nearly 1.6 Bcf per day of processed volume.
Sharon: Mid continent processed volume increased 15% year over year, and Permian Basin, NGL increased 19% year over year.
Sharon: Both benefiting from solid producer activity throughout the year in those regions.
Sharon: Well connects across our operations increased more than 50% compared with 2022 weeks.
Sharon: We continue to see the benefit of those connections throughout 'twenty 'twenty four as volumes ramp.
Sharon: Our natural gas pipeline segment significantly exceeded its 2023 financial guidance range on.
Sharon: On higher earnings from long term storage services and higher rates from negotiated fee based contracts.
Our refined products and crude segment adjusted EBITDA totaled more than $420 million in the segments first full quarter of operation since the acquisition of Magellan.
Sharon: This segment's performance was driven by midyear tariff increases longer haul refined product shipments and steady crude oil transportation volumes.
Sharon: Our optimization and marketing activities, which includes liquids blending also benefited from strong margins and volumes.
Turning to 'twenty 'twenty four.
Sharon: Key drivers for our higher 2024 guidance includes stable producer activity and continued protection efficiency improvements.
Sharon: <unk> strong natural gas and NGL volumes across our systems solid refined products demand continue streaks in fee based earning in rates and our first full year of annualized synergies.
Sharon: In our natural gas liquids segment, we expect higher year over year, adjusted EBITDA and raw feed throughput volume driven.
Sharon: Driven primarily by growth out of the Rocky Mountain region.
Sharon: Despite lower assumptions for incentives.
Sharon: Incentivize ethane recovery in 'twenty 'twenty four.
Sharon: And a low margin contract exploration from overlap overland pass pipeline in November of 2023 we still expect higher year over year NGL volumes.
Sharon: The expired contracts volume is being replaced with higher rate barrels ramping through 2024.
Sharon: Healthy demand for ethane from the petrochemical industry and why gas to oil ratios are setting up a positive backdrop for NGL markets in 2024.
Sharon: On our system, we've assumed high levels of ethane recovery continue in the Permian basin in 2024 and partial recovery in the mid continent.
Sharon: We also expect to see continued opportunities to incentivize ethane recovery in the Rocky Mountain region.
Sharon: As Walt mentioned we.
Sharon: Officially moving forward with the expanding the Elk Creek pipeline to 435000 barrels per day.
Sharon: Increasing our total NGL capacity out of the Rocky Mountain region to 575000 barrels per day.
Sharon: This additional capacity will support future growth and increased ethane recovery.
Sharon: Moving on to the natural gas gathering and processing segment.
Sharon: We expect volume growth in the Rocky Mountains, and mid continent regions, driven by higher than anticipated well connections in 2023 and.
Sharon: And consistent producer activity levels expected in 2024.
And then the Rocky Mountain region, we expect processing volumes to grow 9% at the midpoint compared with 2023 and have average an average more than one six bcf per day in 2024.
Sharon: This outlook includes the impact from the weather, we experienced so far this year, including well freeze offs in mid January when the windshields dropped below negative 60 degrees.
Sharon: By the end of January volumes had recovered to levels achieved prior to the extreme cold.
Sharon: Strong producer activity levels in 2023, and the continued trend of high gas to oil ratios go several months of record North Dakota natural gas production.
Sharon: With the latest record at 3.52 Bcf per day set in December.
Sharon: Producer activity has carried over into 2024, even through the winter months as we enter March there are 36 rigs in the Williston basin with O with 'twenty on our dedicated acreage.
Sharon: Through detailed planning sessions with our customers, we expect additional rigs to return as we move into spring.
Sharon: Additionally, we continue to see a trend our producers drilling longer laterals in the basin.
Sharon: Three miles in length or more as opposed to the historical two mile laterals.
Sharon: These longer laterals continued drive improve production efficiencies and result in fewer well connections needed to grow gathered volumes.
Sharon: As detailed in our earnings presentation, we expect three mile lateral stroke count for a proxy 30% of the wells drilled on our acreage in 2024, compared with only 7% two years ago.
Sharon: In the mid continent region. We are currently seeing approximately 45 rigs in Oklahoma with six operating on our acreage we expect processing volumes to grow approximately 3% at our guidance midpoint compared with 2023 and average approximately 770 million cubic feet per day in 2024.
Sharon: Rig activity across the base and it will continue to drive additional NGL store system.
Sharon: And the natural gas pipeline segment, we continue to expect strong demand for natural gas storage and transportation services in 2024 at.
Sharon: At the end of 'twenty, three 2023 more than 75% of our natural gas storage capacity, which contracted under long term agreements and our pipeline transportation capacity was nearly 96% contracted we expect similar levels in 2024.
Sharon: From a natural gas storage perspective, we continue to focus on expansion projects. We are currently working on a project to reactivate three Bcf a previously idled storage in Texas and.
Sharon: And are further expanding our injecting injection capabilities in Oklahoma.
Sharon: In February 2020 for the FERC approved so Oro connector pipelines presidential permit.
Sharon: And we expect a final investment decision on the pipeline by mid year 2024.
Sharon: Moving on to the refined products and crude segment we continued.
Sharon: You'd expect healthy business fundamentals and the segments more than 85% fee based earnings to drive consistent performance we'll.
Sharon: We will see the full year effect of higher refined products tariff rates driven by the mid year 2023 increase.
Sharon: 11, 5%.
And we expect additional mid single digit increases in July 2024.
Sharon: We also expect an increase in refined products volumes, including a benefit from the completion of our expansion to El Paso.
Sharon: Additional benefits are expected from higher volumes and margins related to liquids blending in 'twenty 'twenty, four driven by favorable market conditions and synergy related opportunities.
Sharon: Walt discussed commercial synergies earlier, which we expect primarily to show up in our refined in our refined products and crude segments earnings.
Sharon: Pierce that concludes my remarks.
Thank you Sheridan and Walt.
Sharon: I started this call by saying that 2023 was a year of significant good growth and transformation.
Speaker Change: None of this would've been possible without our dedicated employees with many of those employees actually listening to this call today.
Speaker Change: So I want to make sure that I. Thank them publicly for all that they did in 2023.
With US now five months post closing of the acquisition our employees have continued to focus on our integration efforts and prioritize the reliable operations of our assets and the high quality of service expected at one up.
Speaker Change: Everything we have accomplished this past year means nothing if we don't do it safely and responsibly.
Speaker Change: From an environmental perspective, we've made significant progress toward our greenhouse gas emissions reduction target.
Speaker Change: <unk> reductions that equate to approximately 50% of our total 2030 reduction target.
Speaker Change: And from a safety perspective.
Speaker Change: Brought together two companies with leading safety cultures and performance and combined we will continue to focus on the safety and health of our employees and the communities that we operate.
Speaker Change: We've created an operational platform that provides increased scale scope and diversification.
Speaker Change: The platform, which is already providing opportunities and enabling us to generate exceptional value for our stakeholders looking.
Speaker Change: Looking ahead, one oak is well positioned in 2024 for another year of significant growth and opportunity.
Speaker Change: With that operator, we're now ready for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause.
Speaker Change: Momentarily to assemble our roster.
Speaker Change: The first question comes from Brian Reynolds with UBS. Please go ahead.
Speaker Change: Okay.
Brian Reynolds: Hi, good morning, everyone, maybe to start off on synergies on slide 10, now we've seen the risk weighted synergies increased roughly 400 million from from the original expectation of $100 million. So perhaps just a two part question first part is can you provide some concrete commercial examples of what's driving that upwards revision just anything specific in a second.
Brian Reynolds: These risk adjusted synergies are up roughly $300 million could you perhaps update us.
Brian Reynolds: Thoughts on the initial like $2 million to $800 million synergy range that you provided.
Brian Reynolds: Last quarter, it seems like there's a little bit of upside to that range at this point. Thanks.
Speaker Change: Oh well.
Speaker Change: You're right, we do see some upside to our synergies would be going forward or as we say in the $700 million and really a lot of it is going to be driven by being able to bring our refined products and crude oil and NGL systems, together, which we have multiple opportunities in many different areas of our systems.
Speaker Change: As we continue through 'twenty, four and 'twenty five slots can be as we said before and prioritization of which ones, we're going to work and we can bring forward.
Speaker Change: We started 24 walls to be driven by we reached substantial amount of our cost savings synergies already.
Speaker Change: 'twenty three we will see a full year of that in 'twenty four.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes, Brian.
Speaker Change: Brian This is Kevin Burdick, our the other thing just on the call. If you think about the cost savings we have realized the vast majority of those.
Kevin L. Burdick: Already so we will see the full impact in 'twenty for a couple of examples to that would be our organizational design and restructuring activities are complete.
Kevin L. Burdick: So that will be factored in another example, you know public company cost have been eliminated for the Magellan.
Kevin L. Burdick: Magellan company so.
Kevin L. Burdick: That's another example, as well as many others. So so the cost savings side will play a big role in 2024 as well.
Kevin L. Burdick: Okay.
Speaker Change: Great. Thanks, appreciate that and maybe to switch to the updated return of capital framework, you outlined the 3% to 4% dividend growth, but no kind of updated it with the the updated payout ratio of 75% to 80% with buybacks and dividends.
Speaker Change: You know just looking at the model it seems like it's pretty clear on 2024, you know that.
Speaker Change: You can kind of come to that conclusion, but when I look at 25, and 26, you know leverage trends below three and a half times you should have some excess cashes based on existing projects that are if I need at this point, what potentially so while going into that into that into that bucket. So as we look in 'twenty five 'twenty six can you maybe update us on how we should think about the return of capital for.
Speaker Change: And where could we see maybe an increase of buybacks or how should we think about maybe interested in M&A or maybe other projects that may come to fruition in 'twenty five 'twenty six maybe keep kind of that that that return of capital framework you know unchanged.
Speaker Change: Sure well.
Speaker Change: I wanted to start out by again continuing to point out that during 2023, we were able to extinguish over $1 $3 billion of debt, including paying off our maturities as they came due and making some open market repurchases in the debt market. So we obviously.
Speaker Change: We are continuing to produce significant amounts of free cash flow.
Speaker Change: As we go into 2024.
Speaker Change: You are correct that we expect to begin our share repurchase program, we do expect that to ramp over the four year period, as we're still getting through our.
Speaker Change: Our debt to EBITDA metrics that we've gone out with the goal of that three five times. So we will expect that to ramp over time, but we do it we do have an intention to begin that program here in 2024.
Speaker Change: So I think we're set up.
Speaker Change: To.
Speaker Change: Make those forward many forward capital.
Speaker Change: Returns to our shareholders, while still retaining are in that.
Speaker Change: The additional $25, 15% to 25% of unallocated cash flow meaningful free cash flow for high return capital projects that we have not yet identified.
Speaker Change: Great makes sense Super helpful enjoy the rest of the morning.
Speaker Change: Thank you.
Speaker Change: The next question comes from Neel Mitra with Bank of America. Please go ahead.
Neil Mehta: Hi, Good morning, I was wondering what you're assuming for any third party frac costs in 2024, and the timing of MB six and how that would impact those costs.
Neil Mehta: Well in N V. Six as we said in our prepared remarks and in our earnings release will come up in the first quarter of 2025, and it's 125000 barrel a day frac. So we'll have an insignificant impact to our third party frac costs are third party frac costs in <unk>.
Neil Mehta: <unk> 824 will be about $30 million a quarter as I think of what we've estimated.
Neil Mehta: Net piece, so we'll be needing third party frac costs through the remainder of that which most of that we've already contracted.
Speaker Change: Got it and then the second question.
Speaker Change: Typically on the butane blending synergies I think legacy Magellan blended about 2% of butane into the gasoline stream, but because youre able to tie a lot of the the butane and gasoline together.
Speaker Change: It seems I can't expand that opportunity.
Speaker Change: Can you give us a sense of the total opportunity there in terms of how much of the butane blending into gasoline as a percentage basis or how much you can expand that operations from legacy Magellan operations.
Speaker Change: For commercial reasons, we won't get into too much of it that butane blending is driven by regulations of RVP into the gasoline. So there is a limit but rather than that we don't want to get too much into it due to commercial sensitivities on what we're doing.
Speaker Change: Okay. Thank you.
Speaker Change: The next question comes from Sunil Sibal with Seaport Global Securities. Please go ahead.
Sunil Sibal: Yeah, Hi, good morning, everybody and thanks for all the clarity so I wanted to start off on the on the consolidation theme. It seems like that's kind of picking up even more.
Sunil Sibal: On the upstream side and some on the midstream side. So I'll just kind of curious you know as you think about that as a growth Avenue.
Sunil Sibal: Should we be thinking about any major guardrails in terms of the assets are all calculations that you look at.
Speaker Change: So they.
Pierce H. Norton: This is pierce the.
Pierce H. Norton: It really question kind of falls in the bucket of of mergers and acquisitions I think.
I just want to reemphasize that our primary focus is to continue to be integrating the Magellan acquisition.
Pierce H. Norton: And executing on the synergies and opportunities that we see to create the maximum value for our shareholders.
Pierce H. Norton: So we're going to be we're going to continue to be intentional and disciplined in our approach to M&A.
Pierce H. Norton: But I'd also say that we have and we will continue to look at other mergers and acquisitions.
Pierce H. Norton: In the context of how do they strengthen our competitive position.
Speaker Change: Okay. Thanks for that.
Pierce H. Norton: And then.
Speaker Change: I think in your prepared comments mentioned that the growth capex.
Speaker Change: Likely to come down in 2025 and forward years.
Speaker Change: Kind of curious if you could.
Speaker Change: Help us think.
Speaker Change: Who the growth capex needs at combined bundle Ah now and.
Speaker Change: Is that a good way to think about the growth Capex, our total capex needed to maintain volumes and then two you know for that on gold Williams.
Speaker Change: So I'll kind of take a high level cut at that and then I'll ask either Walter Sheridan.
Speaker Change: Chime in on this but one thing that I don't know if you picked up on but well just mentioned that.
Speaker Change: We actually have some excess cash of about 20% to 25%.
Speaker Change: So there is money out there for these high return projects.
Speaker Change: Either they are potentially working on or even not not identified at this point.
Speaker Change: So as far as the specifics go I'll kind of turn it over to <unk> Walton Sharon.
Sheridan C. Swords: Well I think you know it.
Sharon: As we mentioned here here in 2024, we've identified a midpoint of $1 85 billion.
Sharon: We have some pretty large projects in there with the M. B six being the largest and then the completion of the West Texas LPG expansion and then the completion of the Bakken expansion expansion, which we want to make sure. It's done here in early 2025.
Sharon:
Sharon: Once those projects are done we don't have any other large identified projects that we've if I did it for the market. So you can you can kind of Peel those away as they've come into 2025.
Sharon: Our routine growth type of expenditures will continue.
Sharon: And we will find more opportunities, they're probably just going to be.
Sharon: Hum more bite sized and ones that we can do out of free cash flow and we will be ones that are really facilitating and accelerating the synergies that we're looking to achieve and in 'twenty five 'twenty six.
Speaker Change: Thank you.
Speaker Change: The next question comes from Michael Blum with Wells Fargo. Please go ahead.
Michael Blum: Thanks, Good morning, everyone. So a question on <unk>.
Michael Blum: Swallow in mid 'twenty four.
First of all would that change the 'twenty four capex number much or would most of that fall into the <unk>.
Michael Blum: 25, 26, and would that change your expectation that twenty-five capex would come down.
Speaker Change: I'm going to let Paul kind of take the Capex question, but theres a couple of things that I want to make sure that that I noted on this call.
Paul: <unk>, Michael and one is.
I don't really think all of those employees, who worked on getting the permit approved in this process.
Paul: And as we look at zero. It is the most economic route for LNG to reach the markets are at least multiple markets.
Paul: And that's actually been indicated by the strong commercial interest in the backing by the major players there.
<unk>.
Paul: And here's where I want to really.
Paul: Kind of make this clear that we said all along that our commitment to this project will involve procuring the presidential permit which is as we noted in our script that is complete.
Paul: The building of the U S portion of the pipe.
Paul: Getting across the border with the pipe and then the operation of the U S pipe and as far as our financial involvement that's gonna be commensurate with the value that it brings to our shareholders you know versus the risk we see in the in the project I'll kind of let Bob fill in some of the details there.
Bob: Yes, Michael given the timing there's not if it.
Bob: I guess, if I D a mid year.
Bob: The capital.
Bob: That would not be a material change to 2024.
Bob: And then 2025 and beyond I don't think you'll see anything that would change my comment before about the.
Bob: <unk> seen a reduction over the 'twenty 'twenty four level of Capex as we go forward.
Bob: Projects takes couple of years to construct and will fit right in within our capital program.
Bob: Yeah.
Speaker Change: Great. Thanks for that and then just wanted to ask on Elk Creek expansion you announce maybe you can just help us understand a little bit of what the ramp in volumes could look like.
Speaker Change: Should we expect this to be highly utilized at start up maybe.
Speaker Change: Or.
Speaker Change: Will this be kind of more of a gradual ramp thanks.
Speaker Change: Well Michael on it or do you think about the Elk Creek expansion. We've always said that we're not going to run out of capacity coming out of the Bakken and that's why we wanted to make sure. This pipeline comes up in the first quarter of 2025. So we will we are expecting volume increases that will need that as we move into 2025.
Speaker Change: And then there's a lot of things affected on the ramp up one is how much incentivize to ethane, we have coming out of there and if we and and the other one is the continued growth.
Speaker Change: In the in the basin as we seen gas to oil ratios continue to grow in the drilling activity that we're seeing right now is conducive to increase overall volumes in the basin. So I think we will we will see quite a bit of growth as we move into 2025 on this pipeline with those two backdrops.
Speaker Change: Thank you.
Speaker Change: The next question comes from Ross on ready with J P. Morgan. Please go ahead.
Ross: Good morning, I appreciate the color you guys provided on producer efficiency in our slides and even in the prepared remarks, it seems like a pretty significant step up there in the share of three mile laterals and 24, So just kind of thinking if we should be thinking about the increase in three mile laterals, we're reducing the required capex to maintain current volumes.
Speaker Change: At this point or any other thoughts you could frame up there would be greatly appreciated.
Speaker Change: Yeah. This is sheridan absolutely with the more efficiency and NIM drawing three mile laterals. So each well is going to have more production on that so we are going to see a drop off from our previous.
Speaker Change: Previous cadence on capital that we need to spend in the area to maintain volume and also remember that in the Bakken we are guiding a little bit over one six bcf of throughput and we have 1.9 Bcf of.
Speaker Change: Processing capacity up there so we have a lot of.
Speaker Change: Working leverage to grow in that area. So we will see our capital come down.
Great and then the second one I wanted to hit on northern border and just.
Speaker Change: Just any thoughts you guys can share on how you see dynamics playing out there throughout the year, mainly if we could see any relief on the pipeline once volume start flowing on coastal gas link to to service LNG, Canada.
Speaker Change: Well. This is this is chuck as far as northern border goes.
Charles M. Kelley: The volumes that we see coming down there today I don't think we'll be appreciably impacted come up with the Canadian volumes devoted to LNG, Canada.
Charles M. Kelley: The strong hold of about 400 million a day, that's held by long term producers that will continue to flow down northern border.
Charles M. Kelley: So the pipe will remain full.
Charles M. Kelley: <unk> headed toward Ventura in Chicago and.
Charles M. Kelley: There's been some relief.
Charles M. Kelley: And our GMP business are you working a.
Charles M. Kelley: A deal with WB item move some gas down to Cheyenne hub and that's that's been a nice relief valve and you've probably seen some information about bison Express.
Charles M. Kelley: Which should be coming on in Q2 of 2026 that will offer upwards of another call. It 400 million a day of relief. So I think I think the pipe is positioned well for the next couple of years.
Speaker Change: Great. Thank you.
Speaker Change: The next question comes from Spiro <unk> with Citi. Please go ahead.
Spiro: Thanks, operator, good morning, everybody maybe.
Spiro: Maybe just to go back to a follow up to Michael's question, but really kind of focused on the three major projects, you've got coming online in the first quarter of 'twenty five adds up to about $1 $4 billion of capital kind of starting up that quarter.
Spiro: Curious if you can give us a sense for what the initial return multiple was on those projects and how to think about the EBIT ramp for all three over 25.
Spiro: Well.
Spiro: The first part of it.
Spiro: And as we look at each one of those project and we think about the ramp up <unk> six is going to come up full we will because we're having third party frac capacity today. So it's gonna be added at a very high operating rates. So it's gonna be a very nice multiple you have on that as we've said with the.
Spiro: The West Texas expansion that we are contract and the continued to contract more volume on that to have an acceptable return with a significant amount of upside going forward. So we're continuing to drive that project's multiple down as we grow on that.
Spiro: Elk Creek expansion is probably going to be the lowest one on that as we don't need a whole lot of volume to be able to have a very low multiple and if we would get to the point that we're at a high utilization rate that multiple will be well below one.
Speaker Change: Okay. That's.
Speaker Change: It's helpful. Thanks, Brett Sheridan.
Speaker Change: Going back to the synergies it sounds like for 2026, plus youre going to have to develop some new infrastructure to achieve those synergies. Just curious can you give us a sense for what that looks like are these storage tanks are these connections within the system just a sense of what Youre building out there.
Speaker Change: Yeah, I think it's going to be all that kind of stuff. It's gonna be small relatively small capital it's going to be some connections here some tanks here, depending all up and down our system. So it some of that will come before 'twenty six but as we continue to look forward to that we'll be achieving most of it as we head into the 26.
Speaker Change: Time frame.
Speaker Change: Great I'll leave it there thanks for the time.
Speaker Change: The next question comes from Jean Ann Salisbury with Bernstein. Please go ahead.
Speaker Change: Hi, just a follow up on the discussion about northern border earlier and my understanding from looking at the screen is that Canada has actually already at the start of 300 to 400, and then CFT that they have directly contracted.
Speaker Change: Do you think we've hit a limit here I'm back in gas takeaway.
Speaker Change: The arrest of Bison comes on in 2026, and how do you think it plays out.
Charles M. Kelley: Julian This is Chuck.
Charles M. Kelley: Stand by what I said I really think the.
Charles M. Kelley: The 400 million a day, we will continue to come down northern border from the legacy Canadian producers.
Charles M. Kelley: So the growth coming out of the Bakken will be.
Charles M. Kelley: Absorbed through Bison Express and the W. B I.
Charles M. Kelley: The WB expansion.
Charles M. Kelley: So gena this is pierce based on what I've seen I mean, I I actually look at this as well there is capacity today.
Charles M. Kelley: So theres no restrictions today and if you look at the fact that there's going to be some.
Charles M. Kelley: Natural gas fired generation facilities that are going to be built and.
Charles M. Kelley: In the North Dakota area.
Charles M. Kelley: And you also look at the <unk>.
Charles M. Kelley: Press and then you also look at W. P I.
Charles M. Kelley: We're not seeing anything in.
Charles M. Kelley: Anywhere in the near future.
Charles M. Kelley: There's going to be any kind of restrictions on gas takeaway.
Charles M. Kelley: Well, we think that there's plenty of takeaway do remember that we always have the lever if we need to that we can we can extract more ethane and put it on the NGL pipe to create capacity for natural gas.
Charles M. Kelley: And I think that's exactly I was looking for and then kind of following up on some.
Charles M. Kelley: The ethane outlets that Sheridan was talking about earlier I think there's not a ton of new ethane demand domestically are experts for a few years from now that associated gas will likely socal.
Charles M. Kelley: And your outlook does that have the risk of increasing injection in the Bakken are midtown over the next couple of years and could that be a drag on EBITDA.
Charles M. Kelley: Yeah.
Speaker Change: Potentially I think as we get out in 2025, we'll see a little bit more of ethane.
Speaker Change: Export capability coming online a lot really depends on how hard the pet chems or running on utilization is a big impact as well and then as we think about we think about ethane rejection and recovery across our footprint a lot depends on what the natural gas price in that area is.
Speaker Change: We feel that we have a very good opportunity to continue to bring incentivised ethane out of the Bakken just from our fully integrated NGL system and G&P system as well.
Speaker Change: Mid continent, maybe where we see a little bit of swing could be a little bit more swing in ethane recovery, but those are at much lower rates than we see coming out of the Bakken.
Speaker Change: The Big thing is going to be is how hard the pet chems or their utilization rate and we're seeing as we move into 2024, they're operating at pretty high levels.
Speaker Change: That's helpful. Thanks for taking my question.
Speaker Change: The next question comes from Keith Stanley with Wolfe Research. Please go ahead.
Keith T. Stanley: Hi, good morning.
Keith T. Stanley: To start and follow up on <unk>, and so if Mexico Pacific declares.
Keith T. Stanley: How are you thinking about.
Risks for that project I think they need an extension of their in service deadline for non FTA exports. How do you how do you mitigate that risk around that issue as it relates to your project in your contracts.
Charles M. Kelley: Keith This is Chuck.
Keith T. Stanley: Yeah as you state M. P. L received back in 2019, the first two trains deal we export approval and.
Charles M. Kelley: They have adequate time to go ahead and start this project post of I D, where that that approval is for bolt FTA and non FTA.
Charles M. Kelley: Country. So.
Charles M. Kelley: Feel pretty good obviously about trains one and two this pause that we're seeing right now impacts their second requested approval, which would be for train three and you know and as you know.
Charles M. Kelley: We don't know exactly how this is going to play out balance of the year. So trains one and two are post up by deep we feel good about those volumes.
Charles M. Kelley: As we sit here today.
Speaker Change: Okay. Thank you and second question, just any updated thoughts on potential to enter the LPG export business and how you're weighing the potential use magellan sites or other facilities versus I think theres a greenfield option that you are in the early stages of looking at too.
Speaker Change: At Sabine pass just any any updated thoughts there.
Speaker Change: Yeah.
Speaker Change: This is Sharon and I on the L. P. S exports, I think where the same spot or what we can share publicly where we have been for a period of time as you're right. We continue to look at all alternatives. We have we have a greenfield side trying to understand if there's a some synergies there.
Speaker Change: From a physical standpoint from the Magellan assets, if we could put something in their sites.
Speaker Change: So we continue to do that but right now as I've said, we see the LPG export is we think something that could enhance.
Speaker Change: Our integration, but it's not something we absolutely need as we continue to be able to to move our barrels to.
Speaker Change: The market today that has the export capabilities at other facilities.
Speaker Change: Thank you.
Speaker Change: It was sort of a follow up to that Mr. Stanley.
Speaker Change: No. That's all thank you. Thank you. The next question comes from Theresa Chen with Barclays. Please go ahead.
Theresa Chen: Good morning.
Theresa Chen: On the refined product side with the significant swings in mid con versus the Gulf coast product prices, thus far into here.
Theresa Chen: Discounted earlier in the year, and then product prices sharply rising blinding outage.
Created opportunities for you to use the sterling system to ship product Southworth.
Theresa Chen: When the airplanes, they're towards the beginning of the first quarter and also opportunities for more long haul movements.
Theresa Chen: Buying product from the Gulf Coast mid Con on the legacy assets in <unk>.
Theresa Chen: Financial earnings result.
Speaker Change: What I'd say is right now we're not going to comment specifically on refined products movements on any specific pipeline, but I can't Sally is NGL pipelines have move refined products.
Speaker Change: Here in the fourth quarter in the first quarter, we do see with that movement in the the two pricing mechanisms between the Gulf and the group, we have seen opportunity for longer haul tariffs on our.
Speaker Change: Refined product system.
Speaker Change: Okay, and Sheraton going back to.
Speaker Change: The butane blending synergies and your comment about the RVP requirements.
Speaker Change: Butane blending needing to come out of the gasoline pool in that mid April timeframe.
Speaker Change: Just given the comments from some of the downstream customers that have a lack of octane in the gasoline pool after that which happens does that lend to some opportunities for your ISO butane volumes as a feedstock for alkylate or said differently Disney acquired Magellan refined products assets and your exposure to gasoline flows now more than before it can create some.
Speaker Change: Uplift for the even heavier components of your NGL barrels.
Speaker Change: Yes, it could be some potential as we look at you know for the natural gasoline component of the barrel some blending into the <unk>.
Speaker Change: Let it pool that we've looked at is in terms of ISO butane, specifically going into alcohol that.
Speaker Change: We've been servicing those alkylate units for quite a long time and the legacy NGL business and typically as you know I'll call. It as a very high priced and usually they run those pretty strong the big difference in those alkylate unit is whether or not they're going to run some refinery grade propylene through that unit or they're gonna stay are or how their RGB.
Speaker Change: These have refinery grade butane runs through that as well. So if we see more propylene run through I Alkylate unit, we will see a little bit more ISO based butane being used but typically it they run pretty steady.
Speaker Change: Thank you.
Speaker Change: The next question comes from Tristan Richardson with Scotiabank. Please go ahead.
Tristan Richardson: Hey, Good morning, guys, just maybe a question on the West Texas expansion, you've talked a while now about the optionality.
Tristan Richardson: But you have once the final we've beaten this complaint in and.
Tristan Richardson: Maybe just a little bit about.
Tristan Richardson: Timing and progress on decision.
Tristan Richardson: What service to put the legacy.
Tristan Richardson: Pipe into normal lumpy crude buying product for Ngls, and then how readily and quickly you can make that transition.
Speaker Change: Well right now.
Speaker Change: It is an option, we havent decided to exercise that option. We continue to see good growth on the NGL side. So there is a good possibility we want to keep it in NGL service to continue to be able to service our downstream assets in the Mont Belvieu area, if we would decide to shift it to some other.
Speaker Change: Product the big thing is going to have to be determined on which way we run. It obviously, if we want to run it from Mont Belvieu out to West, Texas, They will take us a little bit more time, because we will have to do a little bit of work on header systems on that side, if we want another product moving from.
Speaker Change: West, Texas into Mont Belvieu over into the Houston area. It would be quicker because the pumps are already set up with that setup going that direction, but as of this moment right now, we're probably leaning more towards in the natural gas liquid side of it or the raw feed side of it as we continue to see some good growth coming out of the Permian.
Speaker Change: I appreciate it Sheridan and then maybe for Walt just curious you talked about this a couple of questions here, but.
Speaker Change: Thinking about the three major projects coming off in 'twenty five.
Speaker Change: And what that implies for future Capex and certainly what that implies for future free cash flow you're talking about.
Speaker Change: I, usually think about 25% 26, what gets you to maybe at the higher end or the lower.
Speaker Change: Of that.
Speaker Change: Capital return as a percent that 75 to $85.
Speaker Change: Yeah.
Speaker Change: Well clearly clearly with what we have identified today from a capex standpoint, as I said before that we would expect that our capital return to ramp.
Speaker Change: Throughout that period, I think that Oh.
Speaker Change: We will be producing a meaningful amount of free cash will obviously increase when our capex number goes down.
Speaker Change: So we will still stay in that 75% to 85%.
Speaker Change: Availability after Capex, it's just going to be a bigger number so it gives us more opportunity for shareholder return.
Speaker Change: Tristan this is up here's kind of embedded in your question there is.
Speaker Change: So is the implication of kind of what drives you know our EBITDA to the higher end versus the lower end think that's probably worth mentioning there, but you know filling more of our existing capacity across these assets is going to clearly make that movement up.
Speaker Change: And we've already mentioned that we want to make sure that we get this pipe in but first quarter 2025.
The Bakken and then also the continued to prioritize and execute on those additional those connectivity between our NGL refined products and crude oil systems across our footprint and then third is.
Speaker Change: Those quicker than forecasted recognition of synergies.
And then of course the <unk>.
Speaker Change: <unk> would be things that might impact the volume, which is the weather and the producer activity all of those kind of go into.
Speaker Change: How far above or below the midpoint that we might be that impacts what you and Walt just talked about.
Speaker Change: I appreciate it thank you all very much.
Speaker Change: The next question comes from Neal Dingmann with Truth Securities. Please go ahead.
Neal Dingmann: Good morning, all thanks for the time My first question is on Ngls, specifically I'm, just wondering where do you all seen notable notable demand pure NGL. The Permian NGL service is it mostly in key Midland or Delaware areas. I'm. Just wondering are there specific areas that we should be looking at there and then are you all taking market share.
For me it contracts rolling off other pipes or is this more basic expansion.
Neal Dingmann: Yeah.
Speaker Change: When we look at the Midland and Delaware, It's more as we look at that growth to our system. It's more based on the customers out there and who we're seeing in the ones that we are aligned and we have some that are more more Midland spin.
Speaker Change: Specific some that are more Delaware persist specific so that really depends on who's kind of drilling more bring in volume terms at that time. We are in terms of contracts roll off we have seen a little bit of that what we've seen a little bit of some taken kind rights coming to us from different customers as we go forward.
Speaker Change: <unk>.
Speaker Change: But overall, we see an opportunity in both of those basins to be able to source ngls into our system.
Speaker Change: Going forward it depends it really a lot depends on the customer.
Speaker Change: Yeah that makes sense, Okay, and then just quick follow up on like that slide 10 that shows the synergy opportunities I'm just wondering on batch in the batching upside that you laid out here on this slide just wondering timing wise how quickly I'm. Just wondering what are you thinking are there key areas that you didn't have <unk> seen the majority of that that should upset.
Speaker Change: Yeah.
Speaker Change: Well on that Batching, I think we're really going to see a lot of it throughout our system.
Speaker Change: Some of it is is already happening today some of that will happen throughout 2024 of those are opportunities that we see where we already have some connectivity between the system and then that will continue to grow through 25 and 26 as we continue to bring these assets together, but we see that opportunity in the central system, we see it.
Speaker Change: That opportunity on the Gulf Coast, we see that opportunity even as much as on the lines out to West Texas.
Speaker Change: Thank you look forward to the upside.
Speaker Change: The next question comes from Craig Shere with Tuohy Brothers. Please go ahead.
Craig K. Shere: Good morning, Thanks for taking the question.
Craig K. Shere: On Capex opportunities.
Craig K. Shere: Could you opine on the possibility of meeting another frac by 2026 and does the MMP acquisition increase prospects for Accretively rebuilding and we're repurposing, our legacy Medford Frac site.
Craig K. Shere: This is Sheridan yeah, I don't I don't think the MMP effects really affects Medford at all what we have there as we think about.
Sheridan C. Swords: Increased frac capacity and our needs there really what we're looking at right now is bottlenecks throughout our system or we can get very low low cost expansions through our existing fracs and we continue to look at Medford and.
Sheridan C. Swords: What.
Sheridan C. Swords: Type of capacity, we could get out of Metro ran at very low costs by only bring in partial portions of that backup the whole facility wasn't as damaged by the fire is certain parts. So we think there is an opportunity to have a little bit less capacity there at a very low dollar per barrel of capacity. So that's where we see our next really.
Sheridan C. Swords: In fractionation capacity coming from and we really don't see the M. P acquisition have a big impact to that.
Speaker Change: Right and last question.
Speaker Change: On synergies it sounds like you expect almost the full 100 million or so in G&A benefits in 2024.
Speaker Change: Would suggest that you might be being conservative on the commercial side.
Speaker Change: That a fair assessment.
Kevin L. Burdick: Craig It's Kevin.
Craig K. Shere: Like we said I mean, we feel obviously, we feel really good about our progress we've made on the cost savings side.
I think just kind of naturally many many of those synergies come quicker than the commercial.
Kevin L. Burdick: We continue to prioritize those though we did add kind of 100 plus to the.
Kevin L. Burdick: So the upside for the cost savings side. So we will continue to work those but we're just trying to send the message that particularly in 'twenty. Four there is a good chunk of the synergies that are going to be cost savings.
Kevin L. Burdick: Yeah.
Speaker Change: Okay. Thank you.
Speaker Change: And the last question comes from Jack whenever and with T. P. H. Please go ahead.
Hey, guys. Thanks for squeezing me in just going back up to the Rockies growth you noted 9% year over year in 2024, but it looks like NGL growth is a bit lower than that for the year is a majority of the contract rolls on overland are you expecting just less overall ethane.
Speaker Change: Gain recovery, just trying to kind of put those two numbers together.
Speaker Change: Yeah. They are on the NGL growth, we are expecting less or we have.
Speaker Change: Put in our guidance less incentivized ethane coming out of the Bakken, we definitely think there could be some upside there so that has an impact.
Speaker Change: And then the the contract that we will no longer be getting volume off of overland pass is a very low margin very kind of high volume contract that has an impact that we've been expecting that contract are we knew we were not going to be moving forward to renewing that contract. When it came up. So this is something that's been in our plan for it.
Speaker Change: Period of time, so that's what's kind of driving a little bit of a difference when you look at the growth on G&P versus that growth on Ngls.
Speaker Change: Gotcha that makes sense and then shifting over to the right adjustments in July you noted mid single digits, just looking at the FERC regulated calculation trending towards one 5% kind of hints at you know higher market based adjustments curious to get any pushback from customers on that or just how.
Speaker Change: That conversation is going overall.
Speaker Change: We haven't decided what we're going to do on market base rate adjustments, but we do look at it very extensive that each one of our locations and do extensive look at the market and what's appropriate in those locations and that's why we've kind of just given the mid <unk>.
Speaker Change: Single digit mid single digit rate as what we think it will be.
Speaker Change: But we have not yet determined exactly what we're going to do but we do have very conversation with customers to understand the marketplace under net stand the dynamics that are there before we make those adjustments.
Speaker Change: Okay perfect. Thanks, guys, that's all I had.
Speaker Change: This.
Speaker Change: <unk> our question and answer session I would like to turn the conference back over to Andrew <unk> for any closing remarks.
Andrew: Alright, perfect timing everybody.
Andrew: Our quiet period for the first quarter starts when we close our books in April and extends until we release earnings in late April will provide details for that conference call. At a later date. Thank you all very much and have a great day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].