Q1 2024 Kinetik Holdings Inc Earnings Call
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Alyssa: Good morning, and thank you for attending the Kinetik First Quarter 2024 results call. My name is Alyssa, and I will be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the call to our host, Alex Sturkey, Investor Relations. Alex, please go ahead. Thank you.
Elisa: Good morning, and thank you for attending the kinetic first quarter 2024 results call. My name is Elisa and I will be your moderator today at.
Elisa: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
I'd now like to pass the call to our host Alex Turkey Investor Relations. Alex. Please go ahead.
Alex Sturkey: Thank you. Good morning, and welcome to Kinetik's first quarter 2024 earnings conference call. Our speakers today are Jamie Welch, our President and Chief Executive Officer, and Trevor Howard, our Chief Financial Officer. Other members of our senior management team are also in attendance for this morning's call. In the press release we issued yesterday, the slide presentation, and access to the webcast for today's call, we said that our remarks, including the question and answer section, will provide forward-looking statements, and actual results could differ from what is described in these statements.
Alex: Thank you good morning, and welcome to kinetics first quarter 2024 earnings Conference call. Our speakers today are Jamie Welch, our President and Chief Executive Officer, and Trevor Howard, Our Chief Financial Officer.
Other members of our senior management team are also in attendance for this morning's call. The press release, we issued yesterday, the slide presentation and access to the webcast for today's call.
Alex: In our remarks, including the question and answer section, we will provide forward looking statements and actual results could differ from what is described in these statements. These statements are not guarantees of future performance and involve a number.
Alex: <unk> of risks and assumptions. We may also provide certain performance measures that do not conform to U S. GAAP. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release. After our prepared remarks, we will open the call to Q&A with that I will turn the call over to Jamie.
Alex Sturkey: These statements are not guaranteed for future performance and involve a number of risks and assumptions. We may also provide certain performance measures that do not conform to US GAAP. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release. After our prepared remarks, we will open the call to Q&A. With that, I will turn the call over to Jamie.
Jamie W. Welch: Thank you, Alex. Good morning, everyone.
Jamie W. Welch: Thank you Alex good morning, everyone and thank you for joining our call today kinetic had an exceptional start to 2020 full with continued momentum throughout April and early may.
Jamie W. Welch: And thank you for joining our call today. Kinetik had an exceptional start to 2024 with continued momentum throughout April and early May. We reported our first quarter results yesterday afternoon, exceeding our own internal budget and positioning Kinetik for a strong year ahead. First quarter adjusted EBITDA was $234 million, a 25% increase year over year, reflecting robust underlying volume growth and contributions from the Permian Highway Pipeline expansion and Delaware Link.
Jamie W. Welch: We reported our first quarter results yesterday afternoon, exceeding our own internal budget and positioning kinetic for a strong year ahead.
Jamie W. Welch: First quarter, adjusted EBITDA was $234 million or 25% increase year over year, reflecting robust underlying volume growth and contributions from the Permian Highway pipeline expansion and Delaware link.
Jamie W. Welch: We process gas volumes of 1.53 billion cubic feet per day, representing 13% growth year over year and down less than 1% quarter over quarter. This is due to planned maintenance at several processing facilities, Alpine high curtailments as a result of depressed waha prices and winter weather in January. During the quarter, we completed our planned maintenance projects at our Diamond Cryer, East Toya, and Pecos Bend processing facilities. We opportunistically scheduled these projects ahead of the Ramp-In Producer Turn-In-Line activity, starting in March, and the Lee County Contract commencement on April 1st. As a result of the numerous bed changeouts, we have improved our plant recoveries and system efficiency.
Alex: We processed gas volumes of 153 billion cubic feet per day, representing 13% growth year over year and down less than 1% quarter over quarter.
Alex: Due to planned maintenance at several processing facilities.
Alex: Hi, curtailments as a result of depressed prices and winter weather in January.
Alex: During the quarter, we completed a planned maintenance projects at our Diamond Cryo East Toya and Pecos Bend processing facilities.
Alex: We opportunistically scheduled these projects ahead of the ramp in produce it turn in line activity starting in March and the Lea County contract commencement on April 1st.
Alex: As a result of the Mulciber bed change outs, we have improved our plant recoveries and system efficiencies.
Jamie W. Welch: I would like to thank the operations team for their hard work and commitment to safety during this time. They did a phenomenal job ensuring safe operations and system reliability for our customers. More recently, we completed our system-wide front-end amine treating project with the installation at our Pekus Bend processing facility in April. We can now offer enhanced blending and treating services across our system and accept gas that previously did not meet our gas quality specifications. As producers explore different benches such as the Avalon and Bonespring and further expand the boundaries of the Delaware Basin, treating and blending will become critical to manage the elevated levels of H2S and CO2, and Kinetik stands ready to support this next phase of growth out of the basin.
Speaker Change: I would like to thank the operations team for their hard work and commitment to safety. During this time, they did a phenomenal job ensuring safe operations and system reliability for our customers.
Speaker Change: More recently, we completed our system wide front end amine treating project with the installation at our Pecos Bend processing facility in April.
Speaker Change: We can now offer enhanced blending and trading services across our system and accept gas that previously did not meet gas quality specifications as.
Speaker Change: As producers explore different benches, such as the Avalon and bone spring and further expand the boundaries of the Delaware Basin.
Speaker Change: Trading and blending will become critical to manage the elevated levels of H two S and C O two and kinetic stands ready to support this next phase of growth out of the basin.
Jamie W. Welch: As we shared during our February call, we placed our gathering system expansion into Lee County, New Mexico, in service on January 18th, over two months ahead of schedule. The NBC-backed agreement went into effect on April 1, and we are currently receiving volumes well above that threshold. The expansion into Lee County, combined with our enhanced treating and blending capabilities, positions Kinetik to capture incremental market share in New Mexico. Furthermore, with the in service of the PHP expansion and Delaware link, we can now offer producers an integrated well head to Gulf Coast solution.
Speaker Change: As we shared during our February call, we placed our gathering system expansion into Lea County, New Mexico in service on January 18th over two months ahead of schedule.
Speaker Change: The NBC back agreement went into effect on April 1st and we are currently receiving volumes well above that threshold.
Speaker Change: The expansion into Lea County, combined with our enhanced trading and blending capabilities positions kinetic to capture incremental market share in new Mexico.
Speaker Change: Furthermore, with the in service of the PHP expansion in Delaware Link we can now offer produces an integrated wellhead to Gulf coast solution.
Jamie W. Welch: With volatile and even negative natural gas prices in Oaxaca since early March, it has been top of mind for producers to access premium priced natural gas markets, particularly along the Gulf Coast, which offers more price stability. Waha gas daily prices averaged negative $0.72 per MMBTU in the months of March and April.
Speaker Change: With volatile and even negative natural gas prices at <unk> since early March it as being top of mind for producers to access premium priced natural gas markets, particularly along the Gulf Coast, which offers more price stability.
Speaker Change: While high gas daily prices averaged negative <unk> 72 per <unk> in the months of March and April.
Jamie W. Welch: Many of our customers benefited handsomely during this period by having their gas sold in Gulf Coast markets rather than in Basin at the Oaxaca Hub. As a reminder, Kinetik's equity gas exposure shifted from Oaxaca to the Gulf Coast following the in-service of the PHP expansion on December 1st. Oppressed in-basin WAHA prices have not only generated opportunities with Kinetik's reserve PHP capacity but have also further strengthened our partnerships with existing and new customers in need of egress out of the basin. We continue to forecast pressured in-basin pricing until additional pipeline capacity is placed in service.
Speaker Change: Many of our customers benefited handsomely during this period by having the gas so the Gulf coast markets rather than in basin at the West hub.
Speaker Change: As a reminder, kinetics equity gas exposed has shifted from <unk> to the Gulf Coast. Following the in service of the PHP expansion on December 1st.
Speaker Change: The depressed in basin, while high prices have not only generated opportunities with kinetics reserve PHP capacity, but have also further strengthened our partnerships with existing and new customers in need of egress out of the basin.
Speaker Change: We continue to forecast pressured in basin pricing until additional pipeline capacity is placed in service, however, kinetic and our customers are very well positioned with egress from the Permian to demand centers, along the Gulf Coast.
Trevor Howard: However, Kinetik and our customers are very well positioned with egress from the Permian to demand centers along the Gulf Coast. March was an important month for Kinetic shareholders. With a fourth-quarter dividend payment on March 7th, core shareholders completed their commitment to reinvest their dividends. This commitment is important in that it enabled us to execute upon key financial priorities, such as fully redeeming the Series A Preferred in 2022 and fund our elevated 2023 capital program.
Speaker Change: March was an important month for kinetic shareholders with a fourth quarter dividend payment on March 7th core shareholders completed their commitment to reinvested dividends.
Speaker Change: This commitment was important in that it enabled us to execute upon key financial priorities such as.
Speaker Change: Fully redeeming the series a preferred in 2022.
Speaker Change: And fund our elevated 2023 capital program.
Trevor Howard: It further demonstrated strong alignment with all stakeholders. Moving forward, we're excited for all shareholders to now receive cash dividends, starting with the first quarter dividend payment today. Subsequently, in March, we facilitated a secondary offering which fully exited Apache's remaining ownership in Kinetik. When combined with a prior secondary offering in December, we increased our public float to nearly $1.5 billion and quadrupled our average daily trading volume to nearly $30 million. We saw exceptionally high investor demand and participation in the secondary market, and I want to thank our investors for their continued support and belief in the Kinetik story. And with that, I would now like to hand the call over to Trevor.
Speaker Change: It further demonstrates the strong alignment with all stakeholders.
Speaker Change: Moving forward, we are excited for all shareholders to now receive cash dividends, starting with the first quarter dividend payment today.
Speaker Change: Subsequently in March we facilitated a secondary offering which fully exited apache's remaining ownership in Connecticut, when combined with the price secondary offering in December we increased our public float to nearly $1 5 billion and quadrupled our average daily trading volume to nearly $30 million.
Speaker Change: We saw exceptionally high investor demand and participation in the secondary and I wanted to thank our investors for their continued support and belief in the kinetic story.
Speaker Change: And with that I would now like to hand, the call over to Trevor.
Trevor Howard: Thanks, Jamie. In the first quarter, we reported an adjusted EBITDA of $234 million. For the quarter, we generated an adjusted distributable cash flow of $155 million, and free cash flow was $108 million. Looking at our segment results, our midstream logistics segment generated an adjusted EBITDA of $143 million in the quarter, up 20% year-over-year, largely driven by increased process gas volumes and enhanced marketing opportunities captured on our PHP capacity. Shifting to our pipeline transportation segment, we generated an adjusted EBITDA of $96 million, up 32% year over year and 12% quarter over quarter.
Trevor Howard: Jamie in the first quarter, we reported adjusted EBITDA of $234 million.
Trevor Howard: For the quarter, we generated an adjusted distributable cash flow of $155 million and free cash flow was $108 million.
Trevor Howard: Looking at our segment results, our midstream logistics segment generated an adjusted EBITDA of $143 million in the quarter up 20% year over year, largely driven by increased processed gas volumes and enhanced marketing opportunities captured on our PHP capacity.
Trevor Howard: Shifting to our pipeline transportation segment, we generated an adjusted EBITDA of $96 million up 32% year over year and 12% quarter over quarter.
Trevor Howard: Sequential growth within the segment was driven by three full months of contributions from Delaware Link and the PHP expansion. Today, our commodity exposure pertaining to our equity volumes is approximately 50% hedged on average across commodities, with a higher hedge percentage on propane, butane, and crude. Total capital expenditures for the quarter were $61 million, which was lower than our internal expectations as we completed the New Mexico Gathering expansion and several planned maintenance projects in the quarter.
Trevor Howard: Sequential growth within this segment was driven by three full months of contributions from Delaware link and the PHP expansion.
Trevor Howard: To date, our commodity exposure pertaining to our equity volumes as approximately 50% hedged on average across commodities with a higher hedge percentage on propane butane and crude.
Trevor Howard: Total capital expenditures for the quarter were $61 million, which was lower than our internal expectations. As we completed the new Mexico gathering expansion and several planned maintenance projects in the quarter.
Trevor Howard: Our leverage ratio for the credit agreement stands at 3.8 times. In addition to the series of steps taken in March generating incremental value for shareholders, which Jamie touched on earlier, we also executed an accounts receivable securitization facility for $150 million in April. We will use the proceeds from the ARM facility to pay down our existing term loan A to $1 billion, allowing us to extend the maturity of the term loan A an additional six months to December 2026.
Trevor Howard: Our leverage ratio for the credit agreement stands at three eight times.
Trevor Howard: In addition to the series of steps taken in March generating incremental value for shareholders, which Jamie touched on earlier, we also executed an accounts receivable securitization facility for $150 million in April.
Trevor Howard: We used the proceeds from the <unk> facility to pay down our existing term loan a to 1 billion, allowing us to extend the maturity of the term on a an additional six months to December 2026.
Trevor Howard: Looking ahead, we continue to expect volatile commodity prices in 2024, especially for natural gas. As an industry, we collectively benefit from a more constructive natural gas price environment. However, Kinetik stands well positioned relative to its peers with capacity on PHP, allowing us to provide access to Gulf Coast pricing to our customers and to continue to capture incremental marketing opportunities. Despite current gas prices, oil-directed producer activity remains unchanged on our system, and we have seen the return of activity at Alpine High following curtailed volumes in March in response to negative gas prices at the Oaha Hub.
Trevor Howard: Looking ahead, we continue to expect volatile commodity prices in 2020 for especially for natural gas.
Trevor Howard: As an industry, we collectively benefit from a more constructive natural gas price environment. However, kinetic stands well positioned relative to its peers with capacity on PHP, allowing us to provide access to Gulf coast pricing to our customers and to continue to capture incremental marketing opportunities.
Trevor Howard: Despite current gas prices.
Trevor Howard: Oil directed producer activity remains unchanged on our system and we have seen the return of activity at Alpine high following curtailed volumes in March in response to negative gas prices at the Oaxaca hub.
Trevor Howard: We expect to see a step-up in volumes in the second quarter that continues through the remainder of the year, reflecting the completion of planned maintenance projects, the New Mexico MVCs, and customer development activity heavily weighted in the second and third quarters.
Trevor Howard: We expect to see a step up in volumes in the second quarter that continues through the remainder of the year, reflecting the completion of planned maintenance projects that are Mexico, nbc's and customer development activity heavily weighted in the second and third quarters.
Trevor Howard: Before shifting to Q&A, I would like to share the significant progress we have made on our sustainability initiatives. We entered into a first of its kind agreement with Infiniium, an industry leader in the production of synthetic e-fuels, to dedicate the sale of carbon dioxide captured from one of our processing complexes for use as a feedstock in the production of ultra-low carbon e-fuels using their proprietary process at Infiniium's Project Road Notably, there are zero capital or operating costs for Kinetik, and this project will create another revenue stream for Kinetik.
Speaker Change: Before shifting to Q&A I would like to share the significant progress we have made on our sustainability initiatives. We entered into a first of its kind agreement with Infineon and.
Speaker Change: An industry leader in the production of synthetic fuels to dedicate the sale of carbon dioxide captured from one of our processing complexes for use as a feedstock in the production of ultra low carbon fuels using their proprietary process at <unk> project Road runner.
Speaker Change: Notably there are zero capital or operating cost of kinetic and this project will create another revenue stream for kinetic.
Trevor Howard: Our hope is that this partnership can serve as a model for others in the industry and support broader decarbonization efforts. Throughout 2023, we made strong progress in our scope one and scope two greenhouse gas and methane emissions intensity reduction initiatives. When compared to the 2021 baseline, we have reduced greenhouse gas and methane emissions intensity by 12% and 34%, respectively. And we have now surpassed our 2030 methane emissions intensity reduction target of 30% well ahead of schedule.
Speaker Change: Our hope is that this partnership can serve as a model for others in the industry and support broader decarbonization efforts.
Speaker Change: Throughout 2023, we made strong progress in our scope, one and scope two greenhouse gas and methane emissions intensity reduction initiatives when compared to the 2021 baseline we have reduced greenhouse gas and methane emissions intensity by 12% and 34% respectively.
Speaker Change: And we have now surpassed our 2030 methane emissions intensity reduction target of 30% well ahead of schedule.
Trevor Howard: Despite this early achievement, which required considerable financial and human capital investment, we remain focused on furthering our sustainability efforts as a key pillar of Kinetik's everyday operations. We look forward to providing even more detail this summer in our upcoming 2023 Sustainability Report, and with that, I would like to open the line for Q&A.
Speaker Change: Despite this early achievement, which required considerable financial and human capital investment.
Speaker Change: We remain focused on furthering our sustainability efforts as a key pillar of kinetics everyday operations, we look forward to providing even more detail. This summer in our upcoming 2023 sustainability report and with that I would like to open the line for Q&A.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. If, for any reason, you would like to remove your question or your question has been answered, you may press star two. As a reminder, if you are using a speakerphone, please pick up your handset before asking your question. Once again, to ask a question, dial star one. The first question comes from the line of Michael Blum with Wells Fargo. Your line is now open.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: I would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: If for any reason you would like to remove your question or your question has been answered you May press star two.
Speaker Change: As a reminder, if you are using a speakerphone. Please pick up your handset before asking your question.
Speaker Change: Once again to ask a question dial star one.
Speaker Change: The first question comes from the line of Michael Blum with Wells Fargo. Your line is now open.
Speaker Change: Yes.
Michael Jacob Blum: Thanks. Good morning, everyone.
Michael Jacob Blum: Thanks, Good morning, everyone.
Michael Jacob Blum: I guess first question is just really on the full year guidance.
Michael Jacob Blum: I guess my first question is just really on the full year guidance. You know, in the press release, you noted that you've sort of exceeded your internal forecast for Q1. So I was just wondering, does that imply that you could be coming towards the higher end of that range?
Michael Jacob Blum: And in the press release, you noted that Youre sort of exceeded your total forecast for Q1 so.
Michael Jacob Blum: Just wondering does that imply that you could be trending towards the higher end of that.
Michael Jacob Blum: Range.
Jamie W. Welch: Michael, good morning. A very good question.
Michael Jacob Blum: Michael Good morning, very good question.
Jamie W. Welch: Early days, we're obviously just, we're just looking at April numbers right now, and obviously things are trending well with respect to our overall guidance range. So I think we want to wait before making any statements about where we think we're going to ultimately end up. We've got three quarters to go, one quarter down. I feel like it's the end of the first quarter of a sports game, and we still have a ways ahead of us.
Michael Jacob Blum: Early days, yes, we're obviously just we've got we're just looking at even April numbers right now and obviously things are trending well with respect to our NAV.
Michael Jacob Blum: Overall guidance range so.
Michael Jacob Blum: I think we want to wait before making any statements about where we think we're going to ultimately end up we've got three quarters to go one quarter down I feel like it's the end of the first the first quarter of <unk>.
Michael Jacob Blum: A sports game and we've got still a ways ahead of us, but things are really looking good which is which is fantastic and I just can't complement the operations team.
Jamie W. Welch: But things are really looking good, which is fantastic, and I just can't compliment the operations team more. They have done a hell of a job with all of the, you know, I'm not sure if I spoke to you, but what we did say, Michael, when we spoke to a number of investors is we had every reason to stub our toe in the first quarter. Not that we didn't communicate it because we did all this maintenance, all the emulsive bed change outs.
Speaker Change: More they have done a hell of a job with all of the.
Michael Jacob Blum: I think I'm not sure if I spoke to you, but what we did say Michael when we've spoken to a number of investors is we had every reason to stub our toe in the first quarter.
Michael Jacob Blum: Not that we didn't communicate it because we did all this maintenance all the molson bed change outs, yeah. We saw some wet winter weather in January but last time I checked that's what <unk> is all about.
Jamie W. Welch: Yeah, we saw some winter weather in January, but last time I checked, that's what winter is all about. And we had negative pricing with Waha. So we had Apache curtailing, some of the Alpine high volumes. You had a parade of factors that would then give you a reason and cause to say we didn't hit what we should have because. And the short answer is, we saw it, we took it, and we kept going. And that's a phenomenal, I think, that is a phenomenal compliment to the resilience of the business and the operational performance of the system.
Michael Jacob Blum: Sure.
Michael Jacob Blum: And we had negative pricing with Wahaha. So we had Apache curtailing some of the Alpine high volumes you had a pro rate of factors that would then give you a reason and core is to say you we didn't hit.
Michael Jacob Blum: What we should have because and the short answer is we saw it we took it and we kept going and Thats a phenomenal I think that is a phenomenal complement to the resilience of the business and the operational performance of the system.
Michael Jacob Blum: Okay, great. Now that makes sense.
Speaker Change: Okay, great no that makes sense.
Speaker Change: I just wanted to.
Michael Jacob Blum: And then I just wanted to ask on GCX, any updates there in terms of potential extension, just a level set up. I think at this point, there's no sales process. And then kind of the broader question is, do you have an appetite to participate in some of these Greenfield Permian gas takeaway projects that are sort of percolating? So let's do so as it relates to GCS.
Speaker Change: Ask on Gcs.
Speaker Change: Any updates there in terms of.
Speaker Change: In terms of expansion.
Speaker Change: Just to level set up I think at this point that there's no. The sales process is kind of on hold and then kind of a broader question is do you have an appetite to participate in some of these greenfield.
Speaker Change: Permian gas takeaway projects that are sort of percolating.
Jamie W. Welch: So, as it relates to GCX, on the expansion, I think we've been pretty consistent saying that we feel confident it's going to happen. It was just a question of time. Just for the audience, I would tell you, just so everyone appreciates it.
Speaker Change: So as it relates to <unk>.
Speaker Change: The expansion I think we've been pretty consistent saying that we feel confident it's going to happen.
Speaker Change: It was just a question of time.
Speaker Change: Yes, just for the audience I would tell you just say so everyone appreciates cash.
Jamie W. Welch: Cash, cash price today, waha this morning, minus $3, folks, minus three bucks. So if that isn't a cry for help from everyone to say, look, we need more egress capacity, I don't know what it is. You know, as it relates to participation on the greenfield side, yeah, we totally believe that we need more egress. I think we've seen a lot of the commentary from folks like Case at Diamondback and others.
Speaker Change: Cash cash price today Wahaha this morning, minus $3 folks minus three bucks.
Speaker Change: So if that isn't a cry for help from everyone to say look we need more egress capacity I don't know what is.
Speaker Change: Yes, as it relates to participation on the Greenfield side, yes.
Speaker Change: We totally.
Speaker Change: Believe that we need more egress I think we've seen a lot of the commentary from folks like case at Diamondback and others.
Jamie W. Welch: We got to get together, and we got to fix this. We just have to, because this is not fun for anybody. We're in a very privileged position, and we recognize that because we have, you know, this PHP capacity, which is incredibly valued. Our customers appreciate it, new customers appreciate it, and it really helps us differentiate our services versus everybody else. And even saying that, we recognize we need as an industry to get behind and coalesce behind a position that says we need more egress from this basin because this will be one of the significant impediments, we think, to the ultimate potential of the Permian Basin.
Speaker Change: We got to get together and we got to fix this we just got to because this is this is not fun for anybody we are in a very privileged position and we recognize that because we have.
Speaker Change: Yes, this PHP capacity, which is incredibly valuable.
Speaker Change: Customers appreciate it new customers appreciate it and it really helps us differentiate our services versus everybody else.
Speaker Change: And even saying that we recognize we need as an industry to get behind and behind and coalesce.
Speaker Change: And the position that says we need more egress out of this basin because this will be one of the significant impediments, we think to the ultimate potential out of the Permian basin.
Speaker Change: Okay.
Speaker Change: Thank you.
Operator: Thank you. The next question comes from the line of Spiro Dounis with Citi. Your line is now open.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Spiro <unk> with Citi. Your line is now open.
Spiro Michael Dounis: Thanks, operator. Good morning, team.
Spiro Michael Dounis: Jamie, maybe we could go back to the outlook for the rest of the year. I respect that there is a lot of the year still left to go, but I'm wondering if you could just put a finer point on some of the tailwinds you're seeing that were not contemplated in the original guidance. I know Trevor talked about the alpine high activity coming back, but I imagine that was not foreseen. So I'm curious, how many of those sort of tailwinds are sort of adding up here?
Spiro: Thanks, operator, good morning team.
Spiro: Jamie if you could go back to the outlook for the rest of the year respect there is a lot of the year left to go but.
Spiro: If you could just put a finer point on some of the tailwind youre seeing that were not contemplated in the original guidance.
Spiro: Talks about alpine high activity coming back I imagine that was not foreseen. So curious how many of those sort of tailwind just sort of adding up here.
Jamie W. Welch: So Spiro, thanks for the question, good morning, looking forward to seeing you on Tuesday. Alright, as far as I would say the various components, when Trevor mentions Alpine High coming back, that's really just... lifting the curtailment. I would say it's the operational performance that's the real, that's really been the tailwinds here. The recoveries have been fantastic. If you recall when we did this call at the end of February, we said we had a lot of plant maintenance we needed to do, multiple bed changeouts. First time I think we did it at Diamond, we had East Toya, we had Paker's Bend, we had it across the board.
Spiro: So Scott Thanks for the question good morning, looking forward to seeing on Tuesday.
Speaker Change: Alright, as far as I would say that various components.
Speaker Change: When Trevor mentioned at Alpine high coming back Thats really just.
Speaker Change: Lifting the curtailment.
Speaker Change: I would say, it's the operational performance that's the real that's really been the tailwind here is the recoveries have been fantastic. If you recall when we did this call at the end of February. We said, we had a lot of plant maintenance, we needed to do multi bed change outs first time I think we had done at diamond.
Speaker Change: We had a toy we had Pecos bend, we had it across the board we had compressor maintenance, we had lots going on.
Jamie W. Welch: We had compressor maintenance; we had lots going on. Now that we're through that, the recoveries have been fantastic. They really have been fantastic. And so I... because I really want to focus on operational performance and reliability, because that's how you grow this business. And I think we, our team, led by Matt Wall, have done a phenomenal job. So recoveries, in particular, are a tailwind. You know, I would say we're seeing, you know, green shoots here and there. As Trevor mentioned, oil-directed drilling hasn't changed.
Speaker Change: Now that we're through that the recoveries have been fantastic they really have been fantastic and so.
Speaker Change: Because I really want to hop on operational performance and reliability because that's how you grow this business and I think we team led by Matt Wall has done a phenomenal job so recoveries in particular, a tailwind yes I will.
Speaker Change: I'd say were seeing green shoots here and there.
Speaker Change: As Trevor mentioned oil directed all directed drilling Hasnt changed.
Jamie W. Welch: The only customer system that changed behavior for negative gas prices was, you know, Alpine High, and that's out there for the world to see. And it really, you know, we haven't missed a beat. And if anything, you know, I think that that reinforces just the strength of the fundamentals of the business that we've got and, you know, we're above thresholds coming out of New Mexico. As far as volumes are concerned, we're doing really well.
Speaker Change: Yeah the only.
Speaker Change: Only customer system that change behavior for negative gas prices was.
Speaker Change: Alpine high and that's out there for the world to see and it really yeah. We haven't missed a beat and if anything I think that reinforces the just the strength of the fundamentals of the business that we've got.
Speaker Change: And yes.
Speaker Change: We're above thresholds coming out of new Mexico.
Speaker Change: As far as volumes are concerned we're doing really well.
Spiro Michael Dounis: Got it. It's great to hear. Second one, maybe just turning to market share. You talked about maybe two areas where you could see a little bit more gains there. One was on the treating side; you're able to accept a broader range of gas quality now. So first, curious, are you seeing the volume impact from that just yet? And I think about the upside there. And then you also mentioned more customers or new customers on the egress side. I guess how much more room is there for you to gain on that side?
Speaker Change: Got it thats great to hear.
Speaker Change: Second one maybe just turning to market share.
Speaker Change: Talking about maybe two areas, where you could be a little bit more gains. There one was on the treaty side, you're able to access a broader range of gas quality now. So first curious if youre seeing the volume impact from that just yet and how to think about the upside there and then you also mentioned more customers and new customers on the egress side I guess, how much more room is there for you to gain.
Speaker Change: On that side.
Jamie W. Welch: I think as far as, let's go in reverse order, on the egress side, we have customers every day, both existing and new customers approaching us about new packages of gas. Customers; we're always open for them to tell us that they would like to, in fact, have Gulf Coast pricing. When you do a weighted average sales price calculation for residue gas, we give people an option.
Speaker Change: I think as far as let's go in reverse order on the egress side, Yes, we have customers every day both.
Speaker Change: Both existing and new customers approaching us about new packages of gas customers. We are always open for them to tell us that they would like to do in fact have Gulf coast pricing. When you do a weighted average sales price calculation for residue gas we give people.
Speaker Change: An option they can have.
Jamie W. Welch: They can have, you know, Oaxaca. They can have a mix of, you know, Oaxaca and the Gulf Coast. And so we have more and more customers telling us, hey, we want more Gulf Coast, right? I would say the relationships we have and the way you build relationships is you continue to embed that concept of partnership. And that concept of partnership, I think it's to your benefit as you think about future development and opportunities that you get.
Speaker Change: Wahaha they can have a mix of of Wahaha and Gulf coast, and so we have more and more customers, telling us hey, we want more Gulf coast right.
Speaker Change: And.
Speaker Change: I would say the great relationships, we have and the way you build the relationships as you continue to embed that concept of partnership and that concept of partnership I think our newest to your benefit as you think about future development and opportunities that you get so we do have people. We've got we've got space that we can manage.
Jamie W. Welch: So we do have people, we've got space that we can manage not just because we're the majority owner of PHP and how it's performing but also just be given the space that we've contractually taken. And we've got, this is a constant dialogue with so many of these folks. And then, Trev, do you want to just take that first question?
Speaker Change: Not just because we're the majority owner of PHP and how it's performing but also just be given the space that we've contractually.
Speaker Change: Taken.
Speaker Change: And we've got.
Speaker Change: This is a constant dialogue with some of these folks.
Speaker Change: Yeah.
Speaker Change: And then.
Speaker Change: Do you want to just take that first question.
Speaker Change: Sure.
Trevor Howard: On the trading side? Yeah, thanks for the question, Spiro. I'd say we are seeing some benefits on the volume side, but really where we see it is in margin expansion, which is fantastic, right? Because that's 100% incremental to the bottom line without taking up what is really a precious asset in the basin right now, which is any remaining spare processing capacity. So we're seeing the benefits right now that with system-wide front-end amine treating fully complete, we have an immediate step up in margin, and then the commercial team's working right now to continue to sell out the remaining space, both for sweet and sour gas treating and processing. And we are seeing, you know, as we
Speaker Change: Trading side, yes, thanks for the questions Bureau, let's say.
Speaker Change: We are seeing some benefits on the volume side, but really where we see it as margin expansion, which is fantastic right, because thats, 100% incremental to the bottom line.
Speaker Change: Without taking up.
Speaker Change: What is really a precious asset in the basin right now, which is any remaining spare processing capacity.
Speaker Change: So we're seeing the benefits right now that with system wide front of naming treating fully complete we have an immediate step up in margin.
Speaker Change: And then the commercial teams are working right now to continue to sell the remaining space, both for sweet and sour gas treating and processing and we are seeing as we mentioned on the February call. We've got some customers that actually have really elevated levels of Sidoti.
Trevor Howard: We're seeing, as we mentioned in the February call, we've got some customers that actually have really elevated levels of CO2, and we're obviously now fully accommodating that, and obviously, we have a stair-step or a tiering structure pretty much across the board in the context of how we get treatment fees. We've got H2S, we have CO2, we are seeing some nitrogen coming out, and what's interesting about our business is, because of the size of the system and the sources from where we're pulling the gas, we have a lot of sweet gas which has virtually no impurities in it, and we have gas which has higher levels of impurities, and obviously, the blend of the two makes pipeline spec gas that meets all tariffs, and So it's a win-win, we think across the board. I got it.
Speaker Change: And we're obviously now fully accommodating that and obviously, we have a stair step or a tiered structure pretty much across the board in the context of how we get trading phase.
Speaker Change: We've got <unk>, we have to we even have we are seeing some nitrogen coming out right and what's interesting about our business is because of the size of the system and the sources from where we are pulling the gas we have a lot of sweet gas which is.
Speaker Change: Has virtually no impurities in it and we have gas, which has higher levels of impurities and obviously the blend of the two makes pipeline spec gas that it meets all tariffs and it's obviously more.
Speaker Change: <unk> beneficial to the to the to the customers and the producers.
Speaker Change: And we get paid for it as Trevor pointed out so it's a win win we think across the board.
Spiro Michael Dounis: Got it. That's great. I will leave it there and look forward to seeing you all next week.
Speaker Change: Got it great I will leave it there and seeing you all next week.
Speaker Change: With CJS SEC.
Operator: Thank you. The next question comes from the line of Tristan Richardson with Scotiabank. Your line is now open.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Tristan Richardson with Scotiabank. Your line is now open.
Tristan James Richardson: Hi, good morning, guys. Jamie, maybe you could talk a little bit about the NGL side of downstream? I mean, you know, we're closing in on a couple of third-party pipe expansions. Can you talk about how you see your NGL solutions trending once we see these expansions online, and then particularly in the context of thinking about kinetic barrels that may come up for recontracting?
Tristan James Richardson: Hi, good morning, guys.
Tristan James Richardson: Jamie maybe could you talk a little bit about the NGL side of downstream I mean, we're closing in on a couple of third party pipe expansions.
Tristan James Richardson: Can you talk about how you see your.
Tristan James Richardson: Our NGL solutions trending once once we see these expansions online and then particularly in the context of thinking about kinetic barrels that may come up before.
Speaker Change: For <unk>.
Speaker Change: Contracting.
Tristan James Richardson: Tristan, good morning. Thank you for the question. I think we've been pretty clear as far as on the NGL side. We have commitments to Lone Star with respect to some of the legacy plants. We inherited one with Caprock. There's obviously some in relation to what is called Midstream Ventures, which is... primarily East Toya and one of the PECAS plants.
Jamie W. Welch: Trust and good morning. Thank you for the question so as far I think we've been pretty clear as far as on the NGL side, we have three different commitments, we have commitment to answer with.
Speaker Change: With respect to some of the legacy plants, we inherited one with cap rock there was obviously some in relation to what has even core midstream ventures, which is.
Jamie W. Welch: The primarily east toy fair and and one of the Pecos plant and then we have the enterprise.
Jamie W. Welch: And then we have the Enterprise commitment that we have inherited, in large part because Enterprise was the only connection to Diamond Cryo and, as you all know, Apache was one of the foundation shippers on the Chinook pipeline. So we have contracts with Lone Star coming up in 2026. There are two of them.
Jamie W. Welch: That enterprise commitment that we have inherited and lodge in large part because enterprise was the only connection to diamond Cryo and as you probably all know Apache was one of the foundation shippers on the Shin Oak pipeline.
Jamie W. Welch: So we have contracts with one stock come up in 2026, there are two of them.
Jamie W. Welch: And they will roll off and then we obviously have.
Jamie W. Welch: And they will roll off. And then we obviously have our dedication to, or commitment with Targa on Grand Prix. And that will continue out through the beginning of the early 2030s. And then we obviously have what we have at Diamond Cryer. The where we, you know, if you go back to first principles and think about the merger, where you saw the open space in the entire organ, the system complex from a processing standpoint was done. Our job has been to fill up Diamond Cryer. It is The Best Recoveries.
Jamie W. Welch: Dedication with our commitment with Tiger on Grand Prix and that will continue out through beginning of early 2000, <unk> and then we obviously have what we have a diamond crop.
Jamie W. Welch: Where we are if you go back to first principles and thinking about the merger where you saw the open space in the entire system complex from a processing standpoint with diamond.
Jamie W. Welch: Our job is to being to fill up diamond cryo.
Jamie W. Welch: We expanded it from $600 to $720. The only other tenant that sits at Diamond Cryo is Apache. And so we've been utilizing that space, and therefore, you know, we have a very, I would say, mutually beneficial, very flexible arrangement with EPD on Chinook that really gives us flexibility. It's very beneficial economically, and we obviously own a third of Chinook as well. So we think, you know, literally all the stars are aligned to produce a good outcome.
Jamie W. Welch: It is the best recoveries, we expanded it from 600 to 720.
Jamie W. Welch: The only other tenant that sits at Diamond Cryo is Apache.
Jamie W. Welch: So we've been utilizing that space and therefore, we had a very I would say a mutually beneficial very flexible.
Jamie W. Welch: Arrangement with Apd on Shin Oak that really gives us flexibility is.
Jamie W. Welch: It's.
Jamie W. Welch: Very beneficial economically and we obviously own a third of Chinook as well. So we think literally all the stars are aligned to make hay.
Speaker Change: I see.
Jamie W. Welch: Good outcome.
Jamie W. Welch: As it relates to future barrels, we'll decide that as it relates certainly to further expansions, we've got flexibility with respect to Caprock, and flexibility when that contract obviously rolls off. So we've got plenty of flexibility that we can think about sort of what to do next.
Jamie W. Welch: As it relates to future barrels, yes, we will decide that.
Jamie W. Welch: As it relates certainly to.
Jamie W. Welch: Further expansions, we've got flexibility with respect to cap rock flexibility as it when that contract obviously rolls off so we've got plenty of flexibility that we can think about sort of what to do next is something that any <unk> and the team spent a lot of time focused on as we think about the future.
Jamie W. Welch: It's something that Annie Penzik and the team spent a lot of time focused on as we think about the future. We see all these announcements, and we're trying to work out whether, in fact, the basin has been pretty tight right now. In fact, they've been jamming, I'm looking at Annie, every barrel they can because when you get negative three bucks, it's not a good day, and you want to get as much recovery of ethane in the stream as you possibly can.
Jamie W. Welch: We see all these announcements we're trying to work out whether in fact, they are obviously the basin has been pretty tight right now in fact there've been jamming like I'm looking at any every barrel. They can because when you have negative three box, it's not a good day and you want to get as much recovery of ethane in the stream as you, possibly can and.
Jamie W. Welch: And we're still trying to work out whether, in fact, what the fundamentals will look like. We're going to see a lot of pricing pressure going forward, so more power to the customer than necessarily to the owner of the infrastructure. Time will tell how this is all going to play out. We're not the only ones with obviously these mid-25, 26 time frames. You know, there are what, 1.5 million barrels a day of incremental expansions that are coming on, so it's not insignificant, right, Bahia and Daytona and other things.
Jamie W. Welch: We'd still trying to work out whether in fact, what the fundamentals will look like how are we going to see a lot of pricing pressure going forward, so more power to the customer than necessarily to the owner of the infrastructure.
Jamie W. Welch: Time will tell how this is all going to play out we're not the only ones with obviously these mid 'twenty five 'twenty six.
Jamie W. Welch: Timeframes, Yes. This was one five Bcf 115 million barrels a day of incremental expansions that are coming on so it's not insignificant right by here in Daytona and other things. So I do think that look it is going to be a really interesting.
Jamie W. Welch: So I do think that, look, it's going to be a really interesting segment to watch. As I said, we're not the only ones. There are lots of other dedications that will roll off, as you see, I would say, sort of the NGL 1.0 contracts roll off in the 25, 26, 27 timeframe, and see exactly what happens.
Jamie W. Welch: Segment to watch as I said, we're not the only ones theres lots of other dedications that will roll off as you see I would say sort of the NGL one point all contracts roll off in the $25 26, 2007 timeframe and see exactly what happens.
Tristan James Richardson: Appreciate it as always, Jamie. And then maybe more near term, just thinking, you know, you talked about Lee counting project volumes coming in in April and May above MNs, and maintenance done in time to see March turn-in lines increasing. I mean, is there a particular cadence we should think about for turn-in lines for the rest of the year, as you talk about the low double-digit expectations for 24?
Speaker Change: I appreciate it as always Jamie and then maybe more near term just thinking you've talked about Lea County project volumes coming in in April and May above men's.
Speaker Change: Maintenance done in time to see March turned in lines increasing.
Speaker Change: Is there a particular cadence we should think about for turn in lines for the rest of the year as you talk about the low double digit expectations for 'twenty four.
Trevor Howard: What do you think? Do you agree? Yeah, thanks for the question, Tristan. It's, look, it's quite consistent from what we have seen over the past few years, especially coming out of winter storm Yuri, where most of our TIL development, 70 to 80% of our TIL development really takes place late in the first quarter and second quarter, and then by September, generally, we see most of our TILs in the year. So we should expect a similar volume ramp that we saw last year, where producers are bringing wells on right now.
Speaker Change: What do you think.
Jamie W. Welch: Thanks for the question Tristan.
Speaker Change: Look it's quite consistent from what we had seen over the past few years, especially coming out of winter storm Europe, where most of our <unk> development.
Speaker Change: 70% to 80% of our channel development really takes place.
Speaker Change: And late in the first quarter second quarter, and then by September generally we see most of our <unk> in the year. So we should expect.
Speaker Change: A similar volume ramp that we saw last year, where.
Speaker Change: Yes.
Speaker Change: Producers are bringing wells on right now.
Trevor Howard: We're going to have the return of Alpine high curtailments in the second quarter once the maintenance issues on the egress pipes clear up, and in-basin pricing recovers. And come midsummer, we should see higher levels of volume, and that should continue to take up throughout the balance of the year until our producers are completed with their TIL programs for fiscal year 2024.
Speaker Change: We're going to have the return of alpine high curtailments in the second quarter ones.
Speaker Change: The maintenance issues on the egress pipes.
Speaker Change: Clear up in in basin pricing recovers income mid summer, we should see higher levels of volume and that should continue to tick up throughout the balance of the year until our producers are completed with the CIL programs for.
Fiscal year 2024.
Tristan James Richardson: I appreciate it. Thanks, gentlemen.
Speaker Change: I appreciate it thanks gentlemen.
Speaker Change: Thanks Tristan.
Speaker Change: Okay.
Operator: Thank you. The next question comes from the line of Keith Stanley with Wolf Research. Your line is now open.
Tristan James Richardson: Thank you. The next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.
Keith T. Stanley: Hi, good morning. I first just wanted to follow up on the Alpine High curtailment. So you're expecting them to come back once the maintenance ends, I guess later this month. And how good do you feel about them doing that and keeping volumes on? And then just how meaningful is Alpine High to overall kinetic GMP volumes at this point?
Keith T. Stanley: Hi, good morning.
Keith T. Stanley: First just wanted to follow up on the alpine high curtailments or youre expecting them to come back once the maintenance and I guess later this month.
Keith T. Stanley: And how do you feel about them doing that and keeping volumes on and then just how meaningful is alpine high to overall kinetic G&P volumes at this point.
Jamie W. Welch: Keith, good morning. So, as far as we did see, actually, we've already seen a return of volumes. I think, you know, you've got to be mindful; shutting down PDP for extended periods of time does risk the potential for reservoir damage. So, you got to be conscious and cognizant of not doing something that may, in fact, have longer-lasting ramifications.
Keith T. Stanley: Keith Good morning, so as far as we did see actually we've already seen a return of volumes.
Yes, you got to be mindful shutting in PDP for extended periods of time, you do risk the potential for a reservoir damage. So you got to be conscious and cognizant of not doing something.
Speaker Change:
Speaker Change: Net.
Jamie W. Welch: May in fact have longer lasting ramifications and I think look.
Jamie W. Welch: And I think, look... We're seeing the return of those volumes, and you know, they can be, they can be very much increased. Almost immediately, in the context of just the way they've got an auto choke system that operates pretty much across the board. As it relates to, you know, the overall impact as we think about the return and we think about what's going to happen, and how important it is for us, what you should see is...
Speaker Change: We are seeing the return of those of those volumes and they can be.
Jamie W. Welch: They can be.
Jamie W. Welch: Much increased.
Speaker Change: I almost immediately in the context of just the way they've got an auto choke system.
Jamie W. Welch: <unk> operates pretty much across the board.
Jamie W. Welch: As it relates to the overall.
Jamie W. Welch: The impact as we think about the return.
Jamie W. Welch: And we think about.
Jamie W. Welch: That's what's going to happen and how important it is for us what should what you should see is.
Jamie W. Welch: Yes, pro forma Callan, you've got probably 28% of your volumes, I think, sort of sit with Apache between DXL, Callan, and obviously Alpine High, and despite that, our business has basically done incredibly well as far as profit is concerned. And as I said, that strength has continued into April, and we're seeing it in the context of even the first week of May.
Jamie W. Welch: Yes, the pro forma Calin <unk> got probably 28% of your volumes I think sort of sit with Apache between DSL Cowen and obviously alpine high and only alpine high is impacted from a gas because of gas prices.
Jamie W. Welch: And despite that our businesses basically done incredibly well as far as profit is concerned and as I said, yes that strength has continued into April and we're seeing it in the context of even in the first week of May So I think as we think about our business it's nice to have.
Jamie W. Welch: So I think as we think about our business, it's nice to have. And, you know, I still think, look, whether it comes back and if it fully comes back in the next two weeks, three weeks is, we're about to come out, I believe, in the next two weeks out of the pipeline maintenance with a balance of GTX and PHP, and sort of everything should then be done. And then we're just obviously waiting for Matterport, right? And the question is when that comes online.
Jamie W. Welch: And I still I think book, whether it when it comes back and if it fully comes back in the next two weeks three weeks as you were about to come out I believe in the next two weeks out of out of the pipeline maintenance with.
Jamie W. Welch: With a balance of Gtx and PHP and sort of everything should be then done and then we are just obviously waiting for medical.
Jamie W. Welch: And the question is when that comes on online.
Trevor Howard: Keith, I'd also jump in with the small amount of equity space that we do have on PHP. It actually acts as a nice natural hedge, where when we do see... In basing gas prices that warrant curtailment, it's actually a net positive for the company, given the open space. And so, it's actually been a nice hedge here in March and in April, while we're getting through this maintenance and shoulder season on the base.
Speaker Change: Keith I would also jump in with.
Trevor Howard: It's a small amount of equity space that we do have on PHP. It actually acts as a nice natural hedge where when we do see.
Trevor Howard: In basin gas prices that warrant curtailments, it's actually a net positive for the company given the open space and so.
Trevor Howard: It's actually been it's been a nice hedge here in March and in April while we're getting through this this maintenance in shoulder season in the basin.
Trevor Howard: Okay.
Keith T. Stanley: That's helpful, thanks. Just one second question. How are you thinking at this point about growth opportunities for next year? It seems like you have some more opportunities. You have a new plant potentially, maybe a phase two in New Mexico, GCX expansion. Should we think of investments and growth for the company as accelerating into next year as you look at the opportunities set, or just any thoughts around that? Uh, look, I think, Keith, as far as, um...
Keith: That's helpful. Thanks.
Keith T. Stanley: Second question.
Keith T. Stanley: How are you thinking at this point about growth opportunities into next year. It seems like you have some more opportunities you have a new plan to potentially.
Keith T. Stanley: Maybe a phase II in new Mexico, <unk> expansion should we think of investments in growth for the company is accelerating into next year as you look at the opportunities that are just just any thoughts around that.
Jamie W. Welch: Look, I think, Keith, as far as growth opportunities are concerned. We're always looking for growth opportunities across the board. We've been very successful on the organic side, and we'll continue to look for those opportunities. We think that they are highly accretive to the value complex that is Kinetik. And as we think about 2025 and the opportunities out there, Look, you've identified some that, obviously, we have talked about already, and we'll continue to sort of see what we are able to secure and see what that obviously means as far as you know the overall trajectory of EBITDA, and obviously, we are very mindful of making sure that we're thinking about the capital discipline on.
Keith T. Stanley: Look I think Keith as far as growth opportunities, we're always looking at growth opportunities across the board. We've been very successful on the organic side and we'll continue to look for those opportunities. We think that they are highly.
Jamie W. Welch: Clearly accretive to the to the value complex that is kinetic.
Jamie W. Welch: And as we think about 2025, and those and the opportunities out there.
Jamie W. Welch: Look you've identified some that obviously, we have talked about already and we will continue to sort of see what we are able to secure.
Jamie W. Welch: And see how that sort of obviously what that means as far as.
Jamie W. Welch: The overall trajectory of EBITDA and obviously, we are very mindful of making sure that.
Jamie W. Welch: We're thinking about the capital discipline.
Jamie W. Welch: Yes.
Speaker Change: Thank you.
Operator: Thank you. The next question comes from the line of John Mackay with Goldman Sachs. Your line is now open.
Speaker Change: Thank you.
Jamie W. Welch: The next question comes from the line of John Mackay with Goldman Sachs. Your line is now open.
John Ross Mackay: Hey, good morning. Thanks for the time. Figured I might ask about the Infiniium agreement. I think the project's supposed to come online in 2026. Just interested if you guys could kind of frame up, you know, what the size of the opportunity could be for you guys, if there's more of this that you can do, and kind of what to watch next.
John Ross Mackay: Hey, good morning, Thanks for the time.
John Ross Mackay: I might ask on the Infineon agreement I think the projects to come online in 2026, just interested if you guys could kind of frame up what.
John Ross Mackay: What the size of the opportunity could be for you guys. If there's more of this that you can do.
John Ross Mackay: Kind of what the what to watch next.
John Ross Mackay: John, good morning. Thank you. We've got Tyler Milam, who runs our New Energy Ventures business and has been the architect of the Infiniium deal. So Tyler, do you want to take that away?
John Ross Mackay: John Good morning, Thank you.
John Ross Mackay: Tyler.
Tyler Milam: Ireland, who runs our new energy ventures.
Tyler Milam: Business and has been the architect with the on the Infineon deal. So Tyler do you want to take that away.
Jamie W. Welch: Sure. Thanks, Jamie. Hey, John.
Tyler Milam: Sure, Thanks, Jamie Hey, John Yeah.
Jamie W. Welch: So.
Tyler Milam: Just to let you know this is just one of our cryogenic complexes that we have contracted with project Roadrunner via Infineon and so to kind of.
Tyler Milam: Yeah. So just to let you know, this is just one of our cryogenic complexes that we have contracted with Project Roadrunner via Infinium. And so to kind of qualify, I guess, versus even quantify. What we still have on the table is that we're still evaluating our other three complexes. And so I think there's definitely some room to run, and we continue to see the best ways to not only reduce our greenhouse gas emissions as our corporate objective but also turn that into a revenue stream at no capital cost to our organization.
Tyler Milam: Qualify I guess versus even quantified what we are still on the slate as we are still evaluating our other three.
Tyler Milam: Complexes and so I think there's definitely some room to run and we continue to daily C. The best way to to not only reduce our greenhouse gas emissions as our corporate objective, but also turning that into a revenue stream.
Tyler Milam: No capital to our organization.
Jamie W. Welch: You know, John, it's interesting that the whole concept behind Infineum was predicated on the conversion of what was a traditional sweet system, which was the old BCP Eagle Claw Caprock, to a system that could take sour gas. We are seeing higher levels of sour gas. We therefore see much more CO2 tonnage created. This is a stream that we can give you by pipe, and they can then, obviously, using their process, they can convert it into e-fuel.
Speaker Change: Yes, John it's interesting that the whole concept behind the Infineon was predicated on the conversion of what was a traditional suite system, which was the old BCP Eagle claw cap rock to a system that could takes allagash, we are seeing greater levels of sour gas we therefore.
Jamie W. Welch: Much more cotwo tonnage created and.
Jamie W. Welch: Tyler working with Infineon said with all this <unk> tonnage.
Jamie W. Welch: This is a stream that we can give you by pipe and they can then obviously using their process. They can convert it into <unk>.
Jamie W. Welch: No capital, no OPEX for us. It's fully paid for. We get a really nice return. So we're getting paid on the treating side by our customers. And with a byproduct that we're creating, which is incremental direct CO2, we are getting paid for the CO2 stream.
Jamie W. Welch: No capital no opex for us it's fully paid for we had a really nice return. So we're getting paid on the trading side by our customers and with a byproduct that we creating which is incremental direct cotwo. We are getting paid for the cotwo stream.
Jamie W. Welch: Strength.
John Ross Mackay: That's great! That makes sense. And you kind of touched on my next question. You touched on it a little bit earlier in the call, too. But maybe you can kind of just frame up the size of this sour gas opportunity overall. I mean, it feels pretty large, it feels like there's some producers pushing in there, and maybe some of your midstream peers aren't necessarily keeping up. So just wondering if you could kind of frame up that broader opportunity on both, you know, the gathering, processing, treating side, etc.
John: That's great that makes sense and you kind of touched on my next question.
John Ross Mackay: Touching on a little bit earlier on the call too, but maybe you can kind of just frame up the size of the sour gas opportunity overall.
John Ross Mackay: It feels pretty large it feels like there's some producers pushing them there and maybe some of your midstream peers arent necessarily keeping up.
John Ross Mackay: So just wondering if you could kind of frame up that broader opportunity.
John Ross Mackay: On both the gathering processing treating side et cetera.
Chris Kendrick: We'll let Mr. Kendrick take the floor.
John Ross Mackay: Well, let Mr. Kendrick take the floor Hi, John This is Chris.
Chris Kendrick: Hey, John, this is Chris. Look, it's a great question. And as we've alluded to earlier, as we continue to go north in the basin and as our customers drill shallower formations, we see higher amounts of CO2 and some higher amounts of nitrogen. So one of our goals has been, once our treatment facility is installed, to add additional fees and treat that gas. One other point I'd like to make too is that we have some incremental treating capacities down at Diamond.
Chris Kendrick: Look it's a great question and as we've alluded to earlier as we continue to go north in the basin and as our customers drill shallower formations, we see a higher amounts of Seo too and some higher amounts of nitrogen. So one of our goals has been once our trading is installed is to add additional fees and treat that gas one other point I would.
Chris Kendrick: Like to make two is we have some <unk>.
Chris Kendrick: Incremental training capacity down at Diamond, So Matt and the operations team is looking at ways to optimize our system to be able to add more cotwo to the system. So we can extract fees. There. So I think the opportunity is great I think the oil cuts are great from these benches. So the customers customers want a solution to be able to treat not only the <unk>.
Chris Kendrick: So Matt and the operations team are looking at ways to optimize our system to be able to add more CO2 to the system so we can extract fees there. So I think the opportunity is great. I think the oil cuts are great from these benches. So customers want a solution to be able to treat not only the CO2, but also the nitrogen. So we try to get in front of that and are currently talking to a number of producers about a solution there. And it's also
Chris Kendrick: <unk> been handled the nitrogen so we've tried to get in front of that and are currently talking to a number of producers about a solution. There and it's also true I think Chris that on the shallower formations to Avalon and bone spring, we see less produced water. That's right. So I do think there is an element on this which is yeah.
Chris Kendrick: And it's also true, I think, Kris, that in the shallower formations, Avalon and Bonespring, we see less water, produced water. That's right.
Jamie W. Welch: So, I do think there is an element in this which is, you know, the produced water and the gathering and disposal of that. Significant costs on the producer side; not having to deal with as much water is obviously a huge net benefit for them. So I do think that goes into the overall equation of, you know, the decision-making process for our producers and where they're focusing. And so, therefore... Our ability to take wider ranges of CO2, high levels of H2S, and even nitrogen and blend it and treat it is a massive competitive advantage for us in the context of what our customers are now focusing on.
Jamie W. Welch: The produced water and the gathering and disposal of that is an element significant costs from the producer side not having to deal with as much water is obviously a huge net benefit from them for them. So I do think that goes into the overall equation.
Jamie W. Welch: Of.
Jamie W. Welch: Yes, the decision, making process for our producers and where they are focusing and so therefore.
Jamie W. Welch: Our ability to take wider ranges of Seo to high levels of <unk>, and even nitrogen and blended and treat it is a massive competitive advantage for us in the context of what our customers have now focusing on.
John Ross Mackay: safe purchasing. Thanks for that.
Speaker Change: Super Thanks for that.
Speaker Change: Thank you.
Operator: The next question comes from the line of Neil Mitra with Bank of America. Your line is now open.
John Ross Mackay: Our next question comes from the line of Neel Mitra with Bank of America. Your line is now open.
Operator: Sure.
Indraneel Mitra: Hi Jamie, thanks for taking my question. Jamie, I just wanted to kind of touch on the cadence of rich gas growth going through April and May. It seems like that's been strong, but I was wondering, with the gas takeaway situation right now, if there's been any producer issues with getting the gas out of the basement. I know there's been a lot of ethane recovery and maybe moving to markets that are less than desirable, but just trying to understand the flow assurance there.
Indraneel Mitra: Hi, Thanks for taking my question, Jamie just wanted to kind of touch on the cadence of rich gas growth.
Indraneel Mitra: And through April and May it seems like Thats been strong, but was wondering with the gas takeaway situation right now if theres been any producer issues.
Indraneel Mitra: With getting the gas out of the base I know theres been a lot of ethane recovery and maybe moving to markets that are less than desirable, but just trying to understand the flow assurance there.
Jamie W. Welch: Yeah, and Neal, thank you. Good morning.
Jamie: Yeah, Neil Thank you and good morning.
Speaker Change: I think as we mentioned both in our prepared remarks, and maybe an answer to another question. The oil directed drilling cadence has not changed at all if anything we've seen it really continue to pick up which is somewhat typical second quarter through third quarter is literally I want to say prime time as far as turn in line activity.
Jamie W. Welch: I think, as we mentioned both in our prepared remarks and maybe in answer to another question, the oil-directed drilling cadence has not changed at all. If anything, we've seen it really continue to pick up, which is somewhat typical. Second quarter through third quarter is literally, I want to say, prime time as far as turn-in line activity is concerned. That's when it all happens because you sort of are out of the pockets of the year where you have the potential for some... challenging climate and weather.
Jamie W. Welch: Concern that's when it all happens because you're sort of you're out of the pockets of the year, where you had the potential for <unk>.
Jamie W. Welch: Challenging client climate and weather.
Jamie W. Welch: But I think what's interesting for us, and again, this comes back to, I would say, almost the switchboard that Kendrick's got as far as the number of customers calling. Everybody knows that we've got space on PHP. They are literally banging on his door saying, can I, can I, will we, will you take my gas? I have gas here, I need help.
Jamie W. Welch: But I think what's interesting for us and again this comes back to I would say almost the switchboard the kindred Scott as far as the number of customers calling.
Jamie W. Welch: Everybody knows that we've got space on PHP and they are literally banging danny's door, saying can I can I will we will you take my take.
Jamie W. Welch: Take my guess I had gassy I need I need help and look we are very customer focused and we're very customer centric and our viewpoint is we've got space that we can basically say.
Jamie W. Welch: And look, we are very customer focused, and we're very customer-centric. And our viewpoint is that we've got space that we can basically fit in packages of gas. We can give people a hand. We want to see more activity. And so we look at our role as being a partner with our customers in the context of helping them achieve their ultimate goal. Chris, would you?
Jamie W. Welch: In packages of gas, we can give people a hand, we want to see more activity and so we look at our our role as being a partner with our customers in the context of helping them achieve their ultimate Gulf.
Jamie W. Welch: Chris would you add anything.
Chris Kendrick: No, Jamie, I think that that's right. I think Jamie alluded to this earlier, Neil, that having the PHP space is one big differentiator for us. And it has allowed us to provide egress takeaway and not see the curtailments, and unlike maybe some of our peers, they don't have access to the Gulf Coast. So it's been a great tool to have. And we're going to continue to use it to help grow our business.
Chris Kendrick: No Jamie I think that's right I think Jamie alluded to this earlier neo that having the ph space as one big differentiator for us and it has allowed us to provide egress takeaway and not see the curtailments in may.
Indraneel Mitra: Got it. And then second question.
Indraneel Mitra: Maybe some of our peers. They don't have access to the Gulf coast. So it's been a great tool to have and continue to use it to help grow our business.
Indraneel Mitra: Okay.
Indraneel Mitra: Now that Apache has exited the position and we have a bigger public float, you're still a capital constraint in the sense that you want to get to investment grade, and it looks like you're on the path there, and you have expanded into other parts of the Permian and New Mexico areas. How are you looking at M&A now in terms of maybe a bolt-on gathering system, given that you've been able to integrate your upstream and your downstream position, like with PHP and other downstream solutions for those customers?
Speaker Change: Got it and then second question now.
Indraneel Mitra: Apache exited.
Indraneel Mitra: This vision and we have a bigger public flow.
Indraneel Mitra: Still capital constrained in the sense that you won.
Indraneel Mitra: Want to get to investment grade and it looks like down.
Indraneel Mitra: The path there and you expanded into other parts of the Permian and then new Mexico area.
Indraneel Mitra: Are you looking at M&A now in terms of maybe like a bolt on gathering system, given that you've been able to integrate.
Indraneel Mitra: Your upstream and your downstream position like with PHP and other downstream solutions for those customers.
Indraneel Mitra: And, you know, how would that work in terms of, you know, maintaining your leverage ratios and also increasing the public load? Is that something that you are, you know, considering or have on as an option? Neil, you know, I think we have said.
Indraneel Mitra: And how would that work in terms of.
Neil: Maintaining our leverage ratio and also increasing the public float.
Speaker Change: Something that you are.
Neil: Considering or have on.
Neil: That's an option.
Jamie W. Welch: Neil, you know, I think we have said consistently that we look at lots of different opportunities, both organic and inorganic. And we have a very high bar as it relates to all opportunities, where we look through the lens of short-cycle value accretion, we look at overall value accretion to the complex, we look at leverage and ratings impact, so we take everything into consideration.
Indraneel Mitra: Neil.
Neil: Well I think we have said consistently that we look at lots of different opportunities, both organic and inorganic and we have a very high bar as it relates to all opportunities, where we look through the lens of short cycle value accretion, we look at overall vas.
Jamie W. Welch: <unk> accretion to the complex we look at leverage.
Jamie W. Welch: And ratings impact so we take everything into consideration and look.
Jamie W. Welch: When we find something that checks all the boxes, that's, you know, look, that's what will happen as far as, you know, the opportunities that are out there. And I think what we've continued to do is just evaluate. But now, we've been very happy with our organic growth strategy, and we very much believe that, you know, we've got that now. With the completion of the capital program for last year, we're very focused on the execution side. And that's what you've seen, obviously, in the first quarter, and that's how we forecasted it.
Jamie W. Welch: When we find something that checks all the boxes that look thats, what will happen as far as the opportunities that are out there and I think.
Jamie W. Welch: What we've continued to do is just evaluate but now we've been very happy with our organic growth strategy and we very much believe that we've got that now with the completion of the capital program for last year were very focused on the execution side and Thats, what <unk> seen obviously in the first quarter and Thats, how we forecast it to.
Jamie W. Welch: The balance of the year.
Jamie W. Welch: Yes.
Jamie W. Welch: Okay.
Speaker Change: Okay perfect. Thank you.
Speaker Change: Thank you.
Operator: This will conclude the question and answer session for today's call. I would now like to hand the call back over to the team for any final remarks.
Speaker Change: This will conclude the question and answer session for today's call I would now like to hand, the call back over to the team for any final remarks.
Operator: Thank you very much, everybody, for your time this morning. We look forward to seeing you. I know it's a busy time of year, lots of conferences and stuff, so we look forward to seeing you in the next 30 days. Thank you.
Speaker Change: Thank you very much everybody for your time. This morning, we look forward to seeing you I know, it's a busy time of year lots of conferences and stuff. So we look forward to seeing in the next 30 days.
Speaker Change: Thank you bye bye.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect your line. This concludes today's conference call.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect your lines.
Operator: This concludes today's conference call.