Q2 2024 ONEOK Inc Earnings Call
Speaker Change: Good day and welcome to the ONEOK second quarter 2024 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone.
Speaker Change: To withdraw your question, please press star, then 2.
Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Andrew Ziola, Vice President of Investor Relations. Please go ahead.
Andrew Ziola: Thank you, Dave, and good morning, and welcome to ONEOK's second quarter 2024 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.
Unknown Executive: 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, Record Rocky Mountain Region volumes, continued progress on acquisition-related synergies, and solid demand for our products and services drove our strong second quarter performance and provided momentum into the second half of 2024. In July, we announced the expansion of our refined products pipeline to the greater Denver area. Also in July, we received our first shipment of sustainable aviation fuel at our Galena Park Marina terminal in Houston. Our integrated assets are proving their value, and our potential for additional growth remains. With that, I'll turn the call over to Walt. Thank you.
Speaker Change: 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.
Speaker Change: For discussion of factors that could cause actual results to differ, please refer to our SEC filings.
Speaker Change: Just a reminder for Q&A, we ask that you limit yourself to one question and a follow-up to fit in as many of you as we can.
Speaker Change: With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer. Pierce? Thanks, Andrew. Good morning, everyone, and thank you for joining us.
Speaker Change: On today's call is Walt Hulse, the Chief Financial Officer, Treasurer and Executive Vice President, Investor Relations and Corporate Development, and Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing.
Speaker Change: Also available to answer your questions today are Chuck Kelley, our Senior Vice President of Natural Gas Pipelines, and Kevin Burdick, who's the Executive Vice President and Chief Enterprise Services Officer.
Speaker Change: Yesterday we announced the second quarter 2024 earnings and affirmed our full year 2024 financial guidance.
Speaker Change: Record Rocky Mountain Region volumes, continued progress on acquisition-related synergies, and solid demand on our products and services drove our strong second quarter performance and provide momentum into the second half of 2024.
Speaker Change: Increasing volumes across our gathering and processing and natural gas liquid segments and the demand for our natural gas pipeline services combined with the strategic opportunities in our refined products include all segments.
Speaker Change: continue to provide confidence in our long-term growth and highly attractive returns across our business.
Speaker Change: We continue to identify opportunities to expand and to extend our systems, with recent announcements tied specifically to the commercial opportunities and synergy-driven growth in our natural gas liquids and refined products and crude segments.
Speaker Change: In June , we completed our acquisition of a system of NGL pipelines from Easton Energy.
Speaker Change: This acquisition was unique in that it made sense for ONEOK even before the acquisition of Magellan because of the ability to capture value downstream of our Mont Belvieu fractionation assets.
Speaker Change: Now, add in the legacy Magellan assets and the value creation and return potential is even greater.
Speaker Change: In addition to acquisitions, we continue to see substantial organic growth opportunities.
Speaker Change: In July , we announced the expansion of our refined products pipeline to the greater Denver area.
Speaker Change: This project will provide additional needed capacity for various transportation fuels including aviation and sustainable aviation fuel to support increasing demand from the significant future expansion of the Denver International Airport.
Speaker Change: Also in July , we received our first shipment of sustainable aviation fuel at our Galena Park Marina terminal in Houston.
Speaker Change: Facilitating growth with sustainable fuels in this market.
Speaker Change: These opportunities are all in addition to our previously announced NGO related growth projects including our MB6 fractionation and expansions of our Elk Creek and West Texas NGO pipelines.
Speaker Change: Sheridan will provide a more detailed explanation of those projects and timing and more to that shortly. Long-term volume commitments, strong operating performance, and a proven track record of supporting our customers with reliable capacity gives us the confidence
Speaker Change: In our future growth, and we remain committed to investing alongside our customers.
Speaker Change: Less than a year after the Magellan acquisition.
Speaker Change: We're already seeing significant synergies and discovering new growth opportunities that wouldn't have been possible for either company on its own.
Speaker Change: Our integrated assets are proving their value, and our potential for additional growth remains. With that, I'll turn the call over to Walt.
Unknown Executive: ONEOK's second quarter 2024 net income totaled $780 million, or $1.33 per share, representing an earnings per share increase of 28% compared with the second quarter of 2023 and a 22% compared with the prior quarter. Results were driven primarily by higher NGL and natural gas processing volumes in the Rocky Mountain region and increased transportation services in the natural gas pipeline segment.
Walt: Thank you, Pierce.
Walt: ONEOK's second quarter 2024 net income totaled $780 million, or $1.33 per share, representing an earnings per share increase
Walt: of 28% compared with the second quarter of 2023 and a 22% compared with the prior quarter.
Speaker Change: Second quarter adjusted EBITDA totaled $1.6 billion.
Walt: Results were driven primarily by higher NGL and natural gas processing volumes in the Rocky Mountain region, increased transportation services in the natural gas pipeline segments, and contributions from the refined products and crude segment.
Walt: The sale of non-strategic gathering and processing assets in Kansas contributed a pre-tax net benefit of approximately $50 million during the quarter.
Walt: We expect the full year net benefit from the sale to be approximately $40 million when considering the earnings the assets would have provided through the remainder of the year.
Walt: As Pierce mentioned, we affirmed our 2024 financial guidance after increasing it with our first quarter earnings announcement.
Pierce Norton: That increased guidance range included an expected adjusted EBITDA midpoint of $6.175 billion, with the high end at $6.325 billion.
Pierce Norton: We continue to expect to meet or exceed our midpoint of $175 million in cost and commercial synergies in 2024 and expect additional annual synergies to meet or exceed $125 million in 2025.
Pierce Norton: As of June 30, we had no viral means outstanding under our $2.5 billion credit agreement. During the quarter, we extended the maturity of our revolving credit facility to June of 2028.
Pierce Norton: In addition, our run rate net debt to EBITDA ratio was 3.36 times at the end of the second quarter, in line with our long-term leverage target of 3.5 times.
Pierce Norton: We have an approximately $480 million maturity due in September , which we expect to pay with cash, strengthening our balance sheet even further.
Pierce Norton: This will position us well to continue returning value to our investors through a strategic and balanced capital allocation approach.
Pierce Norton: Our approach remains...
Pierce Norton: And all of the above strategy, utilizing a combination of high return capital projects, dividend growth, debt reduction, and share repurchases.
Pierce Norton: I'll now turn the call over to Sheridan for a commercial update.
Sheridan: Thank you all. Beginning with the natural gas liquid segment.
Sheridan: Volume growth from the Rocky Mountain and Mid-Continent regions of 17% and 16% respectively, compared with the first quarter of 2020-24, drove higher earnings in the second quarter.
Sheridan: Rocky Mountain Region growth was primarily from increased propane plus volume, with higher incentivized ethane also contributing.
Sheridan: The mid-continent saw more ethane recovery compared with the first quarter, as well as contributions from overall NGL growth sequentially.
Sheridan: In the Permian Basin, we had higher volumes committed short-term in the second quarter of 2023 and the first quarter of 2024 than in the second quarter of 2024.
Sheridan: We've since recontracted much of that capacity with the volumes committed for longer terms.
Sheridan: We continue to see opportunities to recover ethane across our system. Favorable ethane economics will continue to depend on natural gas values and ethane demand at petrochemical facilities.
Sheridan: Dynamics through the remainder of the year could provide a tailwind to our modest ethane recovery assumptions and guidance.
Sheridan: We've made significant construction progress on our capital growth projects.
Sheridan: And now expect the West Texas NGL Pipeline Expansion and our MV6 Fractionator to be in service by the end of 2024.
Sheridan: Our previous in-service estimates were the first quarter 2025 for both projects.
Sheridan: On the West Texas NGL expansion, the full pipeline looping providing a capacity of 500,000 barrels per day is expected by year end, with a few remaining pump stations to be completed to get to the full capacity of 740,000 barrels per day.
Sheridan: The Elk Creek Pipeline Expansion remains on track for the first quarter 2025 completion.
Sheridan: Additionally, today, with our expanding need for fractionation capacity, we are announcing a project to rebuild our 210,000 barrels per day NGL fractionator in Medford, Oklahoma.
Sheridan: The project is expected to cost approximately $385 million and be completed in two phases, with the first expected to be completed in the fourth quarter of 2026 and the second phase in the first quarter of 2027.
Unknown Executive: Rebuilding at Manford provides a number of strategic benefits. In addition to tariff earnings on the system, we also expect the acquisition to accelerate our commercial synergy opportunities. The close proximity of our NGL and refined products terminals to major refiners in the Houston area and now improved connectivity presents considerable opportunities to capture value downstream of our fractionation assets. We expect to complete connections from the legacy Houston asset to our Houston-based assets beginning in mid-2025 through the year-end 2020. Moving on to the refined products and crude segment, gasoline and jet demand were strong in the second quarter, supported by the beginning of a robust summer travel season.
Sheridan: Rebuilding at Manford provides a number of strategic benefits.
Sheridan: It is the lowest cost per barrel expansion option for ONEOK to help address the expected increase in MGL production.
Sheridan: Its location in the Midcontinent will further increase the reliability and resiliency of ONEOK's fractionation capabilities and will allow our integrated system to accommodate volume growth from the Permian, Balkan, and Midcontinent.
Sheridan: The Medford fractionator will also produce additional butane and natural gasoline for incremental refined products and diluent blending opportunities in the Mid-Continent.
Sheridan: As Pierce mentioned, we recently completed a strategic acquisition of NGL assets from Easton Energy in the Houston area.
Pierce Norton: These assets will provide connectivity between our MGL and refined product systems and with key customers in the area.
Pierce Norton: The acquisition came with associated earnings from existing volumes, and we expect to fill the additional capacity of this system, providing a very attractive return on the project through committed volumes we control.
Pierce Norton: In addition to tariff earnings on the system, we also expect the acquisition to accelerate our commercial synergy opportunities, primarily related to blending.
Pierce Norton: The close proximity of our NGL and refined products terminals to major refiners in the Houston area and now improved connectivity presents considerable opportunities to capture value downstream of our fractionation assets.
Pierce Norton: We expect to complete connections from the legacy Houston asset to our Houston-based assets beginning in mid-2025 through the year-end 2025.
Pierce Norton: Moving on to the refined products and crude segment.
Pierce Norton: Gasoline and jet demand were strong in the second quarter, supported by the beginning of a robust summer travel season.
Unknown Executive: As it relates to marketing and optimization, we were able to optimize our assets through forward sales to capture higher margins on our liquids blending activity. Additionally, as Pierce mentioned, we recently announced the expansion of a refined products pipeline system from Kansas to the greater Denver area. Total system capacity will increase by 35,000 barrels per day, with low-cost expansion opportunities available as demand continues to grow in these markets. The project is expected to cost approximately $480 million and be completed in mid-2026.
Pierce Norton: As it relates to marketing and optimization, we were able to optimize our assets through forward sales to capture higher margins on our liquids blending activity.
Pierce Norton: As Pierce mentioned, we recently announced the expansion of a refined products pipeline system from Kansas to the greater Denver area, including an additional direct connection with the Denver International Airport.
Pierce Norton: Total system capacity will increase by 35,000 barrels per day, with low cost expansion opportunities available as demand continues to grow in these markets.
Pierce Norton: Following a successful open season, the additional capacity is fully subscribed. The project is expected to cost approximately $480 million and be completed in mid-2026.
Unknown Executive: Moving on to the Natural Gas Gathering and Processing segment. In the mid-continent region, we are currently seeing 35 rigs in Oklahoma, with 6 operating on our acreage. In the second quarter, we completed two BCF of the Texas project and expect the remaining one BCF to be in service next month. Our Oklahoma project is expected to be completed in the second quarter of 2025.
Pierce Norton: Moving on to the natural gas gathering and processing segment.
Pierce Norton: Rocky Mountain Region Processing volumes increased 10% year-over-year, averaging a record of more than 1.6 BCF per day during the quarter.
Pierce Norton: There are currently 40 rigs in the Williston Basin with more than 20 on our dedicated acreage.
Pierce Norton: As we look to the remainder of the year, we are reaffirming our volume guidance due to the benefits we're seeing from the drilling of longer laterals and higher well performance on traditional laterals without the need for as many well connects.
Pierce Norton: In the mid-continent region, we are currently seeing 35 rigs in Oklahoma, with 6 operating on our acreage.
Pierce Norton: With current commodity prices, we expect producers to continue concentrating activity in the oilier and NGL-rich areas in the region, and as natural gas prices strengthen towards the remainder of the year, we could see rig activity increase in the gassier regions.
Pierce Norton: In the natural gas pipeline segment, we benefited from higher firm and interruptal transportation rates in the second quarter.
Pierce Norton: The demand for natural gas storage remains high.
Pierce Norton: Progress continues to be made on our current expansion projects in Texas and Oklahoma, which both have firm contracts extending beyond 2030.
Pierce Norton: In the second quarter, we completed two BCF of the Texas project and expect the remaining one BCF to be in service next month. Our Oklahoma project is expected to be completed in the second quarter of 2025.
Pierce Norton: Pierce, that concludes my remarks.
Pierce Norton: Thank you Sheridan and Walt for those updates.
Speaker Change: Before we conclude, I'd like to express my deep appreciation to our Houston-based employees for their incredible dedication through Hurricane Beryl and its aftermath.
Speaker Change: Despite challenging weather conditions and persistent power outages, they remain committed to ensuring the safe and reliable operations of our assets in the area.
Speaker Change: Many also faced impacts to their own homes.
Speaker Change: Yet they continue to demonstrate resilience and professionalism.
Speaker Change: So I want to thank you personally for your dedication and the efforts that you showed during this aftermath of this event. ONEOK employees have consistently demonstrated dedication to responsible operations and doing things the right way.
Speaker Change: As our business has grown, we have continued our commitment.
Speaker Change: to our Company-Wide Sustainability Program and Practices.
Speaker Change: This dedication has been recognized with the MSCI AAA rating and being named as one of America's Greatest Workplaces in 2024 by Newsweek.
Speaker Change: As we close our prepared remarks, we published our 16th Corporate Sustainability Report last week, outlining our safety, environmental, and governance programs.
Speaker Change: This report details our efforts and progress in these crucial areas as we continue to deliver the energy the world needs while innovating for the future.
Speaker Change: Operator, we're now ready for questions.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Spiro Dounis with Citi. Please go ahead.
Spiro Dunis: Thanks, operator, morning team. First one maybe just to start with the guidance. Walt, let me just go back over some of your comments and guide for the year. You maintain the range, but I think in some of your comments there you seem to mainly make reference to the midpoint and high end, and if I combine that with Sheridan's comments.
Speaker Change: Stems suggest coming in below the midpoint is getting a little more remote here. So I'm reading through some of those comments correctly. If you think about the second half of the year, what needs to go right here to kind of beat the midpoint?
Pierce Norton: So Spiro, this is Pierce. You know Walt mentioned in his
Sparrow: In his comments that we did raise guidance in the first quarter.
Speaker Change: during that analyst call.
Sparrow: Personally, I like the team likes where we are.
Sparrow: and where we're trending to. And it does give us a lot of confidence in the back half of the year. So we're gonna take a look at this guidance again as we come to you guys with some additional information in the third quarter. So that's the way I'd answer your question.
Speaker Change: No problem, we'll be patient on that one. Second one, maybe just going to Double H, you know, of course, one of your peers has announced a conversion.
Speaker Change: Q1 NGL Pipeline up in the Bakken, where you've sort of enjoyed a lot of the market share there. So curious, how you're assessing the risk to your Bakken position at this point. And is there a scenario where you actually see some of these volumes flow on OPPL and maybe into a 1-0 PRAC?
Sheridan: Well Spiro, this is Sheridan. What I would say is we were aware this pipeline was being considered as an alternative for NGL to take away out of the region and don't expect a material impact on our business.
Unknown Executive: We have long-term contracts in the basin with a very small amount of NGLs in the Willis Center up for contract renewal in the next five years. The average life on our contracts in the Wilson Basin today is over nine years. If we talk about volumes moving on, could volumes move on OPPL? Currently, OPPL is full and on allocation.
Sheridan: We have long-term contracts in the Basin with a very small amount of NGLs in the Willis Center up for contract renewal in the next five years.
Sheridan: The average life on our contracts in the Wilson Basin today is over nine years.
Sheridan: We think we provide a superior service, both with dual pipeline offerings, redundancy, and reliability to our customers, and a seamless service from the balk at the market centers in Conway and Mont Belvieu on one system, with the overall best value through our integrated system.
Speaker Change: If we talk about volumes moving on, could volumes move on OPPL? Currently today, OPPL is full and on allocation.
Speaker Change: We control over 70% of that allocation and I think if you think about volume coming on to OPPL, people must be assuming that when we complete the Elk Creek pipeline, we will move volume off of OPPL and that is not a foregone conclusion.
Unknown Attendee: Got it. I appreciate all the color there. Thank you, gentlemen.
Unknown Attendee: Morning. Just wanted to pick up with Synergies if I could. Following the Easton acquisition, wondering if you could provide a bit more color on what you see this unlocking specifically for your platform, especially post-Magellan acquisition. Just wondering if you could provide a bit more color on what could be accomplished.
Sheridan Swords: Sure, Jeremy, this is Sheridan, then you go back, the Easton acquisition. We had our eyes on the Easton acquisition for a period of time because we saw that as a way to continue to move our product downstream of our frack, directly through pipelines to India. But when the Magellan acquisition came up, what we saw was an opportunity to buy Easton to create a more capital efficient and faster way to connect our NGL and refined products system.
Sheridan Swords: Thus accelerating our commercial synergies through this acquisition instead of doing new builds, which would take longer. So really, we're going to capture the synergies that we thought before; we're just going to do it at a lower capital cost and faster.
Speaker Change: to connect our NGL and refined products systems.
Unknown Attendee: Just moving along, I guess, with producer activity, you know, as you see it right now, wonder if you could provide a bit more color on how things are shaken out, particularly given, you know, Bakken is well connected year-to-date versus your guide. Just wondering if you could share any thoughts you could share there.
Speaker Change: Just moving along, I guess, with producer activity, you know, as you as you see it right now, I wonder if you could provide a bit more color on how things are shaken out, particularly given, you know, Bakken, Well Connect's year to date versus your guide. Just wondering any thoughts you could share there.
Unknown Executive: Well, I would just say that on the volume side, we still have reaffirmed our guidance on volume. What we are seeing is, as we had talked earlier about, longer laterals, and so the wells are producing more, and they are more efficient, and so we see that we don't need as many well connections.
Speaker Change: To reach our volume guidance that we have in there, and that's been a pleasant surprise this year. We knew we'd see some of it, but it's even more a pleasant surprise. So even you see that our well-connects seem to be a little bit down, we're still very confident in our volumes the remainder of this year and going into 2025.
Speaker Change: Got it. That's very helpful. I'll leave it there.
Speaker Change: And the next question comes from Theresa Chen with Barclays. Please go ahead.
Teresa Chen: Morning. I'd love to get your thoughts on the strength in the refined products and crude segment. Just put some takes on what's
Teresa Chen: driving that? Is it, you know, largely seasonal? Are you realizing the synergies ahead of schedule? And as we look to the second half of the year and kind of, you know, touching on the broader discussion of where you're going to land within your guidance.
Speaker Change: Within this segment, as we see downtime in the Chicago area and the product margins as well as regional product spread spike as a result, would it be reasonable to think that that would increase your earnings in this segment above what you typically budget year in, year out?
Speaker Change: Theresa, this Sheridan, I think you start off really, it's kind of all the above. We are seeing
Theresa: Our synergy capture coming in very nicely and very strong and and that will accelerate through the remainder of the year so we are very confident as we said that we will
Theresa: Be at the cost and commercial synergies at or above the $175 million that we have outlined. We are seeing a little bit of seasonality.
Unknown Executive: This is a little bit more volume in the summer months, but as you remember, as we get into the back half of the third quarter, our blending activity will ramp up, so we will see growth during that time as well. And the issues we have in Chicago are creating a little bit of tailwinds for us right now, but we always anticipate we will see some refinery turnarounds throughout the year. So we feel very comfortable where we are sitting today on both our synergies and where the refined product crude segment is going to end the year.
Theresa: The third quarter, our blending activity will ramp up so we will see a growth in that time as well.
Theresa: And the issues we have in Chicago are creating a little bit of tailwinds force right now, but we always anticipate we will see some of the refinery turnarounds throughout the year. So we feel very comfortable where we are sitting at today on both our synergies and where the refined product accrued segment is going to end the year at.
Unknown Attendee: That's helpful. Thank you.
Speaker Change: That's helpful, thank you.
Speaker Change: And then on your expansion project into Denver, can you help us think through the economics related to that expansion and if there are additional opportunities as you assess the landscape within this segment to expand your infrastructure based on committed volumes to additional inland premium markets?
Unknown Attendee: And then on your expansion project into Denver, can you help us think through the economics related to that expansion? And if there are additional opportunities, as you assess the landscape within this segment, to expand your infrastructure based on committed volumes to additional inland premium markets? Well, let's say...
Unknown Executive: Well, let's say, Theresa, on the expansion, this is a five times multiple project on 35,000 barrels a day. Obviously, we laid a 16 inch line, and we're laying a 16 inch line into Denver. And that's why we say we have very cheap expansion capability on that pipeline as we anticipate volume to continue to grow. And if volume continues, I mean, if demand continues to grow, and we need more volume on that pipeline system, we will go out for a subsequent open.
Speaker Change: Well, I would say, Theresa, on the expansion, this is a five-times-multiple project on the
Speaker Change: 35,000 barrels a day. Obviously we laid a 16-inch, we're laying a 16-inch line into Denver and that's why we say we have very cheap expansion.
Speaker Change: capability on that pipeline as we anticipate volume continue to grow. And if volume continues, I mean, if demand continues to grow and we need more volume on that pipeline system, we will go out for a subsequent open season.
Tristan Richardson: And the next question comes from Tristan Richardson with Scotiabank. Please go ahead.
Speaker Change: Thank you.
Speaker Change: And the next question comes from Tristan Richardson with Scotiabank. Please go ahead.
Tristan Richardson: Hey, good morning, guys. Could you talk a little bit about ethane across the basin?
Speaker Change: Strong recovery in the mid-con and in the Rockies, but is ethane trending better than maybe you were thinking at the beginning of the year and then just how you see the second half looking?
Tristan Sheridan: Tristan Sheridan
Speaker Change: Ethane is going to be volatile. It's going to be up and down. As we said, it's going to be dependent on natural gas prices. That's why we've always put just a very modest amount of ethane recovery into our guidance.
Speaker Change: As we look forward, right now we are seeing the Permian is in full recovery. The mid-continent at this time is in rejection.
Unknown Executive: We do have, and have already locked in some incentivized deafening.
Speaker Change: We do have, have already locked in some incentivized deafening.
Speaker Change: through the third quarter and into the fourth quarter. So we see that going and we'll just have to watch and see how the FAA market evolves as it changes.
Speaker Change: We do see that the petrochemicals are having a very wide spread between ethane and ethylene. It's very wide right now, so they're wanting to run at high utilization rates. And so we anticipate that we will see some recovery in the ethane markets as we finish the remainder of the year.
Walt: Appreciate it Sheridan, and maybe Walt, curious, you know, you haven't offered anything on 25 CAPEX yet, but just given that you've pulled some projects forward, and you've said in the past,
Unknown Executive: really expected a downtrend in 25 versus 24 CapEx.
Walt: You really expect a downtrend in 25 versus 24 capex.
Speaker Change: I'm curious if we should see that maybe amplified with some of the projects pulled forward into 24.
Unknown Executive: Well, Tristan, we were going to be finishing up those projects in 2025, so clearly, the capital that was associated with the tag end of those projects is going to move forward into 2024, and that will be a positive for our CapEx. In 2025, we've added the Denver project, and spread over a couple of years, that isn't really a material increase to our capital, so I think the trends we've talked about in the past continue to be true, and we're getting to that point where we're going to enjoy the operating leverage we have built into our system, and as we fill that demand, we're going to see that drop to the bottom line.
Walt: Well, Tristan, we were, you know, we were going to be finishing up those projects in 25. So, clearly,
Walt: The capital that was associated with the tag end of those projects is going to move forward into 24, and that will be a positive for our CAPEX.
Speaker Change: In 25, you know, we've added the Denver Project.
Speaker Change: Spread over a couple of years that isn't really a material increase to our capital So I think the trends we've talked about in the past continue to be true And we're you know getting to that point where we're going to enjoy the operating leverage. We have built into our system
Speaker Change: And, you know, as we fill that demand, we're going to see that drop to the bottom line.
Speaker Change: I appreciate it, Walt. Thank you guys very much.
Speaker Change: Next question comes from Keith Stanley with Wolf Research. Please go ahead.
Keith Stanley: Hi, good morning. Several of your producer customers in the Bakken have announced mergers, Conoco Marathon, Devin, and Grayson Mill. Any thoughts on what you think that could mean for Bakken production and your business over time?
Keith Stanley: Hi, good morning. Several of your producer customers in the Bakken have announced mergers, ConocoMarathon, Devin and Grayson Mill. Any thoughts on what you think that could mean for Bakken production and your business over time?
Sheridan Swords: Keith, this is Sheridan. One thing I can tell you is all those producers, all those on both sides of the acquisition up in the Bakken, we have very good relationships with them, not only in the Bakken but also in other areas as well. And we think that they will, as we've talked to them a little bit, we think that it's not going to have an immediate impact on what's going on up there.
Keith Stanley: Keith, this is Sheridan. One thing I tell you is all those producers, all those...
Keith Stanley: On both sides of the acquisition up in the Bakken, we have very good relationships with them, not only in the Bakken, but also in other areas as well.
Speaker Change: And we think that they will, as we've talked to them a little bit, we think that it's not going to have an immediate impact on what's going on up there. They're going to continue their cadence that they do as drilling. There may be even some upsizing to the right as they go to the more...
Sheridan Swords: They're going to continue their cadence that they do as drilling. There may even be some... Upsizing to the right as they go to the more, better areas or more in the core areas and drill those a little bit faster. So we are feeling very good about the consolidation that's happened up there going into the hands of strength, and they will, they will want to be producing up there for a long period of time.
Speaker Change: better areas or more in the core areas and drill those a little bit faster. So we are feeling very good about the...
Speaker Change: The consolidation that's happened up there, going into hands of strength, and they will want to be producing up there for the long period of time.
Unknown Executive: Great, thanks. And I wanted to follow up just on the Denver project. So, I mean, the whole Magellan business has historically been viewed as a lower growth, kind of high return on capital business, but the Denver projects are pretty material. When you think about it, are there other material opportunities across refined products besides Denver that you could pursue other areas of the system that are getting tight on capacity or seeing more of a demand inflection? Absolutely not.
Speaker Change: Great, thanks. And I wanted to follow up just on the Denver project.
Speaker Change: I mean the whole Magellan business has historically been viewed as a lower growth.
Speaker Change: Question-Are there other material opportunities across refined products besides Denver that you could pursue other areas of the system that are getting tight on capacity or seeing more of a demand inflection?
Unknown Executive: Absolutely, we continue to look for those areas as well. We think there's some other opportunities. We continue, one is we continue to think El Paso showed some strength as well, as we have completed our expansion into El Paso, and it is running, and running full. We've actually had an open season on a little smaller expansion there that was fully subscribed. So we're already seeing a little bit more growth in that area.
Speaker Change: Absolutely, we continue to look for those areas as well. We think there's some other opportunities. We continue, one is we continue to think El Paso showed some strength as well as we have completed our expansion into El Paso and it is running
Speaker Change: Running full. We've actually had had an open season on a little smaller expansion on there that was fully subscribed So we're already seeing a little bit more growth in that area and we're encouraged about That continuing to grow and then our teams are continuing to look for different areas
Unknown Executive: And we're encouraged about that continuing to grow. And then our teams are continuing to look for different areas. Synergies are growth opportunities that we can expand our system as well. So we are excited about the growth in the refined product and system that we think we will see at a higher rate than has been typically seen in that business. The next question comes from Michael.
Speaker Change: Synergies or growth that we can expand our system as well. So we are excited about the growth in the refined product and system that we think we will see it at a higher rate than has been typically seen in that business.
Michael Blum: The next question comes from Michael Blum with Wells Fargo. Please go ahead.
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. Wondering if you have any updates on potential AI data center related projects in the gas pipeline segment?
Chuck: Good morning, Michael. This is Chuck.
Michael Blum: Good morning, Michael. This is Chuck. Yeah, since we last spoke last quarter...
Speaker Change: As I mentioned then, we head out.
Speaker Change: 15 projects, potential projects across our footprint.
Speaker Change: Of those, there were three that specifically stated AI. Since then, we've...
Speaker Change: Our number is up about to 17 on the potential power plants, of which 5 are AI demand specifically. Approximately across our footprint, these 5 are right in the neighborhood of a BCF per day.
Unknown Executive: Yeah, since we last spoke last quarter, as I mentioned then, we had about 15 projects, potential projects across our footprint. Of those, there were three that specifically stated AI. Since then, we've, our number's up about to 17 on the potential power plants, and of which five are AI demand, specifically. Approximately across our footprint, these five are right in the neighborhood of a BCF per day. So again, early stages, but more to come. Thanks for that.
Speaker Change: So again, early stages, but more to come.
Unknown Executive: And then I was looking for an update on SWARO, any recent conversations, and what's kind of the latest thinking there on timing. Yeah, I would just remind everyone that this really is a commercially strong project with world-class customers, and it makes great commercial sense. I mean, you've got Permian Supplies and L&G DemandPool; it's competitively advantaged for the Asian markets. So NPL is working on their project financing to make their final investment decision. And at this time, we do not anticipate any material capital expenditure on our behalf here in 2024. Thank you.
Speaker Change: Okay, got it. Thanks for that. And then, just was looking for an update on SWARO, any recent conversations, and what's kind of the latest thinking there on timing of SID, if that's going to happen. Thanks.
Speaker Change: Yeah, I would just remind everyone, you know, this really is a commercially strong project with world-class customers, and it makes great commercial sense. I mean, you've got Permian Supplies, L&G Demand Pool, it's competitively advantaged to the Asian markets.
Speaker Change: So NPL is working on their project financing to make their final investment decision, and at this time we do not anticipate any material capital spent on our behalf here in 2024.
Manav Gupta: And the next question comes from Manav Gupta with UBS. Please go ahead.
Speaker Change: And the next question comes from Manav Gupta with UBS. Please go ahead.
Sheridan Swords: Good morning guys. My first question is, can you talk a little bit about ethane? Can you also talk about, you know, any blending opportunities for benzene in your system at this point in time?
Maniv Gupta: Good morning guys. My first question is, can you talk a little bit about ethane? Can you also talk about, you know, any bucane blending opportunities in your system at this point of time?
Sheridan Swords: Yeah, Maneev, this is Sheridan. And we, I mean, obviously, we have opportunities as we continue to integrate the refined products and NGL systems together that we have the opportunity to take our butane and put it into our refined products instead of having to buy it from a third party. So just from a sourcing and logistics savings point of view, we're seeing that opportunity. And also, we continue to find ways to blend more butane into our refined products across our system through more automation and understanding directing volumes through our system.
Maniv Gupta: Yeah, Maneev, this is Sheridan, and we, I mean, obviously we have opportunities as we continue to integrate the refined products and NGL systems together that we are have the opportunity to take our
Speaker Change: butane and put it into our refined products instead of having to buy it from third party. So just from a sourcing and logistics savings, we're seeing that opportunity. And also, we continue to find ways to
Speaker Change: blend more butane into our fine products across our system by more automation.
Sheridan Swords: So we are very pleased with what we're sitting on in our blending strategy at this time. And obviously, we have found some projects that take some capital that will be more into next year. We'll see Easton being one of them, but we'll see greater blending opportunities next year as we put some of these capital projects, small capital projects, in service.
Speaker Change: and understanding directing volumes through our system. So we are very pleased with what we're sitting on on our blending strategy at this time. And obviously we have found some projects that take some capital that will be more into next year. We'll see.
Speaker Change: Easton being one of them, but we'll see greater blending opportunities next year as we put some of these capital projects, small capital projects.
Unknown Attendee: Perfect. My quick follow-up is you kind of mentioned earlier, hinted at it, that 25 CapEx obviously would be lower than 24. So your growth projects are kicking in, and the CapEx is lower. So the free cash flow next year would be higher. I'm just trying to understand if there is a preliminary plan and what we should think about the uses of that extra cash that is going to come out in 2025.
Speaker Change: Service
Speaker Change: Perfect. My quick follow-up is, you kind of mentioned earlier, hinted to it, that 25 CapEx obviously now would be lower than 24. So your growth projects are kicking in and the CapEx is lower.
Speaker Change: The free cash flow next year would be higher. I'm just trying to understand if there is a preliminary plan and how should we think about those uses of that extra cash that is going to come out in 2025.
Unknown Executive: Well, as we stated before, back in January, the board did give us authorization to buy up to $2 billion worth of stock. You know, we remain committed to our level of capital allocation. Our first goal is always to find high-growth projects that are extremely accretive to our shareholders. Then we want to maintain that balance sheet. You know, we've clearly demonstrated that we have a very strong dividend that we've maintained through some very difficult times over time and continued to grow.
Speaker Change: Well, as we stated before, back in January , the board did give us an authorization to buy up to $2 billion worth of stock. We remain committed to our level of capital allocation. Our first goal is always to find high growth.
Speaker Change: Projects that are extremely accretive to our shareholders.
Speaker Change: Then we want to maintain that balance sheet.
Speaker Change: We've clearly demonstrated that we have a very strong dividend.
Speaker Change: that we've maintained through some very difficult times over time.
Unknown Executive: And then if we have excess cash, you know, that does provide the opportunity for stock re-purchasing. We fully expect to complete that $2 billion program over the time plan, time program that we had announced. And we haven't bought any to date, as we mentioned on the first quarter call, because we do have this maturity coming up in September that we were going to focus our free cash flow on through that. And we will just allocate as appropriate as we get out in the coming quarters.
Speaker Change: continue to grow. And then if we have excess cash, those provide the opportunity for stock purchases.
Speaker Change: We fully expect to complete that $2 billion program over the time plan, time program that we had announced.
Speaker Change: And we haven't bought any today, as we mentioned on the first quarter call, because we do have this maturity coming up in September that we were gonna focus our free cash flow on through that.
Speaker Change: And we will just allocate as appropriate as we get out in the coming quarters.
Neal Dingmann: And the next question comes from Neal Dingmann with Truist. Please go ahead.
Speaker Change: Thank you so much.
Speaker Change: And the next question comes from Neal Dingmann with Truist. Please go ahead.
Unknown Attendee: Hey, good morning. I just wanted to approach the data center question from a different angle, not really on new projects, and this might be early, but has the decline in market activity in the last month changed the conversation side of this at all? I would assume they're not changing their, you know, demand forecast in real time, but have there been any pauses in the conversations, or do some parties want to take a step back, or is everything kind of steady as you go?
Neil Dingman: Hey, good morning. I just wanted to approach the data center question from a different angle, not really on new projects, and this might be early, but has the downward market activity in the last month
Speaker Change: Page PAGE of NUMPAGES www.verbalink.com
Unknown Executive: I'm sorry, Neil. Could you repeat the first part of that question? You said something about the past month.
Speaker Change: I'm sorry, Neil, could you repeat the first part of that question? You said something about the past month.
Unknown Attendee: Yeah, just the downward activity in the market over the past month. Has that impacted the conversations at all? Or is everyone still looking so long term that, you know, maybe the downward activity over the last month is just kind of a blip?
Speaker Change: Yeah, just the downward activity in the market over the past month. Has that impacted the conversations at all? Or is everyone still looking so long term that, you know, maybe downward activity over the last month is just kind of a blip?
Unknown Executive: No. As a matter of fact, it hasn't impacted the discussions at all. As a matter of fact, we see even more activity here this month and then in the next several months. So, you know, the markets are looking long term. And, you know, when you're looking at having to add facilities to serve these markets, that takes time. That's understood both by the power generators and the commissions that they answer to. So, there are no impacts at this time.
Speaker Change: No. As a matter of fact, it hasn't impacted the discussions at all. As a matter of fact, we see even more activity here.
Speaker Change: This month and then in the next several months, so, you know, the markets are looking long-term.
Speaker Change: And, you know, when you're looking at having to add facilities to serve these markets, that takes time. That's understood both by the power generators and the commissions that they answer to. So, no impacts at this time.
Unknown Executive: That's helpful, thank you. And then the second one, on slide 10, you do a really good job of showing Williston Basin GORs and kind of how flaring has tailed off, and maybe that relationship is, you know, related, but do you see that continuing? Is this more of an inventory just drifting with a higher GOR or is there any other kind of plateau on that trend?
Speaker Change: That's helpful. Thank you. And then the second one on slide 10, you do a really good job of showing Williston Basin GORs and kind of how flaring has tailed off and maybe that relationship is, you know, related. But do you see that continuing? Is this more of an inventory just drifting with a higher GOR or is there any other kind of plateaued on that trend?
Unknown Executive: What I would say on the GOR question is that as wells age, the GOR goes up. So, a little bit, the movement in the GOR we see is more based on drilling activity, as if you drill in an area that starts at a lower GOR, it may pull the overall GOR down for a little bit, but those wells, even wells that start at a lower GOR, will continue to grow. So, overall, we see the GORs increasing as a general trend increasing in the box.
Speaker Change: Well, I would say on the GOR question, we know that as well as...
Speaker Change: Page the GOR goes up so a little bit the movement in the GOR we see is more based on drilling activity as
Speaker Change: If you drill in an area that starts at a lower GOR, it may pull the overall GOR down for a little bit, but those wells, even wells that start at a lower, will continue to grow. So we, overall, we see the GORs increasing in...
Speaker Change: As a general trend increasing in the bucket.
Neil Mitra: And the next question comes from Neil Mitra with Bank of America. Please go ahead.
Speaker Change: Appreciate the answers. Thanks.
Speaker Change: And the next question comes from Neal Mitra with Bank of America. Please go ahead.
Unknown Attendee: Hi, good morning. Thanks for taking my question. I wanted to touch on the share repurchase. I think the leverage level over the last 12 months has been 3.36, which you pointed out. Are you looking to buy back shares after the September debt maturity? Or are there other factors or criteria that you're waiting for to start executing on that $2 million program?
Neil Mitra: Hi, good morning. Thanks for taking my question. I wanted to touch on the share repurchase. I think
Speaker Change: The leverage level over the last 12 months has been 3.36, which you pointed out.
Neil Mitra: Are you looking to buy back shares after the September debt maturity, or are there other factors or criteria which you're waiting for to start executing on that $2 million program?
Unknown Executive: No, I think the plan is to, you know, allocate the capital as appropriate from the third quarter through the remainder of the program. So, you know, it's over several years.
Speaker Change: I think the plan is to, you know, allocate the capital as appropriate from
Speaker Change: The third quarter through the remainder of the program. So, it's over several years and, you know, we expect that to be executed and
Unknown Executive: And, you know, we expect that to be executed on and, you know, each of those years going forward. But it will obviously ebb and flow as we have opportunities to spend capital on high growth projects in a particular quarter. Then, you know, it will be allocated there, and other quarters that will go, you know, go in other directions. So, but we are committed to completing the program over the time period that we have said. And I think I'm on track with our plans with this maturity coming up in September.
Speaker Change: Each of those years going forward. But it will obviously ebb and flow as we have opportunities to spend capital on high growth projects in a particular quarter. Then it will be allocated there and
Speaker Change: Other quarters, it'll go, you know, go in other directions. So, but we are committed to completing the program over the time period that we have said, and I think on track with our plans with this maturity coming up in September .
Unknown Attendee: Okay, perfect. My second question relates to the Medford rebuild. Can you talk about the decision to move forward with that? My understanding was that with the Magellan merger, you're able to merge or batch NGLs up the refined pipe. So there was an ability to, to maybe replicate Medford with Mont Belvieu sending, and also with the Easton Acquisition. So maybe you can kind of educate me on that, on, you know, where I'm wrong or what's not connecting, and how Medford benefits.
Speaker Change: Perfect. My second question relates to the Medford rebuild. Can you talk about the decision to move forward with that?
Speaker Change: My understanding was that with the Magellan merger, you're able to merge or batch NGLs up the refined pipes, so there was an ability to maybe replicate Medford with Mont Belvieu sending
Speaker Change: Volumes up to Conway and then also with the Easton Acquisition. So maybe you can kind of educate me on that, on you know the where I'm wrong or what's not connecting and how Medford benefits ONEOK.
Unknown Executive: Well, I think the first thing about Medford Benefits ONEOK is that you just do the math on 210,000 barrels a day at fractionation capacity for $385 million. That is a very low cost.
Speaker Change: Well, I think the first thing on Medford Benefits ONEOK is, is you just do the math on 210,000 barrels a day, a fractionation capacity for $385 million. That is a very low cost.
Unknown Executive: Per Barrel Capacity Per Fractionation. The second thing is, what you're alluding to, is could we take all our raw feed all the way down to Mount Bellevue and fractionate it and turn it around and take certain products and ship them all the way back up to the mid-continent and deliver them into the mid-continent. That is, could be a possibility.
Speaker Change: per barrel capacity per fractionation.
Speaker Change: The second thing is, is what you're alluding to, is could we take all our raw feed all the way down to Mont Belvieu and fractionate it, then turn it around, then take certain products and ship them all the way back up to the mid-continent?
Speaker Change: and Deliverum into the Mid-Continent. That is...
Unknown Executive: This is a much more efficient way to do that, to have all those volumes, not have to make that travel and consume that variable cost. We'll fractionate them in the mid-continent, be able to put them back into the mid-continent as we need them, but still have the ability to move them down into the mid-continent. The third thing it also does is, by not having to move all that raw feed down, all the way down to Mont Belvieu to fractionate and bring it up, we are actually creating capacity on our Arbuckle system to be able to source even more raw feed into the Mont Belvieu system.
Speaker Change: It could be a possibility, this is a much more efficient way to do that, to have all those volumes, not have to make that travel, and consume that variable cost, we'll fractionate them in the mid-continent, be able to put them back into the mid-continent as we need it, but still have the ability to move them down into
Speaker Change: The Gulf Coast.
Speaker Change: The third thing it also does is...
Speaker Change: Bye.
Speaker Change: Not having to move all that raw feed down, all the way down to Mont Belvieu to fractionate and bring it up, we are actually creating capacity on our R-buckle system to be able to source even more raw feed into the Mont Belvieu system.
Unknown Executive: So we're moving that volume off of the Arbuckle system, fractionating it in Medford and then putting it on the Sterling system, so it's a much better way to balance our system as we go forward. Our system is really designed to have Medford where it is, and it runs more efficiently that way, so we're pretty excited about bringing this facility back.
Unknown Attendee: Okay, perfect. I appreciate all the detail.
Speaker Change: So we're moving that volume off of the Arbuckle system, fractionating it in MedBird and then putting it on the Sterling system. So it's a much better way to balance our system as we go forward. So we, our system is really designed to have MedBird where it is and it runs more efficiently that way. So we're pretty excited about bringing this facility back up.
Speaker Change: Okay, perfect. I appreciate all the detail.
Craig Shere: And the next question comes from Craig Shere with TUI Bros. Please go ahead.
Speaker Change: And the next question comes from Craig Shere with TUI Bros. Please go ahead.
Unknown Attendee: Hi, thanks for taking the question. Congratulations on your strong performance.
Craig Scheer: Hi, thanks for taking the question. Congratulations on the strong performance.
Unknown Executive: Um, I just have one question. It's obvious that you're finding ways to do more than nickel and dime at a very high return, you know, stable contracted growth that is beyond what was originally guided with the MMP acquisition. But, but, and this kind of relates to some of the questions that have already been asked, but it seems that, apart from contracted stable, very high return growth, your asymmetric optimization opportunities between Y grade or pure DNGL transport with increased lending opportunities with Eastern acquisition and more that in any given year, I mean, it's not going to go down, but you'd have increasing asymmetric upside in any given year. Am I thinking about that wrong
Craig Scheer: I just have one question. It's obvious that your...
Craig Scheer: Finding ways to, more than nickel and dime, at very high return, you know, stable contracted growth that is beyond what was originally
Speaker Change: Guided with the MMP acquisition.
Speaker Change: But, but, and this kind of relates to some of the questions that have already been asked, but it seems that, apart from contracted, stable, very high return growth,
Speaker Change: that your asymmetric optimization opportunities.
Speaker Change: Between Y-grade or pure DNGL transport with increased lending opportunities with Eastern Acquisition and more that in any given year, I mean, it's not going to go down.
Speaker Change: But you have increasing asymmetric upside in any given year. Am I thinking about that wrong?
Sheridan Swords: Craig, I think you are thinking about that correctly, especially as we continue to put into place some of these low capital projects that I had mentioned earlier, we are going to increase our blending opportunities, both with our blending of our refined products, blending butane into gasoline that we do, but also with the Easton acquisition, we have customers at our terminals now that are also blending NGLs into their facilities. And this is gonna really allow us to supply those volumes into those locations and create a bundled service.
Speaker Change: Craig, I think you are thinking about that correct, especially as we continue to put into place some of these low capital projects that I had mentioned about earlier, we are going to increase our blending opportunities, both with our blending,
Speaker Change: Our refined products, blending butane into gasoline that we do, but also with the Easton acquisition, we have customers at our terminals now that are also blending in GLs.
Speaker Change: And this is going to really allow us to supply those volumes into those locations and create a bundled service in there where we're looking at the whole value chain that we'll be able to track even more volume into our terminals.
Sheridan Swords: And there, we're looking at the whole value chain that we'll be able to track even more volume into our terminals on the Gulf Coast down there. So yeah, I think you are seeing that we will continue to grow this. And this is an area that we saw when we bought the Magellan acquisition and we have been very pleased with how it's playing.
Speaker Change: on the Gulf Coast down there. So yeah, I think you are seeing that we will continue to grow this. And this is an area that we saw that when we bought the Magellan acquisition, and it has been, we've been very pleased with how it's playing out.
Pierce Norton: Craig, this is Pierce. I want to add one thing to what Sheridan says, you know, as a big picture comment: As this company has gotten more diversified, it is harder, you know, to point to one thing that may be that will drive our numbers down, which is I think what you're kind of alluding to is that, you know, there's not maybe as much downside as maybe we've had in the past. So I think that's one comment I would make to your question. Right? That's right.
Speaker Change: Craig, this is Pierce. I want to add one thing to what Sheridan says as a big-picture comment is
Frank: As this company has gotten more diversified, it is harder.
Frank: You know to point to one thing
Frank: That may be that will drive our numbers down, which is, I think, what you're kind of alluding to is that, you know, there's not maybe as much downside as maybe we've had in the past. So, I think that's one comment I would make to your question.
Unknown Attendee: Right, that's very helpful. And I think Sheridan's point that, you know, it's not just the optimization I mentioned, but increasing bundled opportunities, which would seem to be even more stable long-term returns that get the icing on the cake potential with the optimization. But all of it's happening at once as you take these expansion and attractive bolt-on opportunities.
Frank: Right, that's very helpful. And I think Sheridan's point that, you know, it's not just the optimization I mentioned, but increasing bundled opportunities, which
Sheridan: would seem to be even more stable long-term returns that get the icing on the cake potential with the optimization that all of it's happening at once as you take these expansion and attractive bolt-on opportunities.
Sunil Sibal: The next question comes from Sunil Sibal with Seaport Global. Please go ahead.
Sheridan: The next question comes from Sunil Sibal with Seaport Global. Please go ahead.
Unknown Attendee: Hi, good morning, everybody, and thanks for all the color of the call. I'm not sure if I missed this, but could you talk a little bit about the economics of the Medford project? How should we think about returns on that project?
Sunil Saibal: Yeah, hi, good morning everybody and thanks for all the color of the call and I'm not sure if I missed this but could you talk a little bit about the economics on the Medford project? How should we think about returns on that project?
Unknown Executive: Well, on the incrementally on the Medford project, we already, even with MB6 coming online here at the end of this year, we still have a need, a pressing need for more fractionation capacity. So what we took a look at is where the cheapest fractionation capacity we could get is and where it best fits into our system. And also, with the idea of bringing that much on board, with what we have contracted already today, we have a very nice project.
Speaker Change: Well, on the, incrementally on the Medford project, we already, even with MV6 coming up online here at the end of this year, we still have need, contracted need for more fractionation capacity.
Speaker Change: So what we took a look at is where was the cheapest fractionation capacity we could get and where is the best fit into our system.
Speaker Change: And also with the idea of bringing that much on, with what we have contracted already today, we have a very nice project and we do this a lot. We have a very nice project with a lot of upside on this capacity.
Unknown Executive: We do this a lot. We have a very nice project with a lot of upside potential for this capacity. And that's why we're going back to Medford, that we will be able to grow into this as we continue to see volume grow across our systems, be able to have that fractionation capacity online to be able to timely meet our customers' demands as they continue to grow their systems as well. So basically, we're saying we're putting in a very low cost option that allows us to compete in all basins across our.
Speaker Change: And that's why we're going back at Medford, that we will be able to grow into this as we continue to see volume grow across our systems, be able to have that vaccination capacity online, to be able to timely meet
Speaker Change: Our customers' demands as they continue to grow their system as well. So basically we're saying we're putting in, we're once again putting in a very low cost option that allows us to compete in all basins across our footprint.
Unknown Attendee: Okay, thanks for that. And then on the Bakken processing, it seems like a lot of commentary here is gas to oil ratios getting higher. And it seems like, you know, your processing system is running close to 85-90% capacity, or at least it was in Q2. How should we think about, you know, opportunities in terms of processing there in that region?
Speaker Change: Okay, thanks for that. And then on the Bakken processing, it seems like a lot of commentary we hear is gas to oil ratios getting higher.
Speaker Change: And it seems like, you know, your processing system is running close to 85-90% capacity, or at least it was in Q2. How should we think about, you know, opportunities in terms of processing there in that region?
Unknown Executive: Yeah, we continue our, I think I understand your question. I mean, our facilities up in the Balkans are running at pretty good utilization, but we still have, you know, we're running about 1.6 BCF today. We have 1.9 BCF capacity, so we still basically have a plant to be able to grow into or be able to handle turnarounds on our system as well. We will continue to monitor production growth at that time, and at the right time that we need to, we'll put more capacity in that region as well to make sure we can service our customers out there, that they have a very reliable alternative to move both the gas and the NGLs to make They're after the production of their crude oil, and they just need to make sure they have a very reliable and resilient outlet for their gas.
Speaker Change: Yeah, we continue our...
Speaker Change: I think I understand your question, I mean our...
Speaker Change #100: Our facilities up in the Balkan are running at a pretty good utilization, but we still have, you know, we're running about 1.6 B.C.F. today, we have 1.9 B.C.F. capacity, so we still basically have a plant to be able to grow into or be able to handle
Speaker Change #100: We will continue to monitor production growth at that time, and if the right time that we need to, we'll put more capacity in that region as well.
Speaker Change #100: to make sure we can be able to...
Speaker Change #100: Service or customers out there that they have a very reliable alternative to move the both the gas and the NGLs to make sure they can produce their crude oil because that's really what they're after they're after the production of their crude oil and they just need to make sure they have a very reliable and resilient outlet for their gas and NGLs.
Andrew Ziola: This concludes our question and answer session. I would like to turn the conference back over to Andrew Ziola for any closing remarks.
Speaker Change #101: Got it. Thanks for that.
Speaker Change #101: This concludes our question and answer session. I would like to turn the conference back over to Andrew Ziola for any closing remarks.
Unknown Executive: Our quiet period for the third quarter starts when we close our books in October and extends until we release earnings in late October. We'll provide details for that conference call at a later date. Thank you all for joining us, and have a good day.
Andrew Ziola: Our quiet period for the third quarter starts when we close our books in October and extends until we release earnings in late October . We'll provide details for that conference call at a later date. Thank you all for joining us and have a good day.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change #102: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.