Q2 2024 Kinder Morgan Inc Earnings Call

Speaker Change: Welcome to the Quarterly Earnings Conference Call. All lines have been placed on the listen-only mode until the question and answer session of today's call.

Operator: Welcome to the quarterly earnings conference call. All lines have been placed on the listen only mode until the question and answer session of today's call.

Speaker Change: Today's call is also being recorded. If you do have any objections, you may disconnect at this time.

Operator: Today's call is also being recorded. If you have any objections, you may disconnect at this time. And I would now like to turn the call over to Rich Kinder, the Executive Chairman of Kinder Morgan. Thank you. You may begin. Thank you, Sue.

Speaker Change: And I would now like to turn the call over to Rich Kinder, Executive Chairman of Kinder Morgan. Thank you, you may begin.

Richard D. Kinder: Thank you, Sue. As usual, before we begin, I'd like to remind you that KMI's earnings released today and this call include forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934,

Richard D. Kinder: As usual, before we begin, I'd like to remind you that KMI's earnings release today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Security and Exchange Act of 1934 as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and the use of non-GAAP financial measures set forth at the end of our earnings release as well as to review our latest filings with the SEC. These forward-looking statements set forth important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements.

Speaker Change: As well as certain non-GAAP financial measures.

Speaker Change: Before making any investment decisions, we strongly encourage you to read our full disclosures

Speaker Change: On forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release.

Speaker Change: as well as review our latest filings with the SEC.

Speaker Change: for important material assumptions, expectations, and risk factors that may cause actual results to differ materially.

Speaker Change: And now, on these investor calls, I'd like to share with you our perspective on key issues that affect our midstream energy segment.

Richard D. Kinder: Now, on these investor calls, I'd like to share with you our perspective on key issues that affect our midstream energy segment. I previously discussed increased demand for natural gas resulting from the astounding growth in LNG export facilities. I also talked about the expected growth and the need for electric power as another significant driver of natural gas demand. Since that call, there has been extensive discussion on this topic, with a consensus developing that electricity demand will increase dramatically by the end of the decade, driven in large part by AI and new data centers.

Speaker Change: I previously discussed increased demand for natural gas resulting from the astounding growth in LNG export facilities, and last quarter I talked about the expected growth in the need for electric power as another significant driver of natural gas demand.

Speaker Change: Since that call, there has been extensive discussion on this topic, with a consensus developing that electricity demand will increase dramatically by the end of the decade, driven in large part by AI and new data centers.

Speaker Change: I'm a firm believer in anecdotal evidence, particularly when it comes from the actual users of that power and the utilities who will supply it, and from the regulators who have to make sure that the need gets satisfied.

Richard D. Kinder: I'm a firm believer in anecdotal evidence, particularly when it comes from the actual users of that power and the utilities who will supply it, and from the regulators who have to make sure that the need gets satisfied. And the anecdotal evidence over the last few months has been jaw-dropping. Let me give you just a few examples.

Speaker Change: And the anecdotal evidence over the last few months has been jaw-dropping. Let me give you just a few examples.

Speaker Change: In Texas, the largest power market in the U.S., ERCOT now predicts the state will need 152 gigawatts of power generation by 2030.

Richard D. Kinder: In Texas, the largest power market in the U.S., ERCOT now predicts the state will need 152 gigawatts of power generation by 2030. That's a 78% increase from 2023's peak power demand of about 85 gigawatts. This new estimate is up from last year's estimate of 111 gigawatts for 2030. Other anecdotal evidence also supports a vigorous growth scenario. For example, one report indicates that Amazon alone is expected to add over 200 data centers in the next several years, consistent with the large expansions being undertaken by other tech companies chasing the need to service AI demand. However, annual electricity demand growth over the last 20 years has averaged around one half of 1%.

Speaker Change: That's a 78% increase from 2023's peak power demand of about 85 gigawatts.

Speaker Change: This new estimate is up from last year's estimate of 111 gigawatts for 2030.

Speaker Change: Other anecdotal evidence also supports a vigorous growth scenario.

Speaker Change: One report indicates that Amazon alone is expected to add over 200 data centers in the next several years.

Speaker Change: Consistent with the large expansions being undertaken by other tech companies chasing the need to service AI demand.

Speaker Change: Annual electricity demand growth over the last 20 years has averaged around one-half of one percent.

Richard D. Kinder: Within the last 60 days, we've seen industry experts predict annual growth from now until 2030 at a range of 2.6% to one projection of an amazing 4.7%. So the question becomes, how will that demand be satisfied, and how much of a role will natural gas play? Many developers of data centers would prefer to rely on renewables for their power, but achieving the needed 24-7 reliability by relying only on renewables is almost impossible, and growth in usage is limited by the need for new electric transmission lines, which are difficult to permit and build on a timely basis.

Speaker Change: Within the last 60 days, we've seen industry experts predict annual growth from now until 2030 at a range of 2.6% to one projection of an amazing 4.7%.

Speaker Change: So the question becomes, how will that demand be satisfied, and how much of a role will natural gas play?

Speaker Change: Many developers of data centers would prefer to rely on renewables for their power, but achieving the needed 24-7 reliability by relying only on renewables is almost impossible.

Speaker Change: And growth in usage is limited by the need for new electric transmission lines, which are difficult to permit and build on a timely basis.

Speaker Change: Batteries will help some, and some tech companies now want to use dedicated nuclear power for their facilities. But as the Wall Street Journal recently pointed out, they will likely increase reliance on natural gas to replace the diverted nuclear power.

Richard D. Kinder: Batteries will help some, and some tech companies now want to use dedicated nuclear power for their facilities. But, as the Wall Street Journal recently pointed out, they will likely increase reliance on natural gas to replace the diverted nuclear power. Again, anecdotal evidence is key.

Speaker Change: Again, anecdotal evidence is key. In Texas, a program that would extend low-cost loans for new natural gas fire-generating facilities was massively oversubscribed.

Richard D. Kinder: In Texas, a program that would extend low-cost loans for new natural gas fire-generating facilities was massively oversubscribed, which an ERCOT official predicted today's gas daily could result in an additional 20 to 40 gigawatts just in the state of Texas, and the Governor has already suggested expanding this low-cost loan program. That oversubscription, I think, is clear evidence that the generators are projecting increased demand for natural gas-fired facilities Perhaps Ernest Moniz, Secretary of Energy under President Obama, summed it up best when he said, and I quote, "There's some battery storage, there's some renewables, but the inability to build electricity transmission infrastructure is a huge impediment, so we need gas capacity."

Speaker Change: which an ERCOT official predicted today's gas daily could result in an additional 20 to 40 gigawatts just in the state of Texas.

Speaker Change: And the Governor has already suggested expanding this low-cost loan program.

Speaker Change: That over-subscription, I think, is clear evidence that the generators are projecting increased demand for natural gas-fired facilities.

Ernest Moniz: Grafts, Ernest Moniez

Speaker Change: Secretary of Energy under President Obama summed it up best when he said, and I quote,

Ernest Moniz: There's some battery storage, there's some renewables, but the inability to build electricity transmission infrastructure is a huge impediment, so we need the gas capacity, end quote.

Speaker Change: As an example of how industry players see the world developing, S&P Global Insights, as quoted in Gas Daily, reports that U.S. utilities plan to add 133 new gas plants over the next several years.

Richard D. Kinder: As an example of how industry players see the world developing, S&P Global Insights, as quoted in Gas Daily, reports that U.S. utilities plan to add 133 new gas plants over the next several years. And this view is reflected in the significant new project in the southeastern United States that we are announcing today. While it's hard to peg an exact estimate of increased demand for natural gas as a result of all this growth in the need for electric power, we believe it will be significant and make the future even more robust for natural gas demand overall and for our midstream industry. And with that, I'll turn it over to Kim.

Speaker Change: And this view is reflected in the significant new project in the Southeastern United States that we are announcing today.

Speaker Change: While it's hard to peg an exact estimate of increased demand for natural gas as a result of all this growth in the need for electric power, we believe it will be significant and makes the future even more robust for natural gas demand overall and for our midstream industry.

Kim: And with that, I'll turn it over to Kim. Okay. Thanks, Rich. I'll make a few overall points, and then I'll turn it over to Tom and David to give you all the details. We had a solid quarter. Adjusted EPS increased by 4%.

Kimberly Allen Dang: Okay. Thanks, Rich. I'll make a few overall points, and then I'll turn it over to Tom and David to give you all the details. We had a solid quarter. Adjusted EPS increased by 4%, and EBITDA increased by 3%. And that was driven by growth in our natural gas segment and our two refined products business segments. We ended the quarter at 4.1 times debt to EBITDA, and we continue to return significant value to our shareholders. Today, our board approved a dividend of $0.2875 per share, and we expect to end the year roughly on budget.

Speaker Change: EBITDA increased by 3% and those were driven by growth in our natural gas segment and our two refined products business segments.

Speaker Change: We ended the quarter at 4.1 times debt to EBITDA, and we continue to return significant value to our shareholders. Today, our board approved a dividend of $0.2875 per share, and we expect to end the year roughly on budget.

Speaker Change: Turn and talk about natural gas for a minute. The long-term fundamentals in natural gas have gotten stronger over the course of this year with the incremental demand expected from power and backing up data centers that Rich just took you through.

Kimberly Allen Dang: Let's turn and talk about natural gas for a minute. The long-term fundamentals for natural gas have gotten stronger over the course of this year with the incremental demand expected from power and data centers that Rich just took you through. Overall, Wood Mack projects gas demand to grow by 20 BCF between now and 2030 with a more than doubling of LNG exports as well as an almost 50% increase in exports to Mexico.

Richard D. Kinder: Overall, Wood Mack projects gas demand to grow by 20 BCF between now and 2030, with a more than doubling of the LNG exports, as well as an almost 50% increase in exports to Mexico.

Speaker Change: However, they are projecting a 3.9 BCF a day decrease in power demand.

Kimberly Allen Dang: However, they are projecting a 3.9 BCF a day decrease in power demand. As Richard's comments indicated, we simply do not believe that will be the case given the anticipated power-related growth in gas demand associated with AI and data centers, coal conversions, and new capacity to shore up reserve margins and backup renewables.

Speaker Change: As Richard's comments indicated, we simply do not believe that will be the case, given the anticipated power-related growth.

Speaker Change: and Gas Demand Associated with AI and Data Centers.

Speaker Change: Coal Conversions and New Capacity to Shore Up Reserve Margins and Backup Renewables.

Speaker Change: Let's start with the data center demand. Utility IRPs and press releases published since 2023 reflect 3.9 BCF a day of incremental demand, and we would expect that number to grow as other utilities update their IRPs.

Kimberly Allen Dang: Let's start with data center demand. Utility IRPs and press releases published since 2023 reflect 3.9 BCF a day of incremental demand, and we would expect that number to grow as other utilities update their IRPs. It's early in the process, but we're currently evaluating 1.6 BCF a day of potential opportunity. Most estimates we have seen are between 3 and 10 of incremental gas demand associated with AI. Rich took you through the 20 BCF a day of natural gas power that Texas is contemplating subsidizing.

Speaker Change: It's early in the process, but we're currently evaluating 1.6 BCF a day of potential opportunities.

Speaker Change: Most estimates we have seen are between 3 and 10 of incremental gas demand associated with AI.

Speaker Change: Rich took you through the 20 BCF a day of natural gas power that Texas is contemplating subsidizing. I should have said 20 gigawatts.

Speaker Change: as well as the U.S. projection of 133 new gas plants over the next several years.

Kimberly Allen Dang: I should have said 20 gigawatts, as well as the U.S. projection of 133 new gas plants over the next several years. At Kinder Morgan, we're having commercial discussions on over 5 BCF a day of opportunities related to power demand, and that includes 1.6 BCF of data center demand. Certainly, not all these projects will come to fruition, but that gives you a sense of the activity levels we're seeing and supports our belief that growth in natural gas between now and 2030 will be well in excess of 20 BCF a day.

Kendra Morgan: And Kinder Morgan, we're having commercial discussions on over 5 BCF a day of opportunities related to power demand, and that includes the 1.6 of data center demand.

Speaker Change: Certainly not all of these projects will come to fruition, but that gives you a sense of the activity levels we're seeing and supports our belief that growth in natural gas between now and 2030 will be well in excess of the 20 BCF a day.

Speaker Change: not included in the five VCF of activity that we're seeing.

Kimberly Allen Dang: Not included in the 5 BCF of activity that we're seeing is capacity S&G signed up during its successful open season for its proposed approximately $3 billion South System 4 expansion that's designed to increase capacity by 1.2 BCF a day. Upon completion, this project will help to meet the growing power demand and local distribution company demand in the southeastern market. mainly As a result of this project, our backlog increased by $1.9 billion to $5.2 billion during the quarter.

Speaker Change: Is Capacity S&G signed up on its successful open season for its proposed approximately $3 billion South System 4 expansion that's designed to increase capacity by 1.2 BCF a day?

Speaker Change: Upon this completion, this project will help to meet the growing power demand and local distribution company demand in the southeastern market.

Speaker Change: Mainly as a result of this project, our backlog increased by $1.9 billion to $5.2 billion during the quarter.

Speaker Change: In the past, we have indicated that we thought the demand for natural gas would allow us to continue to add to the backlog, and South System 4 project is an example of that.

Kimberly Allen Dang: In the past, we have indicated that we thought the demand for natural gas would allow us to continue to add to the backlog, and the South System 4 project is an example of that. We continue to see substantial opportunities beyond this project to add to our backlog. The current multiple on our backlog is about 5.4 times. During the quarter, we also saw some very nice decisions from the Supreme Court. On the Good Neighbor Plan, the court stayed the plan, finding that we were likely to prevail on the merits.

Speaker Change: We continue to see substantial opportunities beyond this project to add to our backlog. The current multiple on our backlog is about 5.4 times.

Speaker Change: During the quarter, we also saw some very nice decisions from the Supreme Court. On the Good Neighbor Plan, the court stayed the plan, finding that we are likely to prevail on the merit.

Speaker Change: There's still a lot to play out here, but I do not think the Good Neighbor Plan will be implemented in its current form. It is likely to be at least a few years before a new or revised plan could be put together, and a few years beyond that for compliance. And in the interim, we've got a presidential election.

Kimberly Allen Dang: There's still a lot to play out here, but I do not think the Good Neighbor plan will be implemented in its current form. It is likely to be at least a few years before a new or revised plan could be put together, and a few years beyond that for compliance. And in the interim, we've got a presidential election. The overturning of the Chevron Doctrine, which gave deference to regulatory agencies when the law was not clear, is also positive.

Speaker Change: The overturning of the Chevron Doctrine, which gave deference to regulatory agencies when the law is not clear, is also a positive.

Speaker Change: Together, these decisions will help mitigate the regulatory barrage we've seen over the last couple of years. And with that, I'll turn it over to Tom to give you some details on our business performance for the quarter.

Kimberly Allen Dang: Together, these decisions will help mitigate the regulatory barrage we've seen over the last couple of years. And with that, I'll turn it over to Tom to give you some details on our business performance for the quarter. Thanks, Kim.

Tom: Thanks, Kim. Starting with the natural gas business unit, transport volumes increased slightly in the quarter versus the second quarter of 2023.

Thomas A. Martin: Starting with the natural gas business unit, transport volumes increased slightly in the quarter versus the second quarter of 2023. Natural gas gathering volumes were up 10% in the quarter compared to the second quarter of 2023, driven by Haynesville and Eagleford volumes, which were up 21% and 8%, respectively. Given the current gas price environment, we now expect gathering volumes to average about 6% below our 2024 plan but still 8% over 2023. We view this slight pullback in gathering volumes as temporary.

Tom: Natural gas gathering volumes were up 10% in the quarter compared to the second quarter of 2023, driven by Haynesville and Eagleford volumes, which were up 21% and 8% respectively.

Tom: Given the current gas price environment, we now expect gathering volumes to average about 6% below our 2024 plan, but still 8% over 2023.

Tom: We view the slight pullback in gathering volumes as temporary. Higher production volumes will be necessary to meet demand growth from LNG expected in 2025.

Thomas A. Martin: Higher production volumes will be necessary to meet demand growth from LNG expected in 2025. Looking forward, we continue to see significant incremental project opportunities across our natural gas pipeline network to expand our transportation capacity and storage capabilities in support of growing natural gas markets between now and 2030. In our products pipeline segment, we find product volumes were up 2%, and crude and condensate volumes were flat in the quarter compared to the second quarter of 2023.

Tom: Looking forward, we continue to see significant incremental project opportunities across our natural gas pipeline network to expand our transportation capacity and storage capabilities in support of growing natural gas markets between now, 2030, and beyond.

Tom: In our products pipeline segment, we find product volumes were up 2%, crude and condensate volumes were flat in the quarter compared to the second quarter 2023.

Tom: For the full year, we expect refined product volumes to be slightly below our plan, about 1%, but 2% over 2023.

Thomas A. Martin: For the full year, we expect refined product volumes to be slightly below our plan, about 1%, but 2% over 2023. Regarding development opportunities, the company plans to convert its double H pipeline system from crude oil to natural gas liquid service, providing Williston Basin producers and others with NGL capacity to key market hubs.

Tom: Regarding development opportunities, the company plans to convert its Double H pipeline system from crude oil to natural gas liquid service, providing Williston Basin producers and others with NGL capacity to key market hubs.

Tom: The approximately $150 million project is supported by definitive agreements, and the initial phase of the project is anticipated to be in service in the first quarter of 2026, with the pipe remaining in crude service well into 2025.

Thomas A. Martin: The approximately $150 million project is supported by definitive agreements, and the initial phase of the project is anticipated to be in service in the first quarter of 2026, with the pipe remaining in crude service well into 2025, future phases could provide incremental capacity, including in support of volumes out of the Powder River Basin. In our terminals business segment, our leased liquid capacity remains high at 94%.

Tom: Future phases could provide incremental capacity, including in support of volumes out of the Powder River Basin.

Tom: In our terminals business segment, our leased liquid capacity remains high at 94%.

Tom: Utilization and Project Opportunities at our key hubs at the Houston Ship Channel and the New York Harbor remain very strong, primarily due to favorable blend margins.

Thomas A. Martin: Utilization and project opportunities at our key hubs in the Houston Ship Channel and New York Harbor remain very strong, primarily due to favorable blend margin. Our Jones Act tankers are 100% leased through 2024 and 92% leased in 2025, assuming likely options are exercised. Currently, market rates remain well above our vessel's currently contracted rates. The CO2 segment experienced lower oil production volumes at 13%, lower NGL volumes at 19%, and lower CO2 volumes at 8% in the quarter versus the second quarter of 2023.

Tom: Our Jones Act tankers are 100% leased through 2024 and 92% leased in 2025, assuming likely options are exercised. And currently, market rates remain well above our vessel's currently contracted rates.

Tom: The CO2 segment experienced lower oil production volumes at 13%, lower NGL volumes at 17%, and lower CO2 volumes at 8% in the quarter versus the second quarter, 2023.

Tom: For the full year, we expect oil volumes to be 2% below our budget and 10% below 2023.

Thomas A. Martin: For the full year, we expect oil volumes to be 2% below our budget and 10% below 2023. During the quarter, the CO2 segment optimized its asset portfolio in the Permian Basin through two transactions for a net outlay of $40 million. This segment divested its interest in five fields and acquired the North McElroy unit, currently producing about 1,250 barrels of oil a day, and an interest in an undeveloped leasehold directly adjacent to our SACROC field.

Tom: During the quarter, the CO2 segment optimized its asset portfolio in the Permian Basin through two transactions for a net outlay of $40 million.

Thomas A. Martin: The impact of these two transactions is to replace fields with high production decline rates and Limited CO2 Flood Opportunity with fields that have attractive potential CO2 flip projects. In the Energy Transition Ventures Group, they continue to have many carbon capture sequestration project discussions that utilize our CO2 expertise for potential projects that take advantage of our existing CO2 network in the Permian Basin and our recently leased 10,800 acres of poor space near sources of emissions in the Houston Ship Channel.

Tom: The segment divested its interest in five fields and acquired the North McElroy unit, currently producing about 1,250 barrels a day of oil, and an interest in an undeveloped leasehold directly adjacent to our SACROC field.

Tom: The impact of these two transactions is to replace fields with high production decline rates and limited CO2 flood opportunities with fields that have attractive potential CO2 flood projects.

Tom: In the Energy Transition Ventures Group, they continue to have many carbon capture sequestration project discussions that utilize our CO2 expertise.

Tom: for potential projects that take advantage of our existing CO2 network in the Permian Basin and our recently leased 10,800 acres of pore space near sources of emissions in the Houston Ship Channel.

Tom: These transactions take time to develop, but the activity level and customer interest are picking up.

Thomas A. Martin: These transactions take time to develop, but the activity level and customer interest are picking up. With that, I'll turn it over to David. All right, thanks, Tom. So, just a few things before we cover the quarterly performance. As Kim mentioned, we're declaring a dividend of $28.75 per share, which is $1.15 per share annualized, up 2% from our 2023 dividend. Additionally, as disclosed in the press release, we're changing our Investor Day presentation from annual to biannual.

Tom: With that, I'll turn it over to David Michaels. All right.

David Patrick Michels: So, a few items before we cover the quarterly performance. As Kim mentioned, we're declaring a dividend of $28.75 per share, which is $1.15 per share annualized, up 2% from our 2023 dividend.

Thomas A. Martin: We'll plan to continue to publish our detailed annual budget early in the first quarter as normal. Also, before we get to the quarterly performance, I'd like to recognize our accountants, planners, legal teams, business unit teams, and everyone involved in the preparation for our earnings release and our 10-Q filing. We already have a tough close at this time of year, with many working during the July 4th holiday period. And additionally, many of our Houston-based colleagues were impacted by Hurricane Bear Horn.

Speaker Change: As disclosed in the press release, we're changing our Investor Day presentation from annual to biannual. We'll plan to continue to publish our detailed annual budget early in the first quarter as normal.

Speaker Change: Also, last one before we get to the quarterly performance, I'd like to recognize our accountants, planners, legal teams, business unit teams, everyone involved in the preparation for our earnings release and our 10-Q filing.

Speaker Change: We already have a tough close at this time of year with many working during the July 4th holiday period, and additionally, many of our Houston-based colleagues were impacted by Hurricane Beryl.

Speaker Change: I want to thank you all for going above and beyond to meet the challenges presented by power outages and damage, and not missing a beat with regards to our quarterly reporting and analysis schedule.

David Patrick Michels: I want to thank you all for going above and beyond to meet the challenges presented by power outages and damage and not missing a beat with regard to our quarterly reporting and analysis schedule. For the quarter, we generated revenue of $3.57 billion, $71 million from the second quarter of last year. Our cost of sales was down $4 million, so our gross margin increased by 3%. We saw our year-over-year growth from our Natural Gas Products and Terminals Businesses, the main drivers with contributions from our acquired South Texas Midstream Assets, greater contributions from our Natural Gas Transportation and Storage Services, and higher contributions from our SFPP Assets.

Speaker Change: For the quarter, we generated revenue of $3.57 billion, $71 million from the second quarter of last year. Our cost of sales were down $4 million, so our gross margin increased by 3%.

Speaker Change: We saw our year-over-year growth from...

Speaker Change: from natural gas products and terminals businesses, the main drivers with contributions from our acquired South Texas midstream assets, greater contributions from our natural gas, transportation, transportation and storage services, and higher contributions from our SFPP asset.

Speaker Change: Our CO2 business unit was down versus last year, mainly due to lower crude oil volumes, due to some timing of recovery of oil in the second quarter of 2023. Interest expense was up due to higher short-term debt balance.

David Patrick Michels: Our CO2 business unit was down versus last year, mainly due to lower crude oil volumes due to some timing of the recovery of oil in the second quarter of 2023. Interest expense was up due to the higher short-term debt balance due in part to our South Texas midstream acquisition. We generated net income attributable to KMI of $575 million.

Speaker Change: Due in part to our South Texas Midstream Acquisition.

Speaker Change: We generated net income attributable to KMI of $575 million. We produced EPS of $0.26, which is flat with last year.

David Patrick Michels: We produced EPS of $0.26, which is flat with last year, on an adjusted net income basis, which excludes certain items. We generated $548 million, up 1% from Q2 of 2023. We generated adjusted EPS of $0.25, which is up 4% from last year. Our average share count decreased by 18 million shares, or 1%, due to our share repurchase efforts. That's up 2% from last year. Our second quarter DCF was impacted by higher sustaining CapEx and lower cash taxes, both of which are, at least in part, due to timing.

Speaker Change: On an adjusted net income basis, which excludes certain items.

Speaker Change: We generated $548 million, up 1% from Q2 of 2023. We generated adjusted EPS of 25 cents, which is up 4% from last year.

Speaker Change: Our average share count reduced by 18 million shares or 1% due to our share repurchase efforts.

Speaker Change: That's up 2% from last year.

Speaker Change: Our second quarter DCF was impacted by higher sustaining capex and lower cash taxes, both of which are, at least in part, due to timing. We expect cash taxes to be favorable for the full year and sustaining capital to be in line with budget for the full year.

David Patrick Michels: We expect cash taxes to be favorable for the full year and sustaining capital to be in line with budget for the full year. On a year-to-date basis, EPS is up 5% from last year, and our adjusted EPS is up 9% from last year, so we have good growth. On our balance sheet, we ended the second quarter with $31.5 billion of net debt and a 4.1 times net debt to adjusted EBITDA ratio, which is consistent with where we budgeted to end the quarter.

Speaker Change: On a year-to-date basis, EPS is up 5% to last year, and our adjusted EPS is up 9% from last year, so good growth.

Speaker Change: On our balance sheet, we ended the second quarter with $31.5 billion of net debt and a 4.1 times net debt to adjusted EBITDA ratio, which is consistent with where we budgeted to end the quarter.

Speaker Change: Our net debt has decreased $306 million from the beginning of the year.

David Patrick Michels: Our net debt has decreased $306 million from the beginning of the year, and I'll provide a high-level reconciliation of that change. We generated $2.9 billion of cash flow from operations year-to-date, and paid out dividends of $1.3 billion.

Speaker Change: and I'll provide a high-level reconciliation of that change.

Speaker Change: We generated $2.9 billion of cash flow from operations year-to-date.

Speaker Change: We've paid out dividends of $1.3 billion. We've spent CapEx of $1.2 billion, and that includes growth, sustaining, and contributions to our joint ventures. And we've had about $100 million of other uses of capital, including working capital.

Kimberly Allen Dang: We spent $1.2 billion on CapEx, and that includes growth, sustaining, and contributions to our joint venture. And we've had about $100 million of other uses of capital, including working capital. And that gets you close to the $306 million decrease in net debt for the year. And with that, I'll turn it back to Kim.

Speaker Change: And that gets you close to the $306 million decrease in net debt for the year.

Speaker Change: And with that, I'll turn it back to Kim. Okay, and so now we'll open it up for questions. Sue, if you could come on, please.

Sue: Thank you. At this time, if you would like to ask a question, please ensure that your phone is unmuted, press star 1, and record your name clearly when prompted.

Operator: Thank you. At this time, if you would like to ask a question, please ensure that your phone is unmuted, press star 1 and record your name clearly when prompted. If you need to withdraw your request, you may press star 2. Again, that is star 1 if you'd like to ask a question. Our first question is from Manav Gupta with UBS. You may go ahead. Thank you, guys. First, a quick question here.

Sue: If you would need to withdraw your request, you may press star 2. Again, that is star 1 if you'd like to ask a question.

Speaker Change: Our first question is from Manav Gupta with UBS. You may go ahead.

Manav Gupta: Thank you guys. First quick question here. The backlog went up pretty much, I mean, on a good note, which is very positive, but the multiple also went up just a little. If you could just talk about the dynamics of those two things here.

Operator: The backlog went up pretty much, I mean, on a good note, which is very positive, but the multiple also went up just a little. If you could just talk about the dynamics of those two things here, okay? Sure.

Speaker Change: Okay, sure. So, you know, the backlog, as I said, was up by $1.9 billion. That's really two projects.

Kimberly Allen Dang: So, you know, the backlog, as I said, was up by $1.9 billion. That's really two projects that are driving that. It's the South System 4 that we mentioned, and then there is also Double H, which is the other one, and it's our share of South System 4.

Manav Gupta: that are driving that. It's the cell system 4 that we mentioned and then it is also double H.

Manav Gupta: is the other one, and it's our share of CELF System IV.

Speaker Change: And then, with respect to the multiple, yes, it increased a little bit as, you know, as we always say.

Manav Gupta: The reason that we give you the multiple is to give you guys some idea of the returns that we're getting on these projects so that you can be able to

Manav Gupta: to model the EBITDA. Now, it is not our goal ever to, we're not targeting a specific multiple and getting a specific multiple on the backlog when we look at these projects. When we look at these projects, we're looking at an internal rate of return.

Kimberly Allen Dang: Now, it is not our goal ever, you know, to target a specific multiple and get a specific multiple on the backlog when we look at these projects. Instead, when we look at these projects, we're looking at an internal rate of return. And so, and we have a threshold for that, and we have a pretty high threshold for our project. And that threshold is well, well, well in excess of our cost of capital.

Manav Gupta: And so, and we have a threshold for that, and we have a pretty high threshold for our project.

Manav Gupta: And that threshold is well, well, well in excess of our cost of capital.

Manav Gupta: And then we vary around that threshold, you know, what I'd say marginally, depending on the risk of a project.

Kimberly Allen Dang: And then we vary around that threshold, you know, what I'd say marginally, depending on the risk of a project. And so, you know, if we have, and projects that we do that are connected to our existing infrastructure, you know, where it's not, you know, greenfield, tend to have a much higher multiple associated with them. You know, when we're having to loop a pipeline or something, those typically might have a little bit higher multiple, but they're still meeting our return threshold.

Manav Gupta: You know, if we have, and projects that we do that are connected to our existing infrastructure, you know, where it's not...

Manav Gupta: Greenfield tend to have a much higher multiple associated with it. When we're having to loop a pipeline or something, those typically might have a little bit higher multiple, but they're still meeting our return threshold.

Kimberly Allen Dang: And so, you know, I think these are very, despite the fact that the multiple on the backlog is going up a little bit because of these projects, these are still very, very attractive return projects. Thank you for a very detailed response. My quick follow-up here is, you mentioned the demand coming from data centers, and we completely agree with you. When you are having these discussions with the data center operators, we believe at one point, these data center operators were not even talking to natural gas companies; they were only talking to renewable sources. Have you seen a change in sentiment where reliability has become a key factor?

Manav Gupta: You know, I think these are very, despite the fact that the multiple on the backlog is going up a little bit because of these projects, these are still very, very attractive return projects.

Speaker Change: Thank you for a very detailed response. My quick follow-up here is, you mentioned the demand coming from data centers, and we completely agree with you. When you are having these discussions with the data center operators, we believe at one point, you know, these data center operators were not even talking to natural gas companies, they were only talking to renewable sources. Have you seen a change in sentiment where reliability has become a key factor, so you are a bigger part of these conversations than you were probably 18 or 24 months ago?

Kimberly Allen Dang: So you are a bigger part of these conversations than you were probably 18 or 24 months ago? Yeah, I'd say our initial reaction was similar to yours when we started to see this demand was that they were probably going to target renewables. But as we have had discussions with them, I think that, you know, the two things are key from their perspective: one is reliability, and two is speed to market. And so I think natural gas, and Rich said this last quarter, you know, given the reliability of natural gas, it is going to play, we believe, a key role in supplying energy to these data centers. Thank you very much. I'll turn it over to you.

Speaker Change: Yeah, I'd say, you know, our initial reaction was similar to yours when we started to see this demand was they're probably going to target renewables, but as we have had discussions with them, I think that, you know, that two things are key from their perspective. One is reliability and two is speed to market.

Speaker Change: And so I think natural gas, and Rich said this last quarter, you know, given the reliability of natural gas, it is going to play, we believe, a key role in supplying energy to these data centers.

Speaker Change: Thank you very much. I'll turn it over.

Speaker Change: Thank you. Our next question is from John Mackay with Goldman Sachs. You may go ahead.

Operator: Thank you. Our next question is from John Mackay with Goldman Sachs. You may go ahead. Hey, team.

John Ross Mackay: Hey team, thanks for the time. Maybe we'll pick up a little bit on that last one, surprisingly. So if you guys are talking about 5 BCF of...

Operator: Thanks for the time. Maybe we'll pick up a little bit on that last one, unsurprisingly. So if you guys are talking about 5 BCF of power demand discussions right now, we'd just be curious to hear a little bit from you on, you know, where you're seeing that geographically. You know, is it primarily Texas?

Speaker Change: Power, Demand, Discussions right now.

John Ross Mackay: We'd just be curious to hear a little bit from you on, you know, where you're seeing that geographically, you know, is it primarily Texas? Is it elsewhere in the portfolio? And anything you can comment on in terms of speed to market? And again, that might be a Texas,

Kimberly Allen Dang: Is it elsewhere in the portfolio? And anything you can comment on in terms of speed to market? And again, that might be a Texas versus kind of more FERC jurisdiction kind of discussion. But both of those would be interesting.

John Ross Mackay: versus kind of more FERC jurisdiction kind of discussion. But both of those would be interesting.

Speaker Change: I think Sital and Tom, you guys supplement here, but the 5 BCF is overall power, so some of that is related to AI and some of it is just related to coal replacement.

Kimberly Allen Dang: Thanks. No, I think that, and Sital and Tom, you guys are just supplements here. But, you know, this 5BCF is overall power. So some of that's related to AI, and some of it's just related to coal replacement, you know, shoring up reserve margins, backing up renewables. So it's across the board, we're seeing it in Texas, we're seeing it in Arkansas, we're seeing it in Kentucky, we're seeing it in Georgia, the desert in Arizona, the desert Southwest.

Speaker Change: shoring up reserve margins, backing up renewables.

Speaker Change: We're seeing it in Arkansas. We're seeing it in Kentucky. We're seeing it in Georgia. Desert in Arizona. Desert Southwest. I mean, it's, you know, it is in almost all the markets we serve. We're seeing

Kimberly Allen Dang: I mean, you know, in almost all the markets we serve, we're seeing, you know, some sort of increase in power demand. And maybe just the kind of time to market in terms of how long it could bring, how long it could bring. The market is very much dependent on where these are going to be used.

Speaker Change: You know, some sort of increase in power demand.

Speaker Change: And maybe just on the kind of...

Speaker Change: Time to market in terms of how long it could to bring.

Speaker Change: Yes, the market is very much dependent on where these are going to be sited. And so, you know, it depends on is it a regulated market, is it an unregulated market? So that's just going to vary depending on the market location.

Kimberly Allen Dang: And so, you know, it depends on whether it's a regulated market, is it an unregulated market. So that's just going to vary depending on the market location. Just a second question. You guys talked a little bit about some kind of portfolio optimization here. There's the CO2, I guess you could call it, you know, asset swap.

Speaker Change: I appreciate that. And just second question, you guys talked a little bit about some kind of portfolio optimization here. There's the

Speaker Change: CO2, I guess you could call it, you know, asset swap.

Kimberly Allen Dang: There's a line in the release about maybe some divestitures in the net gas segment. I guess I'd just be curious overall about how you're thinking about kind of portfolio pruning and optimization over time. Okay, so you know, on natural gas, I'm not sure we did have a divestiture earlier in the year, which was a gathering asset, but not that wasn't during this quarter.

Speaker Change: There's a line in the release on maybe some divestitures in the net gas segment. I guess I'd just be curious overall for an updated view on how you're thinking about kind of portfolio pruning and optimization over time.

Speaker Change: Okay, so, you know, on natural gas, I'm not sure, we did have a divestiture earlier in the year, which was a gathering asset, but not, that wasn't during this quarter, and so...

Speaker Change: That was just, you know, it was an asset that wasn't core to our portfolio and we had someone approach us and so the price made sense.

Kimberly Allen Dang: And so, Um, that was just, you know, it was an asset that wasn't core to our portfolio. And we had someone approach us. And so the price made sense, and so we sold it. On the CO2 sale, you know, we had three, four fields where, you know, there was limited opportunity for incremental CO2 flows. And, you know, that is our business; injecting CO2 to produce more oil. And so, you know, we sold those fields that had limited opportunity.

Speaker Change: And so we sold it. On the CO2 sale, you know, we had

Speaker Change: three, four fields.

Speaker Change: Where, you know, there was limited opportunity for incremental CO2 floods.

Speaker Change: And, you know, that is our business, is, you know, injecting CO2 to produce more oil.

Speaker Change: And so, you know, we sold those fields that had limited opportunity, and then we acquired a field called North McElroy, which we think has very good flood potential.

Kimberly Allen Dang: And then we acquired a field called North McElroy, which we think has very good flood potential. And then we acquired a leasehold interest and some property that is adjacent to some of our most prolific areas at SACROC that we think will also be a great CO2 flood opportunity. Thanks for your time.

Speaker Change: And then we acquired a leasehold interest in some property that is adjacent to some of our most prolific areas at SACROC that we think will also be a great CO2 flood opportunity.

Speaker Change: Thank you. Our next question is from Keith Stanley with Wolf Research. You may go ahead.

Operator: Thank you. Our next question is from Keith Stanley with Wolf Research. You may go ahead. Hi, good afternoon.

Keith T. Stanley: Hi, good afternoon. I wanted to follow up. Hi.

Operator: Wanted to follow up. Hi. I wanted to follow up on the SNG South system project. Can you talk about the timeline for regulatory approval, start of construction, and is it all coming into service in late 2028 or phased over time? And then, sorry for the multi-part question, is it also fair to assume your customer here is your partner, Southern, on the project, or is it a broader customer base supporting this project? So, Keith, this is Sibal.

Keith T. Stanley: I wanted to follow up on the SNG South system project. Can you talk to the timeline for regulatory approval, start of construction?

Keith T. Stanley: And is it all coming into service in late 2028 and or phased over time and then?

Speaker Change: Sorry for the multi-part question. Is it also fair to assume your customer here is your partner, Southern, on the project, or is it a broader customer base supporting this project?

Cecil: So, Keith, this is Sital. One, we had an open season. We do have a broad customer base, you know, in terms of regulatory timeline.

Sital K. Mody: One, we had an open season. We did have a broad customer base. You know, in terms of the regulatory timeline, you know, with an in-service date of 2028, you know, clearly we plan a project of this scale to pre-file and then, and then do a firm filing probably, you know, without getting into too much detail, you know, there is always competition sometime next summer with a targeted in-service date of late 28. So that's probably the 50,000-foot view on... Did I answer your But yeah, and then I just thought, yes, yes, you did.

Speaker Change: With an in-service of 2028, clearly we plan a project of this scale.

Speaker Change: To pre-file and then do a FERC filing, probably, you know, without getting into too much detail, you know, there is always competition sometime next summer with a targeted in-service date of late 28. So that's probably the 50,000 foot view on timeline.

Speaker Change: Did I answer your question?

Speaker Change: Yes, she did. Does the contribution come in all in the end of 2028 or is it phased in over time as you see it? So we do have initial phase in 2028 and we do have some volumes trickling into URAC.

Sital K. Mody: Oh, does it? Um, does the contribution come in all at the end of 2028? Or is it phased in over time, as you see it? So we do have the initial phase in 28, and we do have some volumes trickling into Europe. Okay, great.

Speaker Change: Okay, great. Thank you. Second question, I wanted to touch back on the Texas loan program for gas-fired power plants.

Operator: Thank you. Second question, one touchback on the Texas loan program for gas-fired power plants. How can we think about the opportunity for Kinder here?

Speaker Change: How can we think about the opportunity for Kinder here? So say Texas builds 20 gigawatts of new gas-fired power plants.

Sital K. Mody: So say Texas builds 20 gigawatts of new gas-fired power plants over the next five years. What type of market share do you have in the Texas market today for connecting to power plants? What's a typical sort of capital investment to do a plant tie-in?

Speaker Change: Over the next five years, what type of market share do you have in the Texas market today and connecting to power plants? What's a typical sort of capital investment to do a plant tie-in? Just any sort of thoughts of what it could mean for opportunities for the interstate system?

Sital K. Mody: Just any sort of thoughts of what it could mean for opportunities for the interstate system? So, you know, if I had to take a snapshot and don't quote me on this, probably today we're about 40%, you know, probably have a 40% share in Texas. In terms of connecting and the cost to connect, I really think it's going to vary depending on where that ultimate location is going to be.

Speaker Change: So, you know, if I had to take a snapshot, and don't quote me on this, probably today we're about 40%, you know, probably have a 40% share in Texas.

Speaker Change: In terms of connecting and the cost to connect, I really think it's going to vary depending on where that ultimate location is going to be. We do have some unique opportunities where it's actually quite low in terms of it's very capital efficient.

Sital K. Mody: We do have some unique opportunities where it's actually quite low in terms of it being very capital efficient, and there are some targeted opportunities that might involve a little bit more capital. It really gets to how, you know, are they going to be located on our existing system? Or are we going to need to build a lateral?

Speaker Change: And there are some targeted opportunities that might involve a little bit more capital.

Speaker Change: It really gets to how, you know, are they going to be located on our existing system?

Sital K. Mody: And how far is, you know, how long is that lateral going to need to be? And then, you know, are there going to be opportunities where it requires some expansion of like a mix of mainline capacity? So that's what Cecil means, you know, it's just going to depend with respect to, you know, how big the capital opportunity is. Thank you. Thank you. Our next question is from Jeremy Tonet with J.P. Morgan. You may go ahead. Hi, good afternoon. Good afternoon.

Speaker Change: or are we going to need to build a lateral and how far is, you know, how long is that lateral going to need to be?

Speaker Change: And then, you know, are there going to be opportunities where it requires some expansion of, like, some mainline capacity?

Speaker Change: So that's what CFO means, you know, it's just going to depend with respect to, you know, how big the capital opportunity is.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is from Jeremy Tonet with J.P. Morgan. You may go ahead.

Jeremy Bryan Tonet: Hi, good afternoon. Good afternoon.

Jeremy Bryan Tonet: Just wanted to pivot back to the double H conversion here, and how the, did you say how the NGLs are getting out of Guernsey at this point on, you know, with this project? And I guess...

Operator: Just wanted to pivot back to the double H conversion here. And how did you say the NGOs are getting out of Guernsey at this point with this project, and I guess, Uh, you know, are you working with any other midstreamers on this project? So one, you know, our goal is to get it to the market, being Conway in Mont Belvieu. And, you know, I think when you think about it broadly, A couple of calls ago, we talked about the basin in general and our desire to get egress both on the residue side, and this is an opportunity to get egress on the NGL side.

Speaker Change: Are you working with any other mid-streamers on this project overall?

Speaker Change: So, one, you know, our goal is to get it to market, market being Conway and Mont Belvieu, and, you know, I think when you think about it broadly.

Speaker Change: A couple of calls ago we talked about the basin in general and our desire to get egress both on the residue side and this is an opportunity to get egress on the NGL side. We see the basin.

Operator: We see the basin growing quite significantly, the GLRs are rising, and so without getting into the complicated structures here, because we are in a very competitive situation, I'll, Yeah, and I'd say the other thing, Jeremy, when Cecil says the market's growing, we don't expect any big growth in crude; he's really talking about the NGLs and gas because of the increasing GOR.

Speaker Change: Growing quite significantly, you know, the GORs are rising, and so, you know, without getting into the complicated structures here, because we are in a very competitive situation, I'll just leave it at this, that we are, you know, able to get to both the Conway and the Mont Belvieu market.

Speaker Change: Yeah, and I'd say the other thing, Jeremy, when Cecil says the market's growing, we don't expect some big growth in crude. He's really talking about the NGLs and the gas because of the increasing GOR.

Jeremy Bryan Tonet: That's right.

Jeremy Bryan Tonet: Got it. Okay, and maybe just pivoting when talking about a highly competitive market as far as Permian natural gas egress is concerned, just wondering any updated thoughts you could provide with regards to the potential for

Sital K. Mody: Okay. And maybe just pivoting when talking about a highly competitive market as far as Permian natural gas egress is concerned, just wondering any updated thoughts you could provide with regard to the potential for brownfield expansion, be it through GCX expanding, or greenfield as well, getting to a different market, or even the potential to market a joint solution at the same time. Just wondering how you see this market evolving, given that 2026 Permian gas egress looks like deja vu all over again. Yeah, look, good question and question du jour.

Speaker Change: Brownfield expansion, be it through GCX expanding, or Greenfield as well, getting to a different market, or even the potential to market a joint solution at the same time. Just wondering how you see this market evolving, given that...

Speaker Change: 2026 Permian gas egress, looks like deja vu all over again.

Speaker Change: Yeah, look, good question, and the question is yours. You know, unfortunately, I don't have a different answer for you this time. You know, we still aren't prepared to sanction the GCX project. Still in discussions with our customers.

Sital K. Mody: You know, unfortunately, I don't have a different answer for you this time. You know, we still aren't prepared to sanction the GCX project. We are still in discussions with our customers on the broader Permian egress opportunity. You know, we've been, as I said, pursuing opportunity; we don't have anything firmed up, there is a competitive space, we are open to all sorts of structures on that front and are willing to consider what's best for the base.

Speaker Change: On the broader Permian egress opportunity, you know, we've been, you know, as I said, pursuing opportunity. We don't have anything firmed up. It's a competitive space. We are open to all sorts of structures on that front and are willing to consider what's best for the basin.

Speaker Change: Got it. Understood. I'll leave it there. Thanks.

Speaker Change: Thank you. Our next question is from Theresa Chen with Barclays. You may go ahead.

Sital K. Mody: Got it, understood. I'll leave it there, thanks. Thank you. Our next question is from Theresa Chen with Barclays. You may go ahead. Hi, I wanted to follow up on the double H line of questions. Can you tell us how much capacity the pipe will have once it is converted to NGL service?

Theresa Chen: Hi, I wanted to follow up on the double H line of questions. Can you tell us how much capacity the pipe will be in?

Speaker Change: Once it converted to NGL service and

Theresa Chen: Would you expect the line to be highly utilized right away in first quarter of 2026, or will there be potentially a multi-quarter or multi-year ramp in the commitments?

Operator: And would you expect the line to be highly utilized right away in the first quarter of 2026? Or will there be, you know, potentially a multi-quarter or multi-year ramp-up in the commitment? So, you know, in terms of capacity, this is all, you know, this is going to depend on the hydraulic combinations of our, you know, our suppliers and ultimately what market they take that to. So, you know, I think the takeaway here is that we've got a firm commitment that will likely start day one, and then as we scale the project, it is scalable, both from the Bakken and from the Powder River. And really, the ultimate capacity is going to depend on the customer. Thank you. Thank you. The next question is from Spiro Dounis with Citi. You may go ahead. Thanks, Operator. Afternoon, everybody.

Speaker Change: So, uh, you know, in terms of capacity, this is all, you know, this is going to depend on the hydraulic combinations of our, you know, our suppliers.

Speaker Change: Ultimately what market they take that to, so you know, I think the takeaway here is, you know, we've got a firm commitment that will likely start day one, and then as we scale the project, it is scalable.

Speaker Change: Both from the Bakken and from the Powder River. And really the ultimate capacity is going to depend on the customer.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is from Spiro Dounis with Citi. You may go ahead.

Spiro Michael Dounis: Thanks, Operator. Afternoon, everybody. First question, maybe just to talk about capital spending longer term. Historically, you've talked about spending near the upper end of that sort of $1 billion to $2 billion range.

Sital K. Mody: First question, maybe just to talk about capital spending longer term. Historically, you've talked about spending near the upper end of that sort of $1 to $2 billion range. For Rich and Kim, if I sort of combine your statements at the outset, it seems to suggest, like, there's a pretty robust opportunity set ahead that maybe wasn't contemplated when you last gave us that update. So, curious as you think about these larger projects coming in, like SNG, and then the broader power demand you referenced earlier, are you still sort of on track to being that $2 billion zone long term? Yeah, I'd say we wouldn't say one to two anymore; we would just say around two. And, you know, around two could be two; it could be 2.3.

Speaker Change: For Rich and Kim, if I sort of combine your statements at the outset, it seems to suggest like there's a pretty robust opportunity set ahead.

Speaker Change: [inaudible]

Speaker Change: Yeah, I'd say we wouldn't say one to two anymore. We would just say around two.

Kimberly Allen Dang: I mean, just in that general area is what I would say, you know, when you think about something like an S&G, you know, it's got 2028 in service. And so that's going to be capital that you're spending, you know, just call it rough math, two years of construction. So most of that capital is, you know, in 27 and 28. And so, you know, that's filling out the outer years of potential CapEx. So it is around 2 billion.

Speaker Change: And, you know, a round two could be two, it could be 2.3, I mean, just in that general area is what I would say. You know, when you think about something like an S&G, you know, it's got a 2028 in service, and so that's going to be capital that you're spending.

Speaker Change: You know, just call it rough math, two years of construction, so most of that capital will be, you know, in 27 and 28.

Speaker Change: And so, you know, that's filling out the outer years of potential CapEx. So, around $2 billion.

Speaker Change: Okay, so it sounds like not a material departure from before. Got it.

Kimberly Allen Dang: Okay, so it sounds like it's not a material departure from before. Got it. And then I'd say on the stuff that Rich and I are talking about, as I said, the $5 billion project, the five, the five BCF a day of projects that we're pursuing, that's stuff that we're pursuing today, right? That's not stuff that is in the backlog today. And so, you know, part of my point on, you know, on the, you know, is that we continue to see, you know, great opportunities beyond S&G.

Speaker Change: And I'd say, look, I'd say on the stuff that Rich and I are talking about, as I said, you know, the $5 billion project, I mean, the five, uh...

Speaker Change: the five BCF a day of projects that we're pursuing. That's stuff that we're pursuing today, right? That's not things that are in the backlog today. And so, part of my point on the, you know, was...

Speaker Change: We continue to see...

Kimberly Allen Dang: S&G, the 1.2 BCF a day is not included in the five BCF a day of potential opportunity. So, you know, I think projects like S&G will continue to fill out that capex in the coming years and give us more confidence that we'll be spending $2 billion for a number of years to come. Got it. Okay, that's helpful color.

Speaker Change: You know, great opportunity beyond S&G. S&G, the 1.2 BCF a day, is not included in the 5 BCF a day of potential opportunity.

Speaker Change: I think projects like S&G continue to fill out that capex in the outer years and give us more confidence that we'll be spending $2 billion for a number of years to come.

Speaker Change: Got it. Okay, that's helpful, Culler. And then switching gears a bit here, can you talk about some of the ...

David Patrick Michels: And then switching gears a bit here, Kim, you talked about some of the sort of regulatory events that are sort of becoming tailwinds now, headwinds at first. And I know one other sort of macro factor that sort of got you last year or two was interest rates that were on the rise. I guess if we look forward, you know, I'm not sure what your view is, but it seems like we're setting up for some rate cuts later this year. So maybe David, maybe you could just remind us, as we think about your floating rate exposure, what that looks like. 2025?

Speaker Change: sort of regulatory events that are sort of becoming tailwinds now have been hit first. And I know one other sort of macro factor that

David Patrick Michels: , and I think the other thing that sort of got you last year was interest rates that were on the rise. As we look forward, I'm not sure what your view is, but it seems like we're setting up for some rate cuts later this year. So maybe, David, you can just remind us, as we think about your floating rate exposure,

David Patrick Michels: What does that look like in 2025 and is this a potential tailwind for you?

David Patrick Michels: And is this a potential tailwind for you? Yeah, and I'll let it be a potential tailwind because the forward curve today is, you know, for 2025 is below, you know, what we've experienced in 2024 to date and what the balance of the year is. So the 25 curve is, is below 24.

David Patrick Michels: Yeah, and I'll let, it is a potential tailwind, but the forward curve today is, you know,

David Patrick Michels: For 2025 is below, you know, what we've experienced in 2024 to date and what the balance of the year is. So 25 curve is below 24, but I'll let David give you an update on our floating rate exposure.

David Patrick Michels: Yeah, it could be. We'll see if we actually get these rate cuts or not. Remember, we all expected a bunch of rate cuts in 2024 as well, but we didn't get them. We do have a fair amount of floating rate debt exposure.

David Patrick Michels: But I'll let David give you an update on our floating rate exposure. Yeah, it could be. We'll see if we actually get these rate cuts or not. Remember, we all expected a bunch of rate cuts in 2024 as well, but we didn't get them.

David Patrick Michels: We do have a fair amount of floating rate debt exposure, but I intentionally brought it down a little bit because it's been unfavorable to layer on additional swaps in the last couple of years. And so our voting rate debt exposure has come down from about seven and a half billion dollars to about five point three billion dollars. Additionally, we've locked in a little bit of that 5.3 for 2025, similar to past practice, to take advantage of some of the forward curve, the favorable interest rate forward curves that we're seeing for next year.

David Patrick Michels: Intentionally brought it down a little bit because it's been unfavorable to layer on additional swaps in the last couple of years. And so our floating rate debt exposure has come down from about $7.5 billion to about $5.3 billion.

David Patrick Michels: Additionally, we've locked in a little bit of that 5.3 for 2025, similar to past practice, to take advantage of some of the...

David Patrick Michels: The forward curve, the favorable interest rate forward curves that we're seeing for next year. So about 10% of that, I think, is locked in for 2025 at favorable rates. The rest of it gives us a good opportunity to take advantage of any short-term interest rate cuts.

David Patrick Michels: So about 10% of that, I think, is locked in for 2025 at favorable rates. The rest of it gives us a good opportunity to take advantage of any short-term interest rate cuts that we see coming to the market. Great. I'll leave it there. Thanks, everybody.

David Patrick Michels: Thank you. Our next question is from Michael Blum with Wells Fargo. You may go ahead.

Operator: Thank you. Our next question is from Michael Blum with Wells Fargo. You may go ahead. Thanks. Good afternoon, everyone.

Michael Jacob Blum: Thanks. Good afternoon, everyone. So I wanted to get back to the discussion on the data centers.

Operator: So why don't you get back to the discussion on data centers? It seems like the hyperscalers are much less price sensitive, and they're willing to pay higher PPAs to secure power. Do you think that could translate into... Earning higher returns than you've gotten historically on some of these potential gas pipeline projects, and is there any way to quantify that? You know, I think that we're early in the game, so I think it's hard to judge at this point. I would say again, you know, their two priorities are going to be reliability and speed to market. And I think that's what you're saying.

Speaker Change: It seems like the hyperscales are much less price sensitive

Michael Jacob Blum: Higher PPAs to secure power. So, do you think that could translate into you earning higher returns than you've gotten historically on some of these potential gas pipeline projects? And is there any way to quantify that?

Speaker Change: I think we're early in the game. I think that's hard to judge at this point.

Kimberly Allen Dang: You know, that's what you're hearing from the power guys on the when they're getting the PPAs. So I think, you know, we will get. I think we are confident that we'll be able to meet our return hurdles on these projects. But exactly what we're going to get on these projects at this point, I think, you know, it's too, it's too early to say that. And, you know, generally, you know, these things will be, there'll be some competition.

Speaker Change: I would say, again, you know, their two priorities are going to be...

Speaker Change: Reliability and speed to market, and I think that's what you're seeing, you know, that's what you're hearing from the power guys on the, you know, when they're getting the PPAs.

Speaker Change: So I think, you know, we will get, I think we are confident that we'll be able to meet our return hurdles on these projects, but exactly what we're going to get on these projects at this point, I think, you know, it's too, it's too early to say that. And, you know, generally, you know, these things will be, there'll be some competition. And so I wouldn't expect us to get outrageous returns by any stretch.

Kimberly Allen Dang: And so I wouldn't expect us to get outrageous returns by any stretch. Okay, that makes sense. Thanks for that. And then just one more follow-up on double H. I believe the capacity of the oil capacity of that pipe was, I think, $88 million a day. So $88,000 a day.

Speaker Change: Okay, that makes sense. Thanks for that. And then just one more follow-up on double H. I believe the oil capacity of that pipe was I think 88 million barrels a day, so 88,000 barrels a day. So I'm just wondering, should we assume that the NGL capacity will be kind of similar?

Speaker Change: [inaudible]

Speaker Change: It depends on the receipt and delivery, you know, just think about it this way, I'll just make it real simple. If you're at the beginning of the pipe and at the end of the pipe, it could be. If you're in the middle of the pipe and bringing in volumes, it could be more. I mean, it just depends.

Kimberly Allen Dang: So I'm just wondering, should we assume that the NGL capacity will be kind of similar? Well, I mean, it depends on the receipt and delivery, you know. Just think about it this way, I'll just make it real simple: if you're at the beginning of the pipe and at the end of the pipe, it could be; if you're in the middle of the pipe, and bringing in volumes, it could be more. I mean, it just depends.

Speaker Change: And then you've got to get it to market, so it depends on downstream as well.

Speaker Change: But yeah, I mean, I think for the double H pipe itself, I mean, if you're coming in at the origin and going out at the terminus, yeah, I mean, that's fair, but as Cecil points out, there may be people coming in at various points, and then the downstream points are going to matter as well.

Kimberly Allen Dang: So, and then you got to get it to market. And so it depends on downstream as well. But yeah, I mean, for the double H pipe itself, I mean, if you're coming in at the origin and going out at the terminus, yeah, I mean, that's fair. But at Cecil points out there, you know, maybe people are coming in at various points, and then the downstream points are going to matter as well. I got it.

Speaker Change: Got it. Thank you.

Speaker Change: Thank you. Our next question is from Tristan Richardson with Scotiabank. You may go ahead.

Operator: Thank you. Thank you. Our next question is from Tristan Richardson with Scotiabank. You may go ahead. Hi, good afternoon.

Tristan James Richardson: Hi, good afternoon.

Tristan James Richardson: Maybe just one more on the CO2 portfolio. Can you talk about capital needs or opportunities with the new portfolio? Historically, you've spent

Operator: Maybe just one more on the CO2 portfolio. Can you talk about capital needs or opportunities with the new portfolio? Historically, you've spent 200 to 300 annually here, and you noted that there are greater flood opportunities with the new assets. Curious kind of how this changes capital deployment in CO2.

Tristan James Richardson: [inaudible]

Speaker Change: Also in the context of, I think in the past you've noted a 10-year development plan of around $900 million. Just curious sort of what the new portfolio kind of looks like going forward.

Speaker Change: Hey Tristan, it's Anthony. I think I wouldn't expect a material change in the annual capital numbers for CO2. We weren't spending a lot on any of the divested assets.

Kimberly Allen Dang: And then also, in the context of, I think in the past, you've noted a 10 year development plan of around 900 million. Just curious sort of what the new portfolio kind of looks like going forward. Good afternoon, Anthony. You know, I wouldn't expect a material change in the capital numbers, the annual capital numbers for CO2. We weren't spending a lot on any of the divested assets.

Speaker Change #100: There are obviously opportunities that you mentioned with regards to the two new assets.

Speaker Change: You know, I think the undeveloped acreage that we're talking about, that'll become part of our annual stack rock numbers.

Kimberly Allen Dang: There are all the opportunities that you mentioned with regard to the two new assets. You know, I think the undeveloped acreage that we're talking about, that'll become part of our annual stack rock numbers. Unknown Executive, Elvira Scotto, Theresa Chen, Indraneel Mitra, Zackery Everen, Kinder Morgan Inc. Thanks, Anthony. And then maybe just on refined products.

Speaker Change: and then North McElroy. You know, we think there's excellent opportunity there, as Kim and Tom said, but we've got to do it pilot first, and so we'll be proving out that opportunity. And once we prove out that opportunity, I think we'll have more to say on that.

Speaker Change #101: Thanks Anthony and then maybe just on refined products it seems like the lower 48 maybe saw a later start to the summer driving season but

Kimberly Allen Dang: It seems like the lower 48 maybe saw a later start to the summer driving season, but it also seems like perhaps volumes have picked up in late June and into July. Can you talk about what you're seeing this season and maybe what's contributing to that 1% below your initial budget? Yeah, I would say gasoline overall is, you know, reasonably flat. We've actually seen a bit of a pickup in jet fuel, primarily on the West Coast, as you saw in the release.

Speaker Change: It also seems like perhaps volumes have picked up in late June and into July . Can you talk about what you're seeing this season and maybe what's contributing to that 1% below your initial budget?

Speaker Change #102: Yeah, I would say, you know, gasoline overall is, you know, is reasonably flat. We've actually seen a bit of a bit of a pickup in jet fuel, primarily on the West Coast, as you saw at the release. And then on renewable diesel, we've seen

Kimberly Allen Dang: And then on renewable diesel, we've seen a decent pickup on renewable diesel, but we're still a decent bit below our total capacity on the renewable diesel hub capacity. And we can think we did 48 a day in the third quarter, or sorry, in the second quarter, we've got 57 a day of capacity.

Speaker Change: A Decent Pickup on Renewable Diesel. We're still a decent bit below our...

Speaker Change: Total capacity on the Renewable Diesel Hub capacity, I think we did 48 a day.

Speaker Change: In the second quarter, we've got 57 a day of capacity.

Speaker Change: You know, if that additional refinery comes on later this year, I think that'll...

Kimberly Allen Dang: You know, as that additional refinery comes on later this year, I think that'll continue to pick up. But with respect to being just, you know, slightly below our budget, we had probably slightly higher gasoline numbers in there, but we were reasonably flat in the prior year. Yeah, the other thing I'd say about volume is that volumes are one component of revenue, right prices are the other. And what we've generally seen out in California is that we're moving longer haul barrels rather than some of the shorter haul. So from, you know, from an overall revenue standpoint, I think we're, you know, we're in good shape on the refined product. Appreciate it, Kim.

Speaker Change #103: continue to pick up. But with respect to just being just slightly below our budget we had probably slightly higher gasoline numbers in there but we are reasonably flat for the prior year. So, yeah. The other thing I'd say on the volumes is the volumes are one component of the revenue, right, price is the other.

Speaker Change #103: And what we've generally seen out in California is that we're moving longer haul barrels rather than some of the shorter haul. So from an overall revenue standpoint, I think we're in good shape on the refined products.

Speaker Change #103: I appreciate it, Kim. Thank you guys very much.

Speaker Change #104: Thank you. Our next question is from Harry Mateer with Barclays. You may go ahead.

Operator: Thank you, guys very much. Thank you. Our next question is from Harry Mateer with Barclays. You may go ahead. Hi, good afternoon.

Harry Mead Mateer: Hi, good afternoon. So first question, for South System Expansion 4, how should we think about funding that, given you have the JV-OPCO structure at Songas, and I guess specifically, how much of an opportunity is there for some non-recourse debt financing to be used at the Songas entity itself?

Operator: So my first question is, for South System Expansion 4, how should we think about funding that, given you have the JV-OPCO structure at Songas? And I guess specifically, how much of an opportunity is there for some non-recourse debt financing to be used by the Songas entity itself? Yeah, it's a good question.

Speaker Change #106: Yeah, it's a good question. I think we're, we're, it's, it's still early stages and we're still evaluating all our options.

Speaker Change #106: Generally with these JV arrangements, we prefer to fund at the parent level because our cost of capital is attractive.

David Patrick Michels: I think we're still in the early stages, and we're still evaluating all our options, generally with these AV arrangements. I prefer to fund at the parent level because our cost of capital is subtracted, but we are evaluating our different funding options. I don't, we've never really been big fans of project financing, with a lot of pressure on the project and so forth. We're still evaluating the best course forward. Because of the build time, it's going to take some amount of time to get the pipeline into service. Unknown Executive, Elvira Scotto, Theresa Chen, Indraneel Mitra, Zackery Everen, Kinder, As opposed to at the entity level itself, but it's something that we're looking at.

Speaker Change #106: But we are evaluating our different funding opportunities. We've never really been big fans of project financing. It puts a lot of pressure on the project and so forth.

Speaker Change #106: But we're still evaluating the best course forward, because of the build time, it's going to take some amount of time to get the pipeline into service.

Speaker Change #106: It's likely that there's going to be a fair amount of equity contributions in order to fund that, as opposed to at the entity level itself, but it's something that we're looking at actively.

Speaker Change #107: Okay, thank you. And then second, in energy transition ventures, I'm curious where and whether acquisition opportunities in R&G, you know, might fit right now when you're looking at growth potential in that business.

Kimberly Allen Dang: Okay, thank you. And then second, on energy transition ventures, I'm curious where and whether acquisition opportunities in RNG might fit right now when you're looking at growth potential in that business. Yeah, I'll say a couple things on that. And then Anthony can follow up.

Speaker Change #108: Yeah, I'll say a couple things on that and then Anthony can follow up, but look, I think that business has been harder to operate than we would have expected.

Kimberly Allen Dang: But, you know, look, I think that business has been harder to operate than we would have expected. And as a result of that, until we get our hands fully around the existing operations, you know, we have sort of stood down, if you will, looking at any significant acquisition opportunities. And, you know, I think that once we have these plans operating on a more consistent basis, we can, we will, we can reevaluate that.

Speaker Change #108: And as a result of that, until we get our hands fully around the existing operations, you know, we have sort of...

Anthony: Stood down, if you will, you know, looking at any significant acquisition opportunities.

Anthony: And, you know, I think that, you know, once we have these plans operating,

Anthony: on a more consistent basis.

Anthony: that we can re-evaluate that.

Kimberly Allen Dang: But at this point in time, I think we've got to get those plans up and operating consistently. We think we are on the path to do that, and hopefully, that will be the case for the second half of this year.

Speaker Change #110: Great, thank you.

Speaker Change #111: Thank you. Our next question is from Sameer Kedar with Seaport Global Securities. You may go ahead.

Kimberly Allen Dang: Great, thank you. Thank you. Our next question is from Sameer Kadar with Seaport Global Securities. You may go ahead. Yes, hi, good afternoon. This is Sunil Sibal.

Sunil K. Sibal: Good afternoon, this is Sunil Sibal. So, starting off on the new projects that you announced, could you talk a little bit about the contractual construct behind those? What kind of contract durations you have supporting those two projects?

Operator: So starting off on the new projects that you announced, could you talk a little bit about the contractual construct behind those? What kind of, you know, contract durations do you have supporting those two projects? Yeah, generally speaking, on the south system, we've got 20 year take or pay contracts with credit worthy shippers. And then, you know, we also have a contract that is underpinning the Double H project. Consistent with how we've done, you know, how we do our other projects, I mean, we wanna make sure that we've got good credit and good quality cash flow that supports capital bills.

Speaker Change #113: Yeah, generally on the South System 4, we've got, you know,

Speaker Change #114: 20 year take or pay contracts with credit worthy shippers.

Speaker Change #114: And then, you know, we also have a contract that is that's underpinning.

Speaker Change #114: The Double H Project. So consistent with how we've done, you know, how we do our other projects. I mean, we want to make sure that we've got good credit and good quality cash flow that are supporting capital bills.

Speaker Change #114: Understood.

Speaker Change #115: On the full year expectations, I think you mentioned you're tracking a little bit below budget as well as gathering volumes are concerned. Could you talk a little bit about which basins, etc., are tracking below what you're expecting at the start of the year?

Kimberly Allen Dang: Understandable. Then on the full year expectations, I think you mentioned you're tracking a little bit below budget as far as gathering volumes are concerned. Could you talk a little bit about, you know, which basins, etc.

Speaker Change #116: Yeah, I think just so you know, you know, I mean, what we're assuming for the balance of the year is volumes that are relatively flat with the volumes, the first, the first half of this year. So we're not assuming a big ramp up in volumes the second half of this year.

Kimberly Allen Dang: are tracking below what we're expecting at the start of the year? Yeah, I think just so you know, you know, I mean, what we're assuming for the balance of the year is volumes that are relatively flat with the volumes in the first half of this year, so we're not assuming a big ramp up in volumes the second half of this year, pretty consistent with what we saw in the first half.

Speaker Change #116: Pretty consistent with what we saw in the first half. And then, you know, in terms of, you know, the big, the three big basins where we are going to be, you know, south are going to be Eagleford, Hainesville, and Bakken.

Kimberly Allen Dang: And then, you know, in terms of the big three basins where we are gonna be, you know, south are Eagleford, Haynesville, and Bakken. And so, you know, we've seen a little bit of weakness, I think, in each of those, probably a little more in the Haynesville than in the others.

Speaker Change #116: And so, you know, we've seen a little bit of weakness, I think, in each of those, probably a little more in the Hainesville than in the others.

Speaker Change #117: Yeah, I mean, you saw producers react to the pricing in Haynesville, which is why we've had a little bit of a pullback, but it's prudent.

Kimberly Allen Dang: Yeah, I mean, you saw you saw, producers react to the pricing in the Haynesville, which is why we've had a little bit of a pullback. But it's true. But we expect that to ramp up later this year and the next year as demand picks up.

Speaker Change #117: But we expect that to ramp up later this year and the next year as demand picks up. That's right.

Speaker Change #118: Thank you.

Speaker Change #119: Thank you, and at this time we are showing no further questions.

Kimberly Allen Dang: That's right. Thank you. Thank you, and at this time, we are showing no further questions. All right, thank you very much for listening, and have a good evening. Thank you. That does conclude today's conference. Thank you all for participating. You may disconnect at this time.

Speaker Change #120: All right, thank you very much for listening and have a good evening. Thank you. That does conclude today's conference. Thank you all for participating. You may disconnect at this time.

Speaker Change #121: he is a wonderful, wonderful person. We appreciate it. It's been a pleasure. We appreciate it.