Q2 2024 Plains GP Holdings LP Earnings Call
Speaker Change: Good day, and thank you for standing by. Welcome to the 2024 Second Quarter Plains All-American Pipeline Earnings Call. At this time, all participants are in listen-only mode.
Operator: Concordor Plains All-American Pipeline Learning School.
Operator: Plains All-American Pipeline Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.
Operator: At this time, all participants are in listening-only mode.
Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press Start 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press start 1-1 again.
After the speaker's presentation, there will be a question and answer session.
Blake Fernandez: To ask a question during this session, you'll need to press star 1 1 on your telephone You will then hear an automated message advising your hand is raised To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded Unlike to handle conference over to your first speaker today, Blake Fernandez, VP of Investment Relations. Please go ahead
Operator: To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to your first speaker today, Blake Fernandez, VP of Investment Relations. Please go ahead.
Operator: Please be advised that today's conference has been recorded.
Operator: Unlike the hand over to your first speaker today, lay for an NSP or investor relations. Please go ahead.
Marvin: Thank you, Marvin.
Blake Fernandez: Thank you, Marvin. Good morning, and welcome to Plains All American's second quarter 2024 earnings call. Today's slide presentation is posted on the Investor Relations website under the News and Events section at Plains.gov, and an audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide two. An overview of today's call is provided on slide three. A condensed consolidating balance sheet for BAGP and other reference materials are in the appendix. Today's call will be hosted by our Chairman and CEO, Willie Chak, executive vice president and CFO, Al Swanson, and other members of our management team. With that, I will now turn the call over to Willie.
Blake: Good morning and welcome to Plains All-American second quarter 2024 earnings call. Today's slide presentation is posted on the Investor Relations website under the Newtons and Events section at Plains.com. An audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide 2. An overview of today's call is provided on slide 3. A condensed consolidating balance sheet for BADGP and other reference materials are in the appendix.
Blake Fernandez: Thank you, Marvin. Good morning, and welcome to Plains All-American second quarter 2024 earnings call.
Speaker Change: Today's slide presentation is posted on the Investor Relations website under the News and Events section at Plains.com.
An audio replay will also be available following today's call.
Speaker Change: Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide 2.
Speaker Change: An overview of today's call is provided on slide 3. A condensed consolidating balance sheet for BAGP and other reference materials are in the appendix.
Willie Chang: Today's call will be hosted by our Chairman and CEO, Willie Chang, Executive Vice President and CFO, Al Swanson, and other members of our management team.
Speaker Change: Today's call will be hosted by our Chairman and CEO , Willie Chang.
Speaker Change: Executive Vice President and CFO Al Swanson and other members of our management team. With that I will now turn the call over to Willie.
Willie Chang: With that, I will now turn the call over to Willie. Thank you, Blake. Good morning, everyone, and thank you for joining us. Today, we report the second quarter of Justin Epidock, attributable to PAA of 674 million. This exceeded our expectation, and it highlights our focus on execution and the ability of our team and asset based to respond to the ever changing market dynamics. As a result of our year-to-date performance, both on M&A contributions and momentum as we enter the second half of the year, we're raising the midpoint of our full-year 2024 Justin Epidock guidance by 75 million to a new range of 2.725 to 2.775 billion.
Willie Chak: Thank you, Blake. Good morning, everyone, and thank you for joining us.
Willie Chak: Today we reported second quarter adjusted EBITDA attributable to PAA of $674 million. This exceeded our expectations, and it highlights our focus on execution and the ability of our team and asset base to respond to the ever-changing market dynamics. As a result of our year-to-date performance, bolt-on M&A contributions, and momentum as we enter the second half of the year, we're raising the midpoint of our full year 2024 adjusted EBITDA guidance by $75 million to a new range of $2.725 million to $2.775 billion.
Willie Chang: Thank you Blake. Good morning everyone and thank you for joining us.
Speaker Change: Today we reported second quarter adjusted EBITDA attributable to PAA of $674 million. This exceeded our expectation and it highlights our focus on execution and the ability of our team and asset base to respond to the ever-changing market dynamics.
Willie Chang: As a result of our year-to-date performance, bolt-on M&A contributions, and momentum as we enter the second half of the year, we're raising the midpoint of our full-year 2024 adjusted EBITDA guidance by $75 million to a new range of $2.725 million.
Willie Chang: Our 2024 production outlook remains unchanged at an increase of 200 to 300,000 barrels a day, either to exit with the back half waiting. I would also note that while rigs are trending slightly below our initial expectations, efficiencies have largely offset the impact of a lower overall rig count.
Willie Chak: Our 2024 production outlook remains unchanged at an increase of 200,000 to 300,000 barrels a day, exit to exit with the back half waiting. I would also note that while rigs are trending slightly below our initial expectations, efficiencies have largely offset the impact of a lower overall rig count. A high-level overview of our second quarter results and updated 2024 guidance as shown on slides 3 and slide 4. Consistent with our efficient growth strategy, Plains facilitated and acquired an additional 0.7% interest in the Wink-to-Webster Pipeline Company from Rattler Midstream for an aggregate cash consideration of approximately $20 million.
Willie Chang: to $2.775 billion.
Willie Chang: Our 2024 production outlook remains unchanged at an increase of 200,000 to 300,000 barrels a day exit to exit with the back half waiting.
Willie Chang: I would also note that while rigs are trending slightly below our initial expectations, efficiencies have largely offset the impact of a lower overall rig count.
Willie Chang: A high-level overview of our second quarter results and updated 2024 guidance shown on slide 3 and slide 4. Consistent with our efficient growth strategy, planes facilitated and acquired an additional 0.7 percent interest in the wing to Webster Pipeline Company from Rattler-Mittstream for an aggregate cash consideration of approximately 20 million. Now, while this transaction is small, it's a great example of how our numerous joint ventures, partnerships, and joint ownership agreements provide us with a robust opportunity set as far as potential bolt-on transactions. Slide 5 provides an overview of our bolt-on activity since the second half of 2022.
Willie Chang: high-level overview of our second quarter results and updated 2024 guidance as shown on slides 3 and slide 4.
Willie Chang: Consistent with our efficient growth strategy, Plains facilitated and acquired an additional 0.7% interest in the Wink-to-Webster Pipeline Company from Rattler Midstream for an aggregate cash consideration of approximately $20 million.
Willie Chak: Now, while this transaction is small, it's a great example of how our numerous joint ventures, partnerships, and joint ownership agreements provide us with a robust opportunity set as far as potential bolt-on transactions. Slide 5 provides an overview of our bolt-on activity since the second half of 2022. During this time, we've completed 8 bolt-on acquisitions for an aggregate investment of approximately $535 million net to Plains. These transactions all complement our existing asset base, include strong returns that meet our thresholds, create incremental efficient growth opportunities, and enhance our financial profile. With that, I'll turn the call over to Al.
Willie Chang: Now, while this transaction is small, it's a great example of how our numerous joint ventures, partnerships, and joint ownership agreements provide us with a robust opportunity set as far as potential bolt-on transactions.
Willie Chang: Slide 5 provides an overview of our bolt-on activity since the second half of 2022. During this time, we've completed eight bolt-on acquisitions for an aggregate investment of approximately $535 million net to Plains.
Willie Chang: During this time, we've completed eight bolt-on acquisitions for an aggregate investment of approximately 535 million net to planes. These transactions all complement our existing asset base, include strong returns that meet our thresholds, creating incremental efficient growth opportunities, and enhance our financial. Profile with that.
Al Swanson: These transactions all complement our existing asset base, include strong returns that meet our thresholds, create incremental efficient growth opportunities, and enhance our financial profile. With that, I'll turn the call over to Al.
Al Swanson: I'll turn the call over to Out. Thanks, Willie. We reported second quarter of just a DVD on that the PA of six hundred and seventy four million dollars. This reflects the benefit of higher tariff volumes and several market-based opportunities in our crude oil segments. The NGL segment experience favorable ISO to normal, detained spreads along with higher fracks spreads on our unhedged C3 plus spec product sales. Across both of our crude oil and NGL segments, we benefit from lower than expected operating expenses. Some of this will reverse in the second half of the year, but we remain diligent in managing costs and running efficient operations.
Al Swanson: Thanks, Willie. We reported second quarter adjusted EBITDA net to PAA of $674 million. This reflects the benefit of higher tariff volumes and several market-based opportunities in our crude oil segment. The NGL segment experienced a favorable ISO to normal butane spread along with higher frac spreads on our unhedged C3 plus spec product sale.
Al Swanson: Thanks, Willie. We reported second quarter adjusted EBITDA net to PAA of $674 million.
Al Swanson: This reflects the benefit of higher tariff volumes and several market-based opportunities in our crude oil segment. The NGL segment experienced favorable ISO to normal butane spread along with higher frac spreads on our unhedged C3 plus spec product sales.
Al Swanson: Across both of our crude oil and NGL segments, we benefited from lower than expected operating expenses. Some of this will reverse in the second half of the year, but we remain diligent in managing costs and running efficient operations. Slides 9 and 10 in today's appendix contain blocks that provide details on our second quarter performance.
Al Swanson: Across both of our crude oil and NGL segments, we benefited from lower than expected operating expenses.
Al Swanson: Some of this will reverse in the second half of the year, but we remain diligent in managing costs and running efficient operations.
Al Swanson: Fides 9 and 10 in today's appendix contain walks that provide details on our second quarter performance.
Al Swanson: Slides 9 and 10 in today's appendix contain locks that provide details on our second quarter performance.
Al Swanson: A summary of our updated 2024 guidance is on Flight 11. Shifting the capital allocation as illustrated on flight 6 for 2024, we expect to generate approximately $1.55 billion of adjusted pre-cash flow excluding changes in assets and liabilities and including $130 million of bolt-on acquisitions, with approximately $1.15 billion to be allocated to common and preferred distributions. We will also continue to self-fund our capital program with three hundred and seventy-five million of growth capital and two hundred and fifty million of maintenance capital net to PAA. Finally, in June, we issued $650 million of senior and secured notes due in 2034 at a rate of 5.7 percent.
Al Swanson: Summary of our updated 2024 guidance is on slide 11. Shifting to capital allocation, as illustrated on slide 6, for 2024, we expect to generate approximately $1.55 billion of adjusted pre-cash flow, excluding changes in assets and liabilities and including $130 million of bolt-on acquisitions, with approximately $1.15 billion to be allocated to common and preferred distribution. We will also continue to self-fund our capital program with three hundred and seventy five million of growth capital and two hundred and fifty million of maintenance capital net to PAA.
Al Swanson: A summary of our updated 2024 guidance is on slide 11.
Al Swanson: Shifting the capital allocation, as illustrated on slide 6, for 2024, we expect to generate approximately $1.55 billion of adjusted free cash flow, excluding changes in assets and liabilities, and including $130 million of bolt-on acquisitions.
Al Swanson: with approximately $1.15 billion to be allocated to common and preferred distributions.
Al Swanson: We will also continue to self-fund our capital program with $375 million of growth capital and $250 million of maintenance capital net to PAA.
Al Swanson: Finally, in June, we issued six hundred and fifty million dollars of senior unsecured notes due in 2034 at a rate of five point seven percent. We'll use the note proceeds and cash to repay the seven hundred and fifty million dollar note maturing in November. With that, I'll turn the call back to Willie.
Willie Chang: Finally, in June , we issued $650 million of senior unsecured notes due in 2034 at a rate of 5.7%. We will use the note, proceeds, and cash to repay the $750 million note maturing in November . With that, I'll turn the call back to Willie.
Al Swanson: We'll use the note proceeds and cash to repay the $750 million note, but you're in in November.
Willie Chang: With that, I'll turn the call back to Willie. Thanks, Al. Today's results reflect another quarter of strong execution, and we remain confident in our ability to continue delivering on our goals and initiatives. We're progressing our disciplined bolt-on strategy, and our efficiency efforts are resulting in cost containment throughout the company. Over the coming years, we expect the more durable and resilient cash flow profile underpinned by contract extensions in the Permian Long Hall business and a shift towards more stable fee-based cash flow in our NGL segment. Plains remain well positioned as North American energy supply will be continued to be critical to energy reliability, affordability, and security for the foreseeable future.
Willie Chak: Today's results reflect another quarter of strong execution, and we remain confident in our ability to continue delivering on our goals and initiatives. We're progressing our disciplined bolt-on strategy, and our efficiency efforts are resulting in cost containment throughout the company. Over the coming years, we expect a more durable and resilient cash flow profile, underpinned by contract extensions in the Permian long haul business and a shift towards more stable fee-based cash flow in our NGL sector.
Willie Chang: Thanks Al. Today's results reflect another quarter of strong execution and we remain confident in our ability to continue delivering on our goals and initiatives.
Willie Chang: We are progressing our disciplined bolt-on strategy and our efficiency efforts are resulting in cost containment throughout the company.
Al Swanson: Over the coming years, we expect a more durable and resilient cash flow profile, underpinned by contract extensions in the Permian long-haul business, and a shift towards more stable fee-based cash flow in our NGL segment.
Willie Chak: Plains remains well positioned as North American energy supply will continue to be critical to energy reliability, affordability, and security for the foreseeable future. Our strong operational and equity performance continues to reaffirm our strategy of cash flow discipline, generating meaningful free cash flow and increasing return of capital to our unit holders while maintaining financial flexibility. We appreciate your continued interest and support in Plains, and we look forward to providing further updates at our earnings conference in November. With that, I'll turn the call over to Blake, who will lead us into Q&A. Thank you, Willie.
Al Swanson: Plains remains well positioned as North American energy supply will be continue to be critical to energy reliability, affordability, and security for the foreseeable future.
Willie Chang: Our strong operational and equity performance continues to reaffirm our strategy of cash flow discipline, generating meaningful free cash flow and increasing return of capital to your unit holders while maintaining financial flexibility.
Al Swanson: Our strong operational and equity performance continues to reaffirm our strategy of cash flow discipline, generating meaningful free cash flow, and increasing return of capital to your unit holders while maintaining financial flexibility.
Willie Chang: We appreciate your continued interest and support plans, and we look forward to providing further updates in our earnings conference in November.
Blake Fernandez: We appreciate your continued interest and support in Plains, and we look forward to providing further updates in our earnings conference in November . With that, I'll turn the call over to Blake, who will lead us into Q&A. Thank you, Willie. As we enter the Q&A session, please limit yourself to one question and one follow-up.
Blake: With that, I'll turn the call over to Blake. We'll lead us into Q&A. Thank you, Willie.
Blake Fernandez: Thank you, Willie. As we enter the Q&A session, please limit yourself to one question and one follow-up. For those with additional questions, please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time this morning. The IR team will also be available after the call to address any additional questions you may have. Marvin, please open the call for questions. Thank you.
Blake: As we enter the Q&A session, please limit yourself to one question and one follow-up. For those with additional questions, please feel free to return to the Q&A. This will allow us to address questions from as many participants as possible in our available time this morning.
Speaker Change: For those with additional questions, please feel free to return to the Q&A. This will allow us to address questions from as many participants as possible.
Blake: The IR team will also be available after the call to address any additional questions you may have.
Willie Chang: in our available time this morning. The IR team will also be available after the call to address any additional questions you may have. Marvin, please open the call for questions.
Marvin: Marvin, please open the call for questions. Thank you. At this time, we'll conduct the question-and-answer session. As we remind us of the question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and a follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tristan Richardson of Scotiabank.
Speaker Change: Thank you. At this time, we will conduct a question and answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and a follow-up. Please stand by while we compile the Q&A roster.
Operator: Please bring yourself to one question and the follow-up.
Kristen Richardson: Please stand by while we compile the Q&A. I'll first question because on the line of Kristen Richardson, a Scotiabank, your line is now open. Hey, good morning, guys. Good morning.
Speaker Change: Our first question comes from the line of Tristan Richardson of Scotiabank. Your line is now open.
Tristan Richardson: Hey, good morning guys. Good morning, just a question, Willie, on the crude segment, seeing the guide come up there, and you noted that your producer customers are seeing greater efficiencies. Curious if, you know, is that efficiency gains better than expected kind of the key source of the change in the outlook for the crude segment? And then, you know, I guess we've heard from producers this earnings season that these efficiency gains appear to be more than expected.
Kristen Richardson: Maybe just a question really on the crude segment, seeing the guide come up there. And you noted you're seeing; you produce, your customers are seeing greater efficiencies. Curious if, I mean, is that efficiencies better than expected? Kind of the key source of the change in the outlook for the crude segment.
Tristan Richardson: Hey, good morning guys.
Tristan Richardson: Good morning. Maybe just a question, Willie, on the crude segment, seeing the guide come up there. And you noted you're seeing...
Tristan Richardson: Your producer customers are seeing greater efficiencies. Curious if, I mean, is that efficiency is better than expected, kind of the key source of the change in the outlook for the crude segment? And then, you know, I guess we've heard from producers this earning season that
Jeremy: And then, you know, I guess we've heard from producers this earnings season that these efficiency gains appear pretty sustainable as you look into 2025. Maybe kind of curious sort of the driver of the 2024 move A and then be sort of how you see efficiency gains trending as you exit into and look to the beginning at 25.
Speaker Change: these efficiency gains appear pretty sustainable as you look into 2025. You'd be kind of curious, sort of, the driver of the 2024 move, A, and then, B, sort of, how you see efficiency gains trending as you exit into and look to the beginning of 2025.
Jeremy: Hey Tristan, this is Jeremy. The overall guidance change was part MGL and part crude. Within the crude segment, there are some opportunistic acquisitions in Canada and the U.S. As far as production growth is concerned, it's been in line with expectations, but the producer has been able to do less with more. We've maintained the 200,000 to 300,000 barrels of daily production growth guidance, a little bit of outperformance in the Midland, and a little underperformance in the Delaware, driven by infrastructure constraints and lower natural gas prices, but we see those deferrals of completions into the beginning of next year.
Jeremy: Hey, Jason, this is Jeremy. The overall guidance change was part NGO or crude within the crude segment. There are some opportunistic captures in Canada and the US. As far as production growth has been in line with expectations, but the producer has been able to do less but more. We maintain the 200 to 300 thousand per day production growth guidance. A little bit about performance in the Midland, a little underperformance in the Delaware driven by infrastructure constraints and lower natural gas prices. But we see those deferral completions in the beginning of next year. So we think a healthy or efficient producer is good for our business long term, increasing recovery, lower cycle times, us chasing left connections, more efficient capital on their side in hours.
Tristan Richardson: Hey Tristan, this is Jeremy. The overall guidance change was part MGL, part crude. Within the crude segment, there are some opportunistic captures in Canada and the U.S.
Speaker Change: As far as production growth, it's been in line with expectations.
Speaker Change: But the producer has been able to do less with more. We've maintained the 200,000 to 300,000 barrel a day production growth guidance.
Speaker Change: A little bit of outperformance in the Midland, a little underperformance in the Delaware driven by infrastructure constraints and lower natural gas prices, but we see those deferral of completions into the beginning of next year. So we think a healthier, efficient producer is good for our business long term.
Jeremy: So we think a healthier, efficient producer is good for our business long term, increasing recovery, lower cycle times, us chasing fewer connections, more efficient capital on their side than ours, so I'd say it's directionally positive. It's not the sole source for the increase in guidance, but it's a positive trend for us.
Tristan Richardson: Increasing recovery, lower cycle times, us chasing less connections, more efficient capital on their side than ours, so I'd say it's directionally positive. It's not the sole source for the increase in guidance, but it's a positive trend for us.
Jeremy: So I say it's directly positive. It's not the sole source for the increase in guidance, but a deposit trend for us.
Kristen Richardson: I appreciate it, Jeremy.
Jeremy: I'll appreciate it, Jeremy. And then maybe just the follow up on the NGL segment, you know, presumably as the business becomes more fee based and mix, you know, especially next year, curious how we should think about less variability in the NGL business longer term, and then maybe, sort of at a high level, sort of where a base level of earnings for the NGL segment is once we have become more fee based.
Kristen Richardson: And then maybe just the follow up on the NGL segment, you know, presumably as the business becomes more fee based and mix, you know, especially next year, curious how we should think about, you know, less variability in the NGL business longer term.
Speaker Change: I'll appreciate it Jeremy and then maybe just the follow-up on the NGL segment you know presumably as
Jeremy: As the business becomes more fee-based and mixed, especially next year, I'm curious how we should think about.
Jeremy: And then maybe sort of at a high level sort of where a base level of earnings for the NGL segment is once we once we had become more be based. That turns into Jeremy again. What I would say is we're not going to give forward guidance on the NGL segment, but we've entered into 15-plus year contracts, which has replaced roughly a third of our frax spread exposure. We're investing 150 to 200 million dollars to replace that business with gathering, fractionation, storage, transportation. So it's going to look just like an integrated NGL value chain, which we already have.
Speaker Change: you know less variability in the NGL business longer term and then maybe sort of a at a high level sort of where a Base level of earnings for the NGL segment is once we once we have become more fee based
Jeremy: This is Jeremy again. What I would say is we're not going to give forward guidance on the NGL segment, but we've entered into a 15 plus year contract that has replaced roughly a third of our frac spread exposure. We're investing 150 to 200 million dollars to replace that business with gathering, fractionation, storage, and transportation. So it's going to look. Just like an integrated NGL value chain, which we already have, this is bolting on and bolstering that piece.
Speaker Change: This is Jeremy again. What I would say is we're not going to get four guns on the MGL segment, but we've entered into a 15 plus year contract which has replaced roughly a third of our frack spread exposure.
Speaker Change: We're investing $150 to $200 million to replace that business with gathering, fractionation, storage, transportation. So it's going to look great.
Jeremy: So we'll move from roughly 60, 40 frac spread exposed to less than 50, 50. So I'd say, longer term, this is definitely a more predictable chain, but we do like the straddle business, and we'll continue to lean into that business as well.
Jeremy: This is bolting on and bolstering that piece. So we'll move from roughly 60 40 frax spread exposed to less than 50 50. So I'd say longer term, this is definitely a more predictable chain, but we do like the straddle business, and we'll continue to lean into that business as well.
Speaker Change: Just like an integrated NTL value chain
Speaker Change: which we already have. This is bolting on and bolstering that piece, so we'll move from roughly 60-40 frac spread exposed to less than 50-50. So I'd say, longer term, this is definitely a more predictable chain, but we do like the straddle business and we'll continue to lean into that business as well.
Willie Chang: And Tristan, this is really just a reinforce that point also. You know, it's historically the market's been very seasonal. It will always be seasonal. But what you see us doing by going to more fee-based starts to flatten that saddle out a little, but I think there will always be seasonal opportunities. But everything we're doing is, Jeremy pointed out, going to more fee-based, trying to flatten the saddle out, expanding our facilities over it for Saskatchewan all playing. of that. I appreciate it.
Willie Chak: And, Tristan, this is Willie. Just to reinforce that point also, you know, historically, the market's been very seasonal. It will always be seasonal, but what you see us doing by going to more fee-based starts to flatten that saddle out a little bit. I think there will always be seasonal opportunities, but everything we're doing, as Jeremy pointed out, going to more fee-based, trying to flatten the saddle out, expanding our facilities over at Fort Saskatchewan, all play into that.
Willie Chang: And, Tristan, this is Willie, just to reinforce that point also, you know, it's historically the market's been very seasonal, it will always be seasonal, but what you see us doing by going to more fee-based starts to flatten that saddle out a little bit. I think there will always be seasonal opportunities.
Jeremy: But everything we're doing, as Jeremy pointed out, going to more fee-based, trying to flatten the saddle out, expanding our facilities over at Fort Saskatchewan, all play into that.
Tristan Richardson: I appreciate it. Thank you guys very much. Thanks Tristan. Thank you.
Kristen Richardson: Thank you guys very much. Thanks, Tristan.
Jeremy: I appreciate it. Thank you guys very much. Thanks Tristan.
Michael Blum: Thank you. One moment for our next question. Our next question, because online of Michael Blum of Wells Fargo. Your line is now open. Thanks. Good morning, everyone.
Operator: Thank you. One moment for the next question. Our next question comes from the line of Michael Blum of Wells Fargo. Your line is now open.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question concerns the line of Michael Blum of Wells Fargo. Your line is now open.
Michael Blum: Thanks. Good morning, everyone. I wanted to ask on your, I believe it was your last call, you said that you expected the crude segment EBITDA in 2026 to be roughly flat at 24 EBITDA. Just wondering if that's still a good or true statement given the increase in 24 EBITDA.
Michael Blum: I wanted to ask on your, I believe it was your last call. You said that you expected the crew segment EBITDA in 2026 to be roughly flat with 24 EBITDA. Just wanted to have still a good crew statement given the increase in 24 EBITDA guidance here. Yeah, Michael.
Michael Blum: Thanks, good morning everyone. I want to ask on your, I believe it was your last call, you said that you expected the
Michael Blum: Crews segment EBITDA in 2026 to be roughly flat with 24 EBITDA. Just wondering if that's still a good, a true statement given the increase in 24 EBITDA guidance here.
Willie Chak: Yeah, Michael. This is Willie. I'll take that one.
Willie Chang: This is Willie. I'll take that one. Our perspective hasn't changed.
Willie Chak: Our perspective hasn't changed. So as you think about our performance this year versus 2026, the same perspective. I just want to highlight, last time on the call, the reason we talked about that and gave not formal guidance, but a framework of kind of what we're thinking was to make sure people understood that with these renegotiations of contracts, we don't expect a cliff falling off in 2026. So the short answer again is no change to the perspective on the crude segment. We're always working on a lot of things there to try to bolster our crude business, and more guidance will come as we outline 25, 26 as far as formal guidance is concerned.
Speaker Change: And Michael, this is Willie. I'll take that one. Our perspective hasn't changed.
Willie Chang: So, as you think about our performance this year versus 2026. Same perspective.
Michael Blum: Okay, I got it. Thanks for that.
Speaker Change: So, as you think about our performance this year versus 20...
Willie Chang: I just want to highlight last time on the call. The reason we talked about that and gave not formal guidance, but a framework of kind of what we're thinking was to make sure people understood that with these renegotiations and contracts. We don't expect a cliff falling off in 26. So no short answer again is no change to the perspective on the crew segment.
Michael Blum: 26, same perspective.
Speaker Change: I just want to highlight last time on the call the reason we talked about that and gave not formal guidance But a framework of kind of what we're thinking was to make sure people understood that with these renegotiations of contracts We don't expect the cliff falling off in 26
Speaker Change: So no short answer again is no change to the perspective on the crude segment we're always working on a lot of things there to try to To bolster our crude business and more guidance will come as we Outline 25 26 as far as formal guidance coming out later
Michael Blum: We're always working on a lot of things there to try to bolster our crew business, and more guidance will come as we outline 2526, as far as formal guidance coming out later. Okay, got it. Thanks for that.
Michael Blum: And then just to continue the discussion on Permian production growth, just wanted to get your perspective, just how you see things playing out over the balance of this year and next. And do you think over the next, you know, few years, you could see a scenario where Permian crew takeaway could get tight again? Michael, this is Jeremy.
Michael Blum: And then just to continue the discussion on Permian production growth.
Speaker Change: Okay, got it. Thanks for that.
Speaker Change: Just to continue the discussion on Permian production growth, just wanted to get your perspective. Just how you see things playing out over the balance of this year and next, and do you think over the next...
Michael Blum: Just want to get your perspective just how you see things playing out over the balance of this year and next, and do you think over the next few years you could see a scenario where Permian crew take away could get tight again. Thanks.
Speaker Change: you know, a few years, you could see a scenario where permitting crew take away could get tight again. Thanks.
Jeremy: Michael, this is Jeremy. In the near term, like we said, there's an infrastructure constraint, more mostly in New Mexico, without being water gas, and lower gas prices just lend more completions in the Midland. But we see that as pipeline some on another one announced yesterday, but as we get fourth quarter relief, you're going to see the ability to add more production growth. So it'll be a little lumpy as we hit infrastructure constraints. But we see it directionally continuing to increase the two to 300,000 dollars per day a year that we've stayed with, and naturally the basin will get tighter for differentials.
Jeremy: Michael, this is Jeremy. In the near term, like we said, there are some infrastructure constraints, mostly in New Mexico, that is, water, and gas. Lower gas prices just lend more completions in the Midland Basin. But we see that as pipelines come on, there was another one announced yesterday, but as we get fourth quarter relief, you're going to see the ability to add more production growth. So it'll be a little lumpy as we hit infrastructure constraints, but we see a directionally continuing increase of the two to three hundred thousand barrels a day a year that we've stayed with, and naturally the basin will get tighter.
Jeremy: In the near term, like we said, there's an infrastructure...
Speaker Change: Michael, this is Jeremy. In the near term, like we said, there are some infrastructure constraints, mostly in New Mexico. That being water, gas, and lower gas prices.
Speaker Change: when more completions in the Midland Basin.
Speaker Change: But we see that as pipelines come on, there's another one announced yesterday, but
Speaker Change: As we get fourth quarter relief, you're going to see the ability to add more production growth. So it'll be a little lumpy as we hit infrastructure constraints.
Speaker Change: But we see a directionally continuing increase in the 200,000 to 300,000 barrels a day a year that we've...
Jeremy: Don't reflect that for next year, but contracting discussions are as we've just had. And others are having reflect that the industry is looking to sell more away from Midland as time progresses. So I'm going to directionally positive for our business and everything happening in line with the discussions we had with our shift person to contract when we just completed. Thank you.
Speaker Change: state width, and naturally the basin will get tighter.
Jeremy: Forward differentials don't reflect that for next year, but contracting discussions, as we've just had and others are having, reflect that the industry is looking to sell more away from Midland as time progresses. So again, it's directionally positive for our business, and everything's happening in line with the discussions we had with our shippers in the contract we just completed.
Speaker Change: For differentials don't reflect that for next year, but contracting discussions are, as we've just had and others are having reflect that the industry is looking to sell more away from Midland as time progresses. So I've been as directionally positive for our business.
Speaker Change: And everything's happening in line with the discussions we had with our shippers in the contract that we just completed.
Jeremy: Thank you one more for the next question. Our next question comes from the line of Jeremy Tonnet of JP Morgan Securities. Your line is now open.
Jeremy Tonit: We'll move on to our next question. Our next question comes from a line of Jeremy Tonit of JP Morgan Securities. Your line is now open. Hi, good morning. Hey, Jeremy. Hey, just wanted to pick up, I guess, on M&A opportunity set of more, more kind of little bolt on there. How much depth do you see to that opportunity set going forward here? Just trying to get a feeling for what you see there. Yeah, thanks for the question, Jeremy. You know, you've heard us talk about efficient growth in bolt-ons, and quite frankly, it's been a niche for us.
Speaker Change: Thank you.
Speaker Change: Thank you one more for next question.
Speaker Change: Our next question comes from the line of Jeremy Toney of JP Morgan Securities. Your line is now open.
Jeremy Tonnet: I just wanted to pick up, I guess, on the M&A opportunity set, more more kind of little bolt-ons there. How much depth do you see to that opportunity set going forward here? Just trying to get a feeling for what you see there.
Speaker Change: Hi, good morning. Hey, Jeremy.
Jeremy Toney: I just wanted to pick up, I guess, on M&A opportunity set more, more kind of little bolt-ons there. How much depth do you see to that opportunity set going forward here? Just trying to get a feeling for what you see there.
Willie Chak: Yeah thanks for the question Jeremy. We've you know you've heard us talk about efficient growth and bolt-ons and quite frankly it's been a niche for us and the reason we showed the slide in the deck is to show just the number that we've done and if you think about our asset base where it sits and the integrated nature of it we're really I think uniquely positioned to be able to capture synergies so a lot of these bolt-ons you know they aren't processes that are the formally that that come out but it's more in discussions with our partners to see how do we get to win-win solutions and we've demonstrated that we can do that and you know these are bite-sized but they certainly when you add them up make a meaningful difference and the returns are great on them and we think it's a great great use of our free cash flow.
Speaker Change: Thanks for the question Jeremy. You've heard us talk about efficient growth and bolt-ons.
Jeremy: And the reason we showed the slide in the deck is to show just the number that we've done. And if you think about our asset base, where it sits in the integrated nature of it, we're really, I think, uniquely positioned to be able to capture synergies. So a lot of these bolt-ons, you know, the art processes that are, the formula that come out, but it's more in discussions with our partners to see how do we get to win-win solutions. And we've demonstrated that we can do that. And you know, these are bite-sized, but they certainly, when you add them up, make a meaningful difference.
Speaker Change: Quite frankly, it's been a niche for us.
Speaker Change: And the reason we show the slide in the deck is to show just the number that we've done. And if you think about our asset base, where it sits, and the integrated nature of it, we're really, I think, uniquely positioned to be able to capture synergies. So a lot of these bolt-ons...
Speaker Change: They aren't processes that come out, but it's more in discussions with our partners to see how do we get to win-win solutions.
Speaker Change: And we've demonstrated that we can do that and, you know, these are bite-sized, but they certainly, when you add them up, make a meaningful difference. And the returns are great on them, and we think it's a great use of our free cash flow.
Jeremy: And the returns are great on them. And we think it's a great use of our free cash flow. So we'll continue to try to advance and develop those. I think if you think about the environment and where capital is tight, different partners have different constraints and desires, it's kind of a target-rich environment to be able to have discussions. And the question is, how many of them can you bring to fruition? And we'll just continue to plug away on that.
Willie Chak: So, we'll continue to try to advance and develop those. I think if you think about the environment and where capital is tight, different partners have different constraints and desires. It's kind of a target-rich environment to be able to have discussions.
Speaker Change: So we'll continue to try to advance and develop those. I think if you think about the environment and where capital is tight, different partners have different constraints and desires.
Willie Chak: And the question is, how many of them can you bring to fruition? And we'll just continue to plug away at that. And then maybe just to take it one step further, if you were asking about broader M&A and opportunity sets, we've been pretty open on the views that we think there is going to be more consolidation across the industry, whether it be in upstream, midstream, or downstream, just because capital is more expensive and you start growing a little bit more through efficiencies and synergy.
Speaker Change: It's kind of a target-rich environment to be able to have discussions, and the question is, how many of them can you bring to fruition?
Jeremy: And then maybe just to take it one step further, if you were asking about broader M&A and opportunities sets, we've been pretty open on the views that we think there is going to be more consolidation across the industry, whether it be an upstream, mystery, downstream, just because capital is more expensive and you start growing a little bit more through efficiencies and synergies. And as we look at those, we're just going to stay very disciplined. And if it makes sense to the unit holders to consider something like that, we would certainly be open. But in the meantime, I think this sufficient growth with bolt-ons; we have a deep, deep opportunity set there, and we'll see what we can bring across the line.
Speaker Change: And we'll just continue to plug away on that.
Speaker Change: And then maybe just to take it one step further, if you were asking about broader M&A and opportunity sets, we've been pretty open on the views that we think there is going to be more consolidation across the industry, whether it be in upstream, midstream, downstream, just because, you know,
Speaker Change: Capital is more expensive and you start growing a little bit more through efficiencies and synergies.
Willie Chak: As we look at those, we're just going to stay very disciplined, and if it makes sense for the unit holders to consider something like that, we would certainly be open. But in the meantime, I think sufficient growth with bolt-ons is we have a deep, deep opportunity set there, and we'll see what we can bring across the line.
Speaker Change: And as we look at those, we're just going to stay very disciplined, and if it makes sense to the unit holders to consider something like that, we would certainly be open. But in the meantime, I think there's sufficient growth with bolt-ons. We have a deep, deep opportunity set there, and we'll see what we can bring across the line.
Jeremy: Got it, that's very helpful there.
Jeremy: Got it. That's very helpful there. And then maybe going a little bit further with Permian egress supply and demand. Just wondering if you could provide a bit more color on customer conversations at this point. Do they see tightening and that kind of brings a different tone to the conversation, or just kind of wondering how you think that stands right now?
Jeremy: And then just maybe going a little bit further with Permian egress supply demand, just wondering if you could provide a bit more color on customer conversations at this point. Do they see tightening, and that kind of brings a different tone to the conversation, or just kind of wondering how you think that stands right now? I would say that we've had constructive dialogue on the last quarter. We gave a significant update on our pipes. Those are large shippers that we contracted with us, and we're certainly seeing where there's available capacity; we're having constructive dialogue. I don't want to speak to specific pipes or interest.
Speaker Change: got it that's very helpful there and then just
Speaker Change: Maybe going a little bit further with Permian Egress supply-demand, just wondering if you could provide a bit more color on customer conversations at this point. Do they see tightening and that kind of brings a different tone to the conversation, or just kind of wondering how you think that stands right now?
Jeremy: I would say that we've had constructive dialogue. Obviously, last quarter, we gave a significant update on our pipeline. Those are large shippers that have renegotiated with us, and we'll certainly see where there's available capacity. We're having constructive dialogue that I want to speak to specific pipes or interests. There's a certain amount of exposure we want to retain because we see value and we need to clear the barrels of marketing and silly advice. But with our third-party customers, we're having a very constructive dialogue, but we're going to be patient.
Speaker Change: I would say that we've had constructive dialogue. Obviously last quarter we gave a significant update on our pipes. Those are large shippers that recontracted with us.
Speaker Change: And we certainly see where there's available capacity, we're having constructive dialogue. I don't want to speak to specific pipes or interest. There's a certain amount of exposure we want to retain because we see value and we need to clear the barrels. Our marketing facility size, but with our third-party customers, we're having very...
Jeremy: There's a certain amount of exposure. We want to retain because we see value, and we need to clear the barrels our marketing and silly sides. But when our third party customers were having very constructive dialogue, but we're going to be patient.
Willie Chak: Jeremy, this is Willie. A couple of other things on that. You know, the last time we talked about the extension of our long-haul contracts, and I think this really, our strategy there is really playing into what we think is going to happen. You know, if you think about the last time the market was constrained, it was back in the 2014-15 range, 16, and then there was a lot of capacity built, and there was some, you know, markets were tight, spreads were wide, and we always expected at this point you would start tightening the spare capacity, and I think the strategy on the long-haul extensions to 28-29-30 fit well, as well as retaining some open space on the ability to capture margins between Midland and the Gulf Coast is a strategy that we've laid out, and I think it will pan out pretty well.
Willie Chang: Jeremy, this is Willie. A couple of other things on that. Last time we talked about the extension of our long haul contracts, and I think this really, our strategy there is really playing into what we think is going to happen. If you think about the last time the market was constrained, it was back in the 2014-15 range, and then there was a lot of capacity built and there were some markets where tight spreads were wide. We always expected at this point you would start tightening the spare capacity, and I think the strategy on the long haul extensions to $29.29.30 fit well, as well as retaining some open space on the ability to capture margins between Midland and the Gulf is a strategy that we've laid out, and I think it will pan out pretty well.
Speaker Change: constructive dialogue, but we're going to be patient.
Speaker Change: Jeremy, this is Willie. A couple of other things on that. You know, the last time we talked about the extension of our long-haul contracts.
Jeremy: And I think this really, our strategy there is really playing into what we think is going to happen. You know, if you think about the last time the market was constrained, it was back in the 2014-15 range, 16.
Speaker Change: And then there was a lot of capacity built.
Speaker Change: and there was some, you know, markets worked tight.
Speaker Change: Spreads were wide and we all was expected at this point you would
Speaker Change: Start tightening the spare capacity.
Speaker Change: And I think the strategy on the long-haul extensions to 28, 29, 30
Speaker Change: Fit well as well as retaining some open space on
Speaker Change: The ability to capture margins between Midland and the Gulf Coast is a strategy that we've laid out and I think it will pan out pretty well.
Jeremy: Got it. That's helpful. Thank you. Thank you.
Jeremy: Thank you.
Speaker Change: Got it. That's helpful. Thank you. Thank you.
Manav Gupta: Thank you. One moment for the next question. Our next question comes from the line of Manav Gupta of UBS. Your line is now open.
Manav Kutta: One moment for next question. Our next question comes online from Manav Kutta of UBS. Your line is now open. I just wanted to focus a little bit on the lower operating expenses, lower cost.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from a line of Manav Gupta of UBS. Your line is now open.
Manav Gupta: Congratulations guys, I just wanted to focus a little bit on the lower operating expenses and lower costs. You did mention it was part of the beat.
Manav Gupta: Congrats guys, I just wanted to focus a little bit on the lower operating expenses, lower cost. You did mention it was part of the beat.
Chris Chandler: You would what can actually go on and benefit you in the second half of 2024 and 2025 as it relates to lowering overall expenses and cost. Hey, good morning, Manav. This is Chris Chandler.
Manav Gupta: So, trying to understand what part of it is sticky, what can actually go on and benefit you in the second half of 2024 and 2025 as it relates to lowering overall expenses and cost.
Chris Chandler: So trying to understand what part of it is sticky, what can actually go on and benefit you in the second half of 2024 and 2025 as it relates to, you know, lowering overall expenses and costs.
Chris Chandler: I will note that some of the lower costs in the first half were our ability to successfully defer some spend into the second half, so that won't necessarily be sticky. But we're, of course, always looking to optimize our operating cost. It certainly varies as volumes vary and utility prices vary. And we'll look to optimize that going forward.
Manav Gupta: Hey, good morning. This is Chris Chandler
Speaker Change: I will note that some of the lower costs in the first half were our ability to successfully defer some spend into the second half, so that won't necessarily be
Al Swanson: Hey, good morning; this is Chris Chandler. I will note that some of the lower costs in the first half were our ability to successfully defer some spend into the second half, so that won't necessarily be sticky. But we're, of course, always looking to optimize our operating costs. It certainly varies as volumes vary and utility prices vary, and we'll look to optimize that going forward, but some of that was first half to second half.
Speaker Change: sticky but we're of course always looking to optimize our operating cost. It you know certainly varies as volumes vary and utility prices vary and we'll look to optimize that going forward but some of that was first half to second half deferrals.
Chris Chandler: But some of that was first half to second half deferrals.
Al Swanson: And any quick commentary on, you know, possibility of redeeming the preferred like in the future that could lower your cost of capital. This is out. No change in our thinking at this time. But, as we have articulated, we do recognize that there may be a point in the future where we'll reconsider that. So near term now, medium to longer term, we will reevaluate that. Thank you, guys.
Al Swanson: And any quick commentary on the possibility of redeeming the preferred shares in the future that could lower your cost of capital.
Speaker Change: And any quick commentary on, you know, possibility of renewing the preferred like in the future that could lower your cost of capital?
Manav Gupta: This is Al. No change in our thinking at this time, but as we have articulated, we do recognize that there may be a point in the future where we'll reconsider that. So, near term now, medium to longer term, we will reevaluate that. Thank you, guys.
Al Swanson: This is Al. No change in our thinking at this time, but as we have articulated, we do recognize that there may be a point in the future where we'll reconsider that. So near term now, medium to longer term, we will reevaluate that.
Keith Stanley: Thank you. We'll move for next question. Our next question comes online of key Stanley of both research. Your line is now open. Hi, good morning. I think I clocked your prepared remarks at six minutes. That's a new record for you guys. Congrats on that. I wanted to ask first on capital allocation. You're having another really good year about the expectations in the past. When that happened. I think you've been open about raising the distribution sooner or in larger size. Is that something that would be potentially on the table again? Or should we still assume $0.15 per unit Q4 as the target?
Keith Stanley: Thank you one more for the next question. Our next question comes from the line of Keith Stanley of Wolf Research. Your line is now open.
Speaker Change: Thank you, guys.
Manav Gupta: Thank you one more for next question.
Speaker Change: Our next question comes from the line of Keith Stanley of Wolf Research. Your line is now open.
Willie Chak: Hi, good morning. I think I clocked your prepared remarks at six minutes. That's a new record for you guys, so congrats on that. I wanted to ask first on capital allocation. You're having another really good year above expectations. In the past, when that happened, I think you've been open about raising the distribution sooner or in a larger size. Is that something that would potentially be on the table again? Or should we still assume 15 cents per unit in Q4 as the target?
Keith Stanley: Hi, good morning. I think I clocked your prepared remarks at six minutes. That's a new record for you guys, so congrats on that.
Keith Stanley: I wanted to ask first on capital allocation. You're having another really good year above expectations. In the past when that's happened
Speaker Change: I think you've been open about raising the distribution sooner or in larger size. Is that something that would be potentially on the table again or should we still assume $0.15 per unit Q4 as the target?
Willie Chak: Yeah, Keith, this is Willie. Thanks for the question. I think we've been pretty steadfast in laying out our capital allocation strategies, and to answer your question directly, we've demonstrated, and we will continue to focus on returns of capital to our unit holders. If we are able to have sustainable EBITDA going forward, we absolutely will consider that as we do our annual reviews on each district. We've done 220 cent increases, we've stated the 15 cents, and it's an annual increase that we look at early every year. But to answer your question again, it's absolutely part of our discussions. We want to get back more cash to the unit holders.
Willie Chang: Yeah, Keith. This is Willie. Thanks for the question. I think we've been pretty stiff, fast, and laying out our capital allocation strategies, and to answer your question directly. We've demonstrated and we will continue to focus on returns of capital to our unit holders. If we are able to have sustainable Epidog going forward, we absolutely will consider that as we do our annual reviews on distribution. We've done 220 increases. We've stated the $0.15, and it's an annual increase that we look at early every year. But to answer your question again, it's absolutely part of our discussions.
Keith Stanley: Yeah, Keith, this is Willie. Thanks for the question.
Willie Chang: I think we've been pretty steadfast in laying out our capital allocation strategies and to answer your question directly We've demonstrated and we will continue to
Speaker Change: To focus on returns of capital to our unit holders, if we are able to have sustainable EBITDA going forward, we absolutely will consider that as we do our annual reviews on distribution.
Manav Gupta: We've done 220 cent increases. We've stated the 15 cents and it's an annual increase that we look at early every year but to answer your question again it's it's absolutely part of our part of our discussions we want to get back more cash to the unit holders if we can.
Willie Chang: We want to get back more cash to the unit holders if we can.
Keith Stanley: Great. Thanks for that.
Keith Stanley: Great, thanks, thanks for that. Second, just tying back to the Permian, any early thoughts you would give on 2025 and the trajectory for volumes there, just given what you're seeing with efficiencies, producer consolidation, I think Jeremy alluded to relief when Matterhorn came on, just any thoughts just directionally for next year? You know, Keith, this is Willie again.
Willie Chang: Second on just time back to the Permian. Any early thoughts you would give on 2025 and the trajectory for volumes there, just given what you're seeing with efficiencies, producer consolidation? I think Jeremy alluded to relief when Matterhorn comes on. Just any thoughts, just directionally for next year.
Speaker Change: Great. Thanks for that.
Speaker Change: Second, just tying back to the Permian, any...
Speaker Change: Early thoughts you would give on 2025 and the trajectory for volumes there, just given what you're seeing with efficiencies, producer consolidation. I think Jeremy alluded to relief when Matterhorn comes on. Just any thoughts just directionally for next year?
Spiro Dunes: You know, Keith, this is Willie again. We're not we haven't given long-term guidance, but I'll give you some general thoughts. We've played for the long term, and our belief is that the Permian will be a key basin for the world. Our growth of two to three hundred, I think we've directionally said we expect that kind of to be more close to that than some of the incredible growth numbers that we've had in the past. There will be constraints; there will be lumpiness in the growth profile, but we are pretty bullish on the Permian in technology and some of the synergies that the EMP site is with the consolidations, I'm being able to develop it more responsibly, or more efficiently, and more efficiently, not responsibly. Thank you. Thanks. Thank you. One moment for next question. Our next question comes from a line of Spiro Dunes of Citi. Your line is now open. Thanks, operator. What do you guys want to go back to Permian Egress just quickly? So certainly respect he can't say much for commercial reasons, but maybe you could just give us a sense on maybe what's open to contract here and help us sensitize how to think about the impact. And it's been kind of at the 2026 plus more pipeline capacity coming. What is your appetite to have, you know, kind of a more than 10% contract book open at that point? Here, this is Jeremy. If we haven't provided that and don't intend to, but I would say that there's a small amount on Cactus One and Cactus Two, and then Basin has some uncontracted capacity. Bridge Tex does have some as well, but we're 20% not pretty interested. You might want to talk to one of them here, but Cactus One and Two are largely contracted. We've retained some space to fill our dock, and there's some other things I want to do, and then there's some space available to Cushioning as well. Okay, thank you. Jeremy, second one maybe just quickly on the volume guidance. Notice that the Permian intra-basin looks like that's stepped up a bit. The gathering stepped down a bit, and so sorry if I missed you. Maybe just walk us through the back there. What's going on? Sure, this is Jeremy again. It's largely associated with transportation to Colorado City to hit other connecting carriers. That space, the pipeline towards Corpus, are all full, so this is just getting in digital barrels production growth from the basin out to Colorado City and hitting even the Houston or Midcon in markets. And some of that's a reflective TMX. You see the heavy barrels leave the mid-continent; there's some other barrels that have to take its place. So we've seen some impact on Basin and some on since when the west are extended into Beaumont. You're seeing more flows into Houston that can come across Bridge Tex, so it's just as new pipeline dynamics add as production goes on the five new markets. Got it. Helpful as always. Thank you. Thank you. One moment for next questions. Our next question concern lined up Neil Mitra of Bank of America. Your line is now open. Hi, thanks for taking my question.
Willie Chak: You know, Keith, this is Willie again. We haven't given long-term guidance, but I'll give you some general thoughts. We play for the long term, and our belief is that the Permian will be a key basin for the world. Our growth of 200 to 300, I think we've directionally said we expect that kind of to be more close to that than some of the incredible growth numbers that we've had in the
Speaker Change: You know Keith, this is Willie again. We haven't given long-term guidance, but I'll give you some general thoughts.
Speaker Change: We play for the long term and our belief is that the Permian will be a key basin for the world our growth of two to three hundred I think we've Directionally said we expect that kind of to be More close to that than some of the the incredible growth numbers that we've had in the past
Willie Chak: There will be constraints, there will be lumpiness in the growth profile, but we are pretty bullish on the Permian and technology and some of the synergies that the E&P side has with the consolidations on being able to develop it more responsibly. Or more efficiently, not responsibly.
Speaker Change: There will be constraints.
Speaker Change: There will be lumpiness in the growth profile, but we are pretty bullish on the Permian and technology and some of the
Speaker Change: The synergies that the E&P side is with the consolidations on being able to develop it more responsibly so or more more efficiently And more efficiently not responsibly
Operator: Thank you one moment for the next question. Our next question comes from the line of Superior Duties of Cities. Your line is now open.
Speaker Change: Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you one moment for next question.
Speaker Change: Our next question comes from the line of Superior Duties of Cities. Your line is now open.
Superior Duties: Thanks Operator. Morning guys. I wanted to go back to permit egress just quickly.
Speaker Change: Thanks operator. Morning guys. I wanted to go back to permit egress just just quickly. So certainly respect that you can't say much for commercial reasons, but maybe if you could just give us a sense on maybe what's open to contract here and help us sensitize how to think about the impact and as we think kind of out to 2026 plus.
Superior Duties: So certainly respect that you can't say much for commercial reasons, but maybe if you could just give us a sense of maybe what's open to contract here and help us sensitize how to think about the impact and, as we think kind of out the 2026 plus more pipeline capacity coming, what is your appetite to have, you know, kind of a more than 10% contract book open at that point? This is Jeremy. We haven't provided that and don't intend to, but I would say that there's a small amount on cactus one and cactus two and then
Speaker Change: More pipeline capacity coming. What is your appetite to have, you know, kind of a more than 10% contract book open at that point?
Jeremy: We haven't provided that and don't intend to, but I would say that there's a small amount on Cactus 1 and Cactus 2, and Basin has a small amount.
Speaker Change: This is Jeremy. We haven't provided that and don't intend to, but I would say that there's a
Speaker Change: Small amount on Cactus 1 and Cactus 2 and then Basin has
Speaker Change: I like it.
Speaker Change: to uncontracted capacity.
Speaker Change: Bridge Tech does have some as well, but we're 20% not operating interest, so you might want to talk to one of their
Speaker Change: But Cactus 1 and 2 are largely contracted. We've retained some space to fill our dock and do some other things that we do. And then there's some space available to Cushing as well.
Jeremy: Got it. Okay. Thanks, Jeremy. Second one, maybe just quickly on the volume guidance, notice that the Permian Intra Basin looks like it stepped up a bit, but Gathering stepped down a bit. And so sorry if I missed anything, maybe you could just walk us through the document there of what's going on. Sure. This is Jeremy again.
Speaker Change: Got it. Okay. Thanks, Jeremy. Second one, maybe just quickly on the volume guidance, notice that the Permian intrabasin looks like that stepped up a bit, but gathering stepped down a bit. And so sorry if I missed it. Maybe you just walk us through the dynamic there of what's going on.
Jeremy: Sure, this is Jeremy again. It's largely associated with transportation to Colorado City to hit other connecting carriers out of space. The pipelines towards Corpus are all full, so this is just getting additional barrels of production growth from the basin out to Colorado City and hitting either the Houston or mid-continent markets. And some of that's a reflective TMX. You see that if the heavy barrels leave the mid-continent, there's some other barrels. Since Wayne to Webster extended into Beaumont, you're seeing more flows into Houston that can come across BridgeTech. So it's just as new pipeline dynamics add, as production goes, comes and finds new markets.
Jeremy: It's largely associated with transportation to Colorado City to hit other connecting carriers out of space.
Jeremy Toney: Sure, this is Jeremy again. It's largely associated with transportation to Colorado City to hit other connecting carriers that have space.
Speaker Change: The pipelines towards Corpus are all full, so this is just getting additional barrels production growth from the basin out to Colorado City and hitting either the Houston or mid-continent markets.
Speaker Change: And some of that is reflected in TMX, you see if the heavy barrels leave the mid-continent there are some other barrels that have to take its place, so we've seen some impact on basin and some on...
Speaker Change: Since Wayne-to-Webster extended into Beaumont, you're seeing more flows into Houston that can come across BridgeTech. So it's just as new pipeline dynamics add, as production goes, comes and finds new markets.
Superior Duties: Got it. Helpful as always. Thanks, Dean.
Speaker Change: Got it. Helpful as always. Thanks, Dean.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Neil Mitra of Bank of America. Your line is now open.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from Neal Mitra of Bank of America. Your line is now open.
Neil Mitra: Hi, thanks for taking my question. It looks like the 25 frack spread in Canada has, you know, in 25 years, peaked up to close to 70 cents a gallon. Have you started looking at hedging that out and adding more stability on top of your fixed fee contracts that you talked about last quarter? Hey Neil, this is Jeremy. We have a continued program of looking at...
Jeremy: It looks like the 25 Frax bread in Canada has, you know, in 25 peaked up to close to 70 cents a gallon. Have you started looking at hedging that out and adding more stability on top of your fixed fee contracts that you talked about last quarter? Hey, Neil, this is Jeremy. We have a continuous program of looking at hedging on a forward basis and current year and crop year. Absolutely, we're looking forward, and we try to have a rolling program. So we're not going to provide guidance at this point, but we see market signals and we're opportunistic around trading around those positions and putting hedges on as well.
Neal Mitra: Hi, thanks for taking my question. It looks like the 25 frac spread in Canada has...
Neal Mitra: You know, in 25 peaked up to close to 70 cents a gallon. Have you started looking at hedging that out and adding more stability on top of your fixed fee contracts that you talked about last quarter?
Jeremy: Hey Neil, this is Jeremy. We have a continuous program of looking at hedging on a forward basis and for the current year and for the prompt year. Absolutely, we're looking forward, and we try to have a rolling program. So we're not going to provide guidance at this point, but we see market signals, and we're opportunistic about trading around those positions and putting hedges on as well. So we continue to look at it. It's not something we're going to provide an update on now, but we absolutely pay attention to the forward price spread. It's steeply backwardated, and so opportunities are fewer, and liquidity is lower on the forward basis, but it's definitely something we monitor in our actions.
Jeremy Toney: Hey Neil, this is Jeremy. We have a continuous program of looking at hedging on a forward basis and current year and prompt year. Absolutely, we're looking forward and we try to have a rolling program. So we're not going to provide guidance at this point, but we see market signals.
Speaker Change: We're opportunistic around trading around those positions and putting hedges on as well. So we continue to look at it It's not something we're to provide an update now, but we absolutely pay attention to the forward price spread. It's steeply backward aided
Jeremy: So we continue to look at it because not something we're going to find an update now, but we absolutely pay attention to the forward Frax bread. It's deeply vaccinated, and so the opportunities are fewer and liquidity fewer on the forward basis, but it's definitely something we monitor and are active in. In, you know, we typically give guidance closer to the beginning of the year. And as you'll know, as you probably know, the liquidity for the ability to hedge is as you move further out.
Speaker Change: And so, opportunities are fewer and liquidity is fewer on a forward basis, but it's definitely something we monitor and are active in.
Jeremy: And you know, we typically give guidance closer to the beginning of the year, and as you probably know, the liquidity for the ability to hedge, as you move further out, it's more difficult. So more to come on that.
Speaker Change: And Neil, we typically give guidance closer to the beginning of the year, and as you probably know, the liquidity for the ability to hedge, as you move further out, it's more difficult. So more to come on that.
Neil Mitra: Okay, perfect. And then maybe we can go back to Jeremy on this. You know, we've talked about the Permian being back half-weighted with growth. Could you maybe talk about what you've seen in the second quarter with some of the negative WAHA prices and some of the heavier gas-cut wells have been shut in, or we've seen delayed turn-in-line wells? And now that Matterhorn is delayed into early Q4, do you have any different expectations as to whether Q4 is heavier on growth versus Q3, or if your initial projections are unchanged? Neil, I think we're still in the range of
Jeremy: It's back to Jeremy on this. You know, we've talked about the Permian being back half weighted with growth. Could you maybe talk about what you've seen in the second quarter with some of the negative Waha prices and some of the heavier gas cut wells have been shut in or we've seen delayed turning on wells. And now that Matterhorn has delayed into early Q4, do you have any different expectations on if Q4 is heavier on growth versus Q3 or if your initial projections are unchanged? So Neil, I think we're still in the range of two to three hundred thousand barrels. Today can move within that range, but we haven't seen growth today.
Neil: OK, perfect and then.
Neil: Back to Jeremy on this, you know we've talked about the Permian being back half-weighted with growth.
Speaker Change: Could you maybe talk about what you've seen in the second quarter with some of the the negative waha prices and this
Jeremy Toney: Some of the heavier gas cut wells
Jeremy Toney: have been shut in or we've seen delayed turn in line wells.
Speaker Change: And now that Matterhorn is delayed into early Q4, do you have any different expectations on if Q4 is heavier on growth versus Q3, or if your initial projections are unchanged?
Jeremy: So, Neil, I think we're still in the range of 200,000 to 300,000 barrels a day and can move within that range. But we have seen growth to date, so it's not like we didn't see anything. Q4 was very strong last year, which flattened out for a period, but we continue to see growth. Weather has not been as hot this year as it has been, so you've seen even growth during the summer where maybe you didn't see growth last year.
Speaker Change: So Neil, I think we're still in the range of 200,000 to 300,000 barrels a day and move within that range.
Jeremy: So it's not like we didn't see anything. Q4 was very strong last year, which flattened out for a period, but we continue to see growth, whether it has not been as hot this year as it had been. So you've seen even growth during the summer, where maybe you didn't last year. Last year actually saw declines in this time of period of time. So directly, it's been positive and consistent. Maybe it's delayed some completion to the Mexico and places that are more impacted, but that's really just a quarter. So that could be into the first quarter next year, but Midland, like I said earlier, was outperformed.
Speaker Change: But we have seen growth.
Speaker Change: to date. So it's not like we didn't see anything. Q4 was very strong last year, which flattened out for a period. But we continue to see growth. Weather has not been as hot this year as it has been. So you've seen even growth during the summer where maybe you didn't last year. Last year actually saw declines in this time period of time.
Jeremy: Last year actually saw declines in this period of time, so directionally, it's been positive and consistent. Maybe it's delayed some completions in New Mexico and places that are more impacted, but that's really just a quarter, so that could be into the first quarter of next year. But Midland, like I said earlier, has outperformed, so I would say it's still in line with expectations. The timing of some completions has moved.
Speaker Change: So, directionally it's been positive and consistent.
Speaker Change: Maybe it's delayed some completions in New Mexico and places that are more impacted, but that's really just a quarter.
Speaker Change: So that could be into the first quarter of next year, but Midland, like I said earlier, is outperformed. So I would say still in line with expectations. Timing of completions has moved. But I think our forward guidance captures what our expectations are.
Jeremy: So I would say still in line with the expectations, timing of some completion has moved, but I think our four guidance captures what our expectations are.
Neil Mitra: Okay, perfect.
Neil Mitra: Okay, perfect. Thank you so much.
Neil Mitra: Thank you so much. Thank you. Our next question comes from Linus, A.J. O'Donnell of TPH. Your line is now open. Hey, good morning. Thanks for taking my question. I just wanted to go back to some of the comments around the forward curves. You mentioned next year that those curves might not accurately be pricing in some of the conversations that you're having. Just curious, if you see, you know, gross differentials between Midland and Houston winding out beyond the average transport rate, and is that like a more of a 25 thing or is that later on in 26?
Operator: Thank you. One moment for our next question. Our next question comes from the line of A.J. O'Donnell of TPH. Your line is now open.
Speaker Change: Okay, perfect. Thank you so much.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of AJ O'Donnell of TPH. Your line is now open.
A.J. O'Donnell: Hey, good morning. Thanks for taking my question. I just wanted to go back to some of the comments around the forward curve. You mentioned next year that those curves might not accurately price in some of the conversations that you're having. I'm just curious if you see gross differentials between Midland and Houston widening out beyond the average transport rate, and is that like more of a 25 thing or is that later on in 26? Certainly not something we give forward guidance on, but if you look...
AJ O'Donnell: Hey, good morning. Thanks for taking my question. I just wanted to go back to some of the comments around the forward curves. You mentioned next year that those curves might not accurately be pricing in some of the conversations that you're having.
Speaker Change: I'm just curious if you see, you know, gross differentials between Midland and Houston widening out beyond the average transport rate. And is that like a more of a 25 thing or is that later on in 26?
Jeremy: Certainly not something we give forward guidance on, but if you look, MEH is something that doesn't reflect an on-the-water number, so the prices for water and the realized prices to the coast are 30 to 50 cents higher than that. So you have to start from there; there's the disconnect.
Jeremy: Certainly not something we give forward guidance on, but if you look at NEA, it's something that doesn't reflect on the water number, so the prices to the water and the realized prices to the coast are 30 to 50 cents higher than that. So if you have to start from there, there's the disconnect, and then from there, when you get into long-term contracting, you're looking over a five-year period, so the prompt doesn't impact the total rate, it's just a blended rate over time. So I guess what I would say is, 2025 does show a lower number, but you have to get to the water, and that premium is higher, both in core percent and in Houston, and then it's market-driven, Corpus 1st Houston vs.
Speaker Change: Certainly not something we give forward guidance on, but if you look, MEH is
Speaker Change: It's something that doesn't reflect an on-the-water number, so the prices to the water and the realized prices to the coast are 30 to 50 cents higher than that. So you have to start from there, there's the disconnect. And then from there,
Jeremy: And then from there. When you get into long-term contracting, you're looking over a five-year period, so the prompt doesn't impact the total rate. It's just a blended rate over time. So I guess what I would say is 2025 does show a lower number, but you have to get to the water, and that premium is higher, both in Corpus and in Houston. And then it's market-driven, Corpus versus Houston versus Nederland. So it's more nuanced than that, but near-term, the pipes are filling, and in 2026,
Speaker Change: When you get into long-term contracting, you're looking over a five-year period, so the prompt doesn't impact the total rate. It's just a blended rate over time.
Speaker Change: So I guess what I would say is...
Speaker Change: 2025 does show a lower number, but you have to get to the water and that premium is higher both in Corpus and in Houston.
Willie Chang: New Zealand, so it's more nuanced than that, but near term, the pipes are filling, and in 2026 plus I think those are constructive dialogues between us and the customers.
Speaker Change: and then it's market driven, Corpus versus Houston versus Nederland, so it's more nuanced than that but near-term the pipes are filling and in 2026 plus I think those are constructive dialogues between us and the customers.
Jeremy: AJ, we, by think we've all experienced how forward curves are usually not good predictors of future prices. It's just a methodology to be able to hedge and protect a future price. But as Jeremy said, when you start running out of spare capacity, the pricing signals change different behaviors. So I would expect that as spare capacity and tightness, we will start to see wider opportunities. Okay, thanks for that. Maybe just one last one on the NGL business, just going back to some comments about wider spreads between ISO and normal butane. Just curious about the opportunity there.
Willie Chak: AJ, I think we've all experienced how forward curves are usually not good predictors of future prices. It's just a methodology to be able to hedge and protect the future price. But as Jeremy said, when you start running out of spare capacity, the pricing signals change, and different behaviors. So I would expect that as spare capacity tightens, we'll start to see wider opportunities.
A.J.: A.J., I think we've all experienced how forward curves are usually not good predictors of future prices. It's just a methodology to be able to hedge and protect the future price. But as Jeremy said, when you start running out of spare capacity, it's not a good thing.
Speaker Change: The pricing signals change different behaviors, so I would expect that as spare capacity tightens, we'll start to see wider opportunities.
A.J. O'Donnell: OK, thanks for that. Maybe just one last one on the NGL business, just going back to some comments about wider spreads between ISO and normal butane.
Speaker Change: Okay, thanks for that. Maybe just one last one on the NGL business. Just going back to some comments about wider spreads between...
A.J. O'Donnell: I'm just curious about the opportunity there. Has that facility always been up and running? And if it hasn't, I mean, going forward, will that be a quarter to quarter decision or or how are you treating that? as a surrogate.
Speaker Change: Iso and normal butane. I'm just curious about the opportunity there. Has that facility always been up and running and if it hasn't I mean you know going forward will that be a quarter-to-quarter decision or how are you treating that?
Jeremy: Has that facility always been up and running, and if it hasn't, I mean, you know, going forward, will that be a quarter-to-quarter decision, or how are you treating that? Jerry, we have multiple facilities. One run, all the time; one is more opportunistic. The spread blew out in Q2, wider than historical norm. We've got our outlook for the remainder of the year in it, but I'd say the biggest impact was in Q2, modest impact in Q3, and while we don't forecast it in future periods, if it does, we'll turn it on and we'll operate. So it's just, I would say that is more opportunistic, and when it's there, we're capturing it.
Jeremy: We have multiple facilities. One runs all the time; one is more opportunistic.
Speaker Change: Sure, we have multiple facilities. One runs all the time, one is more opportunistic.
Jeremy: The spread flew out in Q2 wider than historical norms. We've got our outlook for the remainder of the year in it, but I'd say the biggest impact was in Q2, a modest impact in Q3, and while we don't forecast it in future periods, if it does, we'll turn it on, and we'll operate. So it's just I would view that as more as
Speaker Change: The spread blew out in Q2 wider than historical norm. We've got our outlook for the remainder of the year in it, but I'd say the biggest impact was in Q2, modest impact in Q3. And while we don't forecast it in future periods, if it does, we'll turn it on and we'll operate.
Speaker Change: It's just I would see that as more as opportunistic and when it's there we're capturing it
Jeremy: Great, thanks.
Sonosibol: Thank you. One moment for next question. Our next question comes online with Sonosibol or Seaboard Global. Your line is now open. Hi, good morning, everybody, and thanks for all the color. So seems like, you know, the kind of these operating assumptions for forward years are 200 to 300,000 per day of production growth in Permian, say, 3 to 4%. How should we think about that in the context of planes, Permian systems? Should we expect a similar kind of trajectory in volumes and cash flows from that system? Or there should be some unexpected changes in flight. You know, there has been a little bit of realignment in terms of, you know, your competitors in the basin.
Speaker Change: Great, thanks.
Speaker Change: Thank you. One moment for our next question.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Soo Civil or Seaboard Global. Your line is now open.
Speaker Change: Our next question comes from the line of Sono Ceibal of Seaboard Global. Your line is now open.
Soño Civil: Hi, good morning, everybody. And thanks for all the color.
Sono Ceibal: Hi, good morning everybody and thanks for all the color. So seems like you know the kind of base operating assumptions for forward years are 200 to 300 thousand barrels per day of production growth in Permian, say three to four percent.
Soño Civil: So, seems like you know, the kind of base operating assumptions for forward years are 200 to 300,000 barrels of production growth per day in Permian, say three to 4%. How should we think about that in the context of the Plains Permian system? So should we expect a similar kind of trajectory in volumes and cash flows from that system, or should there be some expected changes in this slide? You know, there has been a little bit of realignment in terms of your competitors in the basin, so I just wanted to understand that a little bit. I'm saying that we're a good team.
Speaker Change: How should we think about that in the context of Plains Permian systems? Should we expect a similar kind of trajectory?
Speaker Change: in volumes and and cash flows from that system or there should be some you know expected changes in slide you know there has been a little bit of realignment in terms of you know your competitors in the basin so just wanted to understand that a little bit
Jeremy: So just want you to understand that. I'd say that we're a good proxy for the basins' overall growth. I think that's a fair assessment.
Jeremy: I'm saying that we're a good proxy for the base.
Speaker Change: I'd say that we're a good proxy for the basins overall growth. I think that's a fair assessment.
Chris Chandler: Okay. Fair enough. And then one housekeeping for me seems like, you know, your cash taxes are tracking fairly, you know, higher versus last year. Is there any timing issues there, or how should we think about that for the remainder of 24? Yeah, they have been part of its income-based higher like this increase in guidance. Part of that is coming from our Canadian business. The taxes follow it. Also in 2024, we repatriated a significant amount of money back and had a small withholding tax on that. And as well as just some refinements in our estimates as to depreciation and that we would expect in 2025 to see taxes come back off of this higher level in 2025.
Soño Civil: Okay, fair enough. And then one housekeeping item for me seems like, you know, your cash taxes are tracking fairly, you know, higher versus last year. Are there any timing issues there? Or how should we think about that for the remainder of 24?
Speaker Change: Okay.
Speaker Change: Fair enough. And then one housekeeping for me seems like, you know, your cash taxes are tracking fairly, you know, higher versus last year. Is there any timing issues there? Or how should we think about that for the remainder of Q4?
Jeremy: Yeah, they have been. Part of it's income-based. Higher, like this increase in guidance, part of that is coming from our Canadian business. The taxes follow it. Also, in 2024, we repatriated a significant amount of money back and had a small withholding tax on that. And as well as just some refinements in our estimates as to depreciation and that we would expect in 2025 to see taxes come back off of this higher level in 2025. Okay.
Speaker Change: Yeah, they have been part of its part of its income based.
Speaker Change: Higher, like this increase in guidance, part of that is coming from our Canadian business.
Speaker Change: The taxes follow it. Also, in 2024, we
Speaker Change: Repatriated a significant amount of money back and had a small withholding tax on that. And as well as just some refinements in our estimates as to depreciation and that. We would expect...
Speaker Change: in 2025 to see taxes come back off of this higher level in 2025.
Sonosibol: Okay. Thanks.
Neil Dingman: Thank you. One moment for next question. Our next question comes online from Neil Dingman of Tree Securities.
Speaker Change: Okay.
Speaker Change: Okay, thanks.
Speaker Change: Thank you. One moment for next question.
Operator: Thank you. One moment for our next question. Our next question comes from Neil Dingman of Tree Securities. Your line is now open.
Neil Dingman: Peter Line is not open. I wanted to thanks for the time you guys. My first question is on MNA specifically. I just wonder are there any packages from the market that would make strategic sense for you all and giving your available available capacity out there. I'm just wondering, are you more inclined to continue to grow organically?
Speaker Change: Our next question comes from the line of Neil Dingman of Tree Securities. Your line is now open.
Neil Dingman: Morning, thanks for the time guys. My first question is on M&A specifically. I'm just wondering if there are any packages currently in the market that would make strategic sense for you all and, given your available capacity out there, I'm just wondering whether you are more inclined to continue to grow organically. Neil, thank you for the question. Unfortunately, we can't.
Neil Dingman: Morning, thanks for the time guys. My first question is on M&A specifically. I'm just wondering are there any packages currently in the market that would make strategic sense for you all and given your available capacity out there, I'm just wondering are you more inclined to continue to grow organically?
Willie Chang: Neil, thank you for the question. Unfortunately, we can't really talk about active processes or MNA. It's something we talk about after it's over. But I don't think it changes our approach to be disciplined, and it's got to be something where we can add significant value and compress multiple through synergies and our ability to operate. So, regardless of size, it's got to be something that added it to our broader business. We can extract synergies and be more competitive than others.
Jeremy: Neal, thank you for the question. Unfortunately, we can't really talk about active processes or M&A. It's something we talk about after it's over, but I don't think it changes our approach to be disciplined, and it's got to be something where we can add significant value and compress the multiple through synergies and our ability to operate. So regardless of size, it's got to be something that's additive to our broader business so we can extract synergies and be more competitive than others. And if we can't, we just won't buy it.
Speaker Change: Neil, thank you for the question. Unfortunately, we can't really talk about active processes or M&A. It's something we talk about after it's over, but...
Speaker Change: I don't think it changes our approach to be disciplined, and it's got to be something where we can add significant value and compress multiple through synergies and our ability to operate.
Speaker Change: Regardless of size, it's got to be something that's additive to our broader business and we can extract synergies and be more Competitive than others and if we can't we just won't buy it
Willie Chang: And if we can't, we just won't buy it.
Neil Dingman: Very helpful and then just secondly on hedging typically given the strip that you're seeing out there. Do you plan to continue having the majority to see three plus sales hedge going forward, or is there a scenario that would cause you to take a bit more exposure? Hi, this is Jeremy. We do not...
Neil Dingman: They're helpful, and then just secondly on hedging civically given the strip that you're seeing out there. Do you plan to continue having the joy to see three plus sales hedge going forward, or is there a scenario where you try to take a bit more exposure?
Speaker Change: Very helpful. And then just secondly on on hedging, typically given the strip that you're seeing out there do you plan to continue having the majority of the C3 plus sales hedge going forward or is there a scenario where you cause you to take a bit more exposure?
Jeremy: This is Jeremy. We do not leave a lot of money, but there's a certain time of year when you sell NGLs, and we're towards the end of that, so we've got the vast majority of our barrel plates on firm contracts through this season, and then next year when it comes up at the beginning of the year, you're selling for the next year.
Jeremy: Neil, this is Jeremy. We do not leave a lot of money. Look, there's a certain time of year when you sell NGLs, and we're towards the end of that. So we've got the vast majority of our barrel plates on her own contract through this season. And the next year, when it comes up, beginning of the year, you're selling for the next year. So I think what I would tell you is incremental production. We have to sell what we're very rigorous and making sure that when it's produced and when there's the time to sell, we lock in our storage spread.
Neil Dingman: This is Jeremy. We do not...
Speaker Change: There's a certain time of year when you sell NGLs, and we're toward the end of that. So we've got the vast majority of our barrels placed on firm contracts through this season. And then next year, when it comes up, beginning of the year, you're selling for the next year.
Neil Dingman: What I would tell you is incremental production we have to sell, but we're very rigorous in making sure that when it's produced and when there's the time to sell, we lock in our storage spreads, we lock in the downstream economics associated with it. We're not sitting with a big basis exposure.
Jeremy: We lock in the downstream economics. We're not sitting with a basic exposure.
Neil Dingman: Sir, you've done a nice job with this. Thank you.
Neil Dingman: Sure. Yeah, you've done a nice job with this. Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from the line of John McKay of Coleman. Your line is now open. You have it. Thanks.
Speaker Change: Sir, yeah, you've done a nice job with this. Thank you.
Operator: One more for next question.
Speaker Change: Thank you. One moment for our next question.
John McKay: Our next question comes from a line of John McKay of Coleman. Your line is now open. Hey guys, thanks for the time. I just wanted to look at the kind of second quarter crew to our performance versus the implied guide for the back of the year. Just curious, you kind of unpack a little more on terms of, you know, maybe what you caught in the marketing this quarter or made from pipeline allowances or the movement in OPEX versus kind of getting the benefit from some of these programming efficiencies because we're like the back half of your guidance that kind of implies flat on second quarter versus, you know, we're talking about the fourth quarter step up here potential. It's just trying to unpack kind of that cadence.
Speaker Change: Our next question comes from the line of John McKay of Goldman. Your line is now open.
John McKay: Hey guys, thanks for the time. I just wanted to look at the kind of second quarter performance versus the implied guide for the rest of the year. Just curious, can you kind of unpack a little more in terms of, you know, maybe what you caught in the marketing this quarter, or maybe from Pipeline and Loss Allowances or the movement in OPEC versus kind of getting the benefit from some of these farming efficiencies because we like the back half of your guidance; it kind of implies flat in the second quarter versus, you know, we're talking about the fourth quarter step up here potentially. So just trying to unpack kind of that cadence.
John McKay: Hey guys, thanks for the time. I just wanted to look at the kind of second quarter career to performance.
John McKay: versus the implied guide for the back of the year. Just curious if you could kind of unpack a little more in terms of, you know, maybe what you caught in the marketing this quarter, or maybe from pipeline and loss allowances or the movement in OPEX.
Speaker Change: versus kind of getting the benefit from some of these farming efficiencies because we like the back half of your guidance it kind of implies
Speaker Change: flat on second quarter versus, you know, we're talking about the fourth quarter step up here potentially. So just trying to unpack kind of that cadence. Thanks. Sure. Sure. I think Al spoke and Chris spoke to some of the operating expenses, lower utilities in the second quarter for movements on Pytor where we have T&D's.
John McKay: Thanks. Sure. Sure. I think Al spoke and Chris spoke about some of the operating expenses.
Al Swanson: Thanks. Sure, I think Al spoke to some of the operating expenses, lower utilities in the second quarter for movements on pipes where we have T and D. That doesn't repeat in the second half, so that's part of it. I'd say the other part of it is there's some storage economics in the second quarter that we won't see going forward. We unlocked those in earlier in the year and taking those positions off in the second quarter. So I'd say it's part of trading and part operating expense; both the pieces that not repeat the rest of the app performance should repeat.
John McKay: [inaudible]
Speaker Change: That doesn't repeat in the second half, so that's part of it. I'd say the other part of it is there's some storage economics in the second quarter that we won't see going forward.
Neil Dingman: We had locked those in earlier in the year and taken those positions off in the tech quarter. So I'd say it's part trading and part Operating expensible the pieces that not repeat the rest of the outperformance should repeat
John McKay: I appreciate that. Just one last thing for me. You know we see the volumes elsewhere, including outside the Permian, kind of move around quarter to quarter. Know a lot of that is just kind of the accounting of volumes and some sort of marketing side.
John McKay: I appreciate that. There is just one last thing for me.
John McKay: Yeah, we see the volumes elsewhere in crude outside the perimeter kind of move around quarter to quarter. No, a lot of that is the accounting for volumes and sums on the marketing side, but maybe if you could just give us a quick update on maybe just the run rate EBITDA generation off of that footprint and maybe how that should trend over the next couple of years, given we've, you know, you've laid out a pretty clear story on the permitting side. Sure, what would I say...
Speaker Change: I appreciate that. Just one last one for me. You know, we see the volumes elsewhere in crude outside the perimeter kind of move around quarter to quarter. I know a lot of that is
Jeremy: But maybe if you could just give us a quick update on maybe just a run rate EBITDA generation off of that footprint and maybe how that should trend over the next couple of years given that you've laid out a pretty clear store in the Permian side. Sure when I would say that performance in the Rocky is both rails from the UNDA that production growth continues and that goes into a couple of our facilities today and we expect that to continue. So that's been a good surprise, and then our Rocky's pipes remain to be full. Our customers are happy along those pipes, and we continue to see opportunities.
Speaker Change: just kind of the accounting of volumes and sums on the marketing side. But maybe if you could just give us a quick update on maybe just the run rate EBITDA generation off of that footprint and maybe how that should trend over the next couple of years, given we've, um, you know, you've laid out a pretty clear story on the permanent side. Thanks.
Jeremy: Sure, what I would say is we see our performance in the Rockies, both rails from Uinta, that production growth continues, and that goes into a couple of our facilities today, and we expect that to continue. So that's been a good surprise, and then our Rockies pipes remain full. Our customers are happy along those pipes, and we continue to see opportunities. So I'd say in Canada, gathering assets like Rainbow, the cross-border and the Rocky integrated system that we have into Cushing, that's been a source of our performance, plus the rails in the U.N. The rest is performed by the next.
Speaker Change: Sure, what I would say is we see our performance in the Rockies both rails from the UN to that production growth continues and that goes into a couple of our facilities today and we expect that to continue.
Speaker Change: So that's been a good surprise, and then our Rockies pipes remain to be full. Our customers are happy along those pipes, and we continue to see opportunities. So I'd say, in Canada, gathering assets like Rainbow, the cross-border pipes,
Jeremy: So I'd say in Canada gathering assets like rainbow, the cross-order pipes, and the Rocky's integrated system that we have into pushing, that's been a source of that performance plus the rails that we went to. The rent is performed in line with expectations.
Speaker Change: and the Rocky integrated system that we have into Cushing. That's been a source of our performance plus the rails that we went to.
Speaker Change: The rest is performed in line with expectations.
John McKay: All right, good at the time. Thank you.
John McKay: All right, good for the time. Thank you.
Teresa: Thank you one more for next question. Our next question comes from line up to reception of Barclays. Your line is now open.
Operator: Thank you. One more question for the next question. Our next question comes from the line of Theresa Chen of Barclays. Your line is now open.
Speaker Change: All right, appreciate the time. Thank you.
Speaker Change: Thank you. One moment for next question.
Speaker Change: Our next question comes from the line of Theresa Chen of Barclays. Your line is now open.
Teresa: Hi, would you be able to quantify the ISO to normal beauty uplift in your results this quarter, and just thinking about the repeatability of this uplift. Can you selling the ISO domestically for inland or just inland calculations be stuck in general or is this more related to getting your ISO across the water for export i.e. Is it seasonal from driving demand or can you take advantage of the global shortage of arcane agnostic of seasonality. Sure, Teresa, I've put it in the Q2 from the $15 million range, and then Q3 probably the $5 million range. We find domestic shorts.
Theresa Chen: Hi, would you be able to quantify the ISO to normal butane uplift in your results this quarter? And just thinking about the repeatability of this uplift, are you selling the ISO domestically for Inland or just Inland alkylation feedstock in general? Or is this more related to getting your ISO across the water for export, i.e., is it seasonal from driving demand, or can you take advantage of the global shortage of octane agnostic of seasonality?
Theresa Chen: Hi, would you be able to quantify the ISO to normal butane uplift in your results this quarter? And just thinking about.
Theresa Chen: the repeatability of this uplift. Are you selling the ISO domestically for inland or just inland alkylation feedstock in general? Or is this more related to, you know, getting your ISO across the water for export, i.e. is it seasonal from driving demand, or can you take advantage of the global shortage of octane agnostic of seasonality?
Jeremy: Sure Teresa, I put it in the Q2 roughly $15 million range and then Q3 probably in the $5 million range roughly, and we find domestic shorts. We have a pretty big rail footprint in Canada, and we're able to hit any specific market, so we actually have unique access to specific markets that are short, and so when it blows up, we optimize that. The same thing we do with our C3 sales and C4 sales from our straddles; you are able to do the same thing with ISO.
Speaker Change: I put it in the Q2 roughly $15 million range and then Q3 probably in the $5 million range roughly. And we find domestic shorts. We have a
Jeremy: We have a pretty big rail footprint in Canada, and we're able to hit any specific market. So we actually have unique access to specific markets that are short. And so when it blows up, we optimize; that's the same thing we do with our C3 sales and C4 sales from our straddle. You were able to do the same thing with ISO.
Speaker Change: Pretty big rail footprint in Canada, and we're able to hit any specific market So we actually have unique access to specific markets that are short and so when it blows up we optimize that the same thing We do with our c3 sales with NC for sales from our straddle
Willie Chak: Teresa, this is Willie. As you think about the ISO normal example that we just talked about, I don't I wouldn't characterize that as a structural change. You look at the large system we have; there's always going to be opportunities, market opportunities that we can capture. And I think what we're seeing now is as infrastructure becomes a little tighter, some more of those are coming to fruition. We went through a period where it was very difficult to capture those markets because there was lots of spare capacity and lots of infrastructure. So I understand your question, but I would also, I wanted to reinforce that our system is big, it's got a lot of optionality, and if there are opportunities out there, we're able to capture them.
Willie Chang: So this is Willie. As you think about the ISO normal example that we just talked about. I don't. I wouldn't characterize that as a structural change. You look at the large system we have, there's always going to be opportunities, market opportunities that we can capture. And I think what we're seeing now is, as infrastructure becomes a little tighter. Some more of those are coming to fruition. We went through a period where it was very difficult to capture those markets because there's lots of spare capacity in lots of infrastructure. So I would I would I understand your question, but I would also I wanted to reinforce that our system is big.
Speaker Change: You are able to do the same thing with ISO.
Speaker Change: Teresa, this is Willie. As you think about the isonormal example that we just talked about, I don't...
Speaker Change: I wouldn't characterize that as a structural change. You look at the large system we have, there's always going to be opportunities, market opportunities that we can capture. And I think what we're seeing now is as infrastructure becomes a little tighter,
Speaker Change: Some more of those are coming to fruition We went through a period where it was very difficult to capture those markets because there's lots of spare capacity and lots of infrastructure
Speaker Change: So, I would, I understand your question, but I would also, I wanted to reinforce that our system is big, it's got a lot of optionality, and if there are opportunities out there, we're able to capture them.
Willie Chang: It's got a lot of optionality, and if there are opportunities out there, we're able to capture them.
Teresa: And just said, I met more the special demand for oxygen and ISO as a feedstock for alcoholation for that demand.
Theresa Chen: Understandable. I meant more the structural demand for octane and ISO as the feedstock for alkylation for that demand. So, turning to the cost commentary of cost deferred into the third quarter and maybe fourth quarter, any quantification or, you know, end points we should think about of how much that moved over?
Speaker Change: Understood. I meant more the structural demand for octane and iso as the feedstock for alkylation for that demand.
Chris Chandler: So turning to the cost commentary of cost of third into third quarter and maybe fourth quarter, any quantification or, you know, end points, which you think about of how much that moved over. Hi, three cents, Chris Chandler. No is the short answer, as in we won't quantify the amount that is deferred versus sustainable cost savings. I would just, you know, reinforce our continued commitment to cost discipline and cost efficiency, and we'll continue to look for opportunities to defer costs from the second half into following years. And there's a number of factors we take a look at, including, you know, expectations from customers, volumes on systems, weather, supplier availability, all the things you might imagine around optimizing our cost for. We'll continue to do that.
Speaker Change: So turning to the cost commentary of cost deferred into third quarter and maybe fourth quarter, any quantification or you know end points we should think about of how much that moved over?
Chris Chandler: Hi Teresa, it's Chris Chandler. No is the short answer, as in we won't quantify the amount that is deferred versus sustainable cost savings. I would just, you know, reinforce our continued commitment to cost discipline and cost efficiency, and we'll continue to look for opportunities to defer costs from the second half into the following years. And there are a number of factors we take a look at, including, you know, expectations from customers, volumes on systems, weather, supplier availability, all the things you might imagine around optimizing our cost footprint. We'll continue to do so.
Speaker Change: Hi, Teresa. It's Chris Chandler.
Teresa: No is the short answer, as in we won't quantify the amount that is deferred versus sustainable cost savings.
Teresa: I would just, you know, reinforce our continued commitment to cost discipline and cost efficiency and we'll continue to look for opportunities to defer costs from the second half into the following years.
Speaker Change: And there's a number of factors we take a look at including, you know, expectations from customers, volumes on systems, weather, supplier availability, all the things you might imagine around optimizing our cost footprint. We'll continue to do that.
Blake Fernandez: Teresa, this is Blake. I would just add, obviously, we've contemplated that in our forward guidance.
Teresa: Teresa, there's a blank. I would just add, obviously we've contemplated that into our forward guiding, so. Got it. Thank you very much. Thanks, Teresa. Thank you.
Teresa: Teresa, this is Blake. I would just add, obviously, we've contemplated that into our forward guidance.
Theresa Chen: Got it. Thank you very much.
Teresa: Got it. Thank you very much.
Plains: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Plains for closing remarks.
Operator: I'm showing all further questions at this time.
Teresa: Thanks, Teresa.
Willie Chang: I'll now like to turn it back to planes for close remarks. Well, listen, thanks for all of your questions. We look forward to seeing you soon on the road. Have a great day. Thank you for your participation in today's conference.
Speaker Change: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Plains for closing remarks.
Plains: Well, listen, thanks for all of your questions. We look forward to seeing you soon on the road. Have a great day.
Speaker Change: Well listen, thanks for all of your questions. We look forward to seeing you soon on the road. Have a great day.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: This does conclude the program.
Operator: You may now disconnect. Thank you. Thank you very much.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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Speaker Change: Thank You.