Q4 2024 Energy Transfer LP Earnings Call
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Speaker Change: Good day and welcome to the Energy Transfer 4th Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: And the Securities Exchange Act of $19 34. These statements are based upon current beliefs as well as certain assumptions and information currently available to US and are discussed in more details in our Form 10-K for the year ended December 31, 2024, which we expect to file this Friday February the 14th.
Speaker Change: I'll also refer to adjusted EBITDA, and distributable cash flow or DCF.
Speaker Change: Of which are non-GAAP financial measures you will find a reconciliation of our non-GAAP on our website.
Speaker Change: I'll start today by going over the financial results for the full year 2024, adjusted EBITDA was $15 5 billion.
Speaker Change: Which came in at the high end of our 2024 guidance range.
Speaker Change: This was up 13% over 2023 and was a partnership record.
Speaker Change: DCF attributable to the partners of energy transfer as adjusted was $8 4 billion, which was up 10% over 2023 and was also a partnership record operationally.
Speaker Change: We moved record volumes across our Interstate midstream NGL and crude segments for the year ended 2024 addition, we exported a record amount of total Ngls out of our Nederland and Marcus Hook terminals.
Speaker Change: For the fourth quarter of 2024, we generated adjusted EBITDA of $3 9 billion compared.
Speaker Change: Compared to $3 $6 billion for the fourth quarter of 2023.
Speaker Change: We continue to see strong volumes during the fourth quarter, including increased throughput across the majority of our segments.
Speaker Change: DCF attributable to the partners of energy transfer as adjusted was $2 billion consistent with the fourth quarter of 2023.
Speaker Change: And for the full year of 2024, we spent approximately $3 billion.
Speaker Change: One organic growth capital, excluding Sun and USA compression Capex. These investments were primarily in the midst of an NGL and refined products segments.
Speaker Change: Now, let's turn to the results by segment for the fourth quarter, and I'll start with NGL and refined products.
Speaker Change: Adjusted EBITDA was one <unk>.
Speaker Change: $1 billion compared to 1.14 billion.
Speaker Change: For the fourth quarter of 2023.
Speaker Change: This was primarily due to higher throughput and higher rates across our Gulf Coast and Mariner East pipeline operations also had strong NGL exports and increased profits from the optimization of hedged NGL inventory.
Speaker Change: For midstream adjusted EBITDA was $705 million compared to $674 million for the fourth quarter 2023.
Speaker Change: The increase was primarily due to higher volumes in the Permian basin, which was related to a 9% increase in legacy Permian throughput as well as the addition of the Crestwood and Wtt assets in November of 'twenty. Three in July of 24, respectively. This was partially offset by decreased.
Speaker Change: Volumes in dry gas regions as a result of low natural gas pricing and increased operating expenses from recent acquisitions.
Speaker Change: For the crude oil segment, adjusted EBITDA was $760 million compared to $775 million for the fourth quarter of 2023.
Speaker Change: During the quarter, we saw growth across our crude gathering systems.
Speaker Change: As well as contributions related to the recently formed Permian joint venture with Sun.
Speaker Change: And the acquisition of Crestwood. These were offset by lower transportation revenues, primarily on the Bakken pipeline and reduced earnings from marketing.
Speaker Change: In the Interstate natural gas segment, adjusted EBITDA was $493 million compared.
Speaker Change: Compared to $541 million for the fourth quarter of 2023 <unk>.
Speaker Change: During the quarter, we saw higher demand on Panhandle, and trunkline Gulf run and FGT. This was offset by lower interruptible utilization reduced rates on Panhandle and increased operating expenses.
And for our intrastate natural gas segment, adjusted EBITDA was $263 million compared to $242 million in the fourth quarter of last year.
Speaker Change: The increase was primarily due to increased gains related to pipeline and storage optimization opportunities.
Speaker Change: Now turning to our 2025 organic growth capital guidance and our growth projects first I'm pleased to say, we've recently approved the construction of the Mustang draw a processing plant in the Midland Basin.
Speaker Change: Now for our growth capital expenditures, given our wealth of opportunities, we expect to spend approximately $5 billion in 2025.
Speaker Change: To provide more color by segment. This spend includes approximately $1 4 billion.
Speaker Change: In our intrastate natural gas segment, which includes approximately $1 3 billion.
Speaker Change: Related to the recently approved <unk> pipeline as well as additional spend related to small laterals and tie in project supporting new demand growth on our Texas pipelines in the NGL and refined product segment, we expect to spend approximately $1 4 billion in 2020.
Speaker Change: Five.
Speaker Change: This includes approximately $1 $1 billion on the Netherlands Flex Board expansion Frac nine Marcus Hook optimization Lone Star Express optimization Sabina, two NGL pipeline and storage upgrades at Mont Belvieu and spinel.
Speaker Change: The projects are all focused on increasing our ability to meet the fast growing international demand for Ngls within the midstream segment.
Speaker Change: We expect to spend approximately $1 $6 billion. In 2025. This includes approximately $1 2 billion related to the Permian basin processing expansions treating upgrades compression additions and well connects.
Speaker Change: Within the crude oil segment, we expect to spend approximately $295 million primarily.
Speaker Change: Related to crude oil and water gathering in the Williston basin crude.
Speaker Change: Crude gathering build out in the Permian basin, as well as optimization projects and well connects.
Speaker Change: And within our Interstate natural gas segment, we expect to spend approximately $170 million largely related to smaller laterals and tie in supporting new demand growth off our pipelines as well as optimization projects on FGT.
Speaker Change: In addition in the all other segment, we expect to spend approximately $100 million of.
Speaker Change: New power generation facilities, which will make our critical transportation systems more reliable in the areas that we have significant electricity shortages or intermittent outages are.
Speaker Change: Our projects are expected to achieve mid teen returns with most of them also providing incremental downstream benefits.
Speaker Change: Some of these projects are expected online later this year with the majority of these projects expected online in 2026 as such we expect the majority of earnings growth from these projects significantly ramp up in 2026 and 2027.
Speaker Change: Now taking a closer look at some of our largest growth projects that are currently underway in December we.
Speaker Change: Phase one of the <unk> pipeline, which will provide significant incremental transportation capacity out of the Permian basin to connect shippers to energy Transfer's vast intrastate natural gas pipeline network and other downstream pipelines as well as access to the majority of gas utilities and every.
Speaker Change: Major trading hub in Texas.
Speaker Change: The first phase of the project, which is expected to be in service by the end of 2026 includes the construction of approximately 400 miles of 42 inch pipeline from <unk> to <unk>, Texas with a capacity of approximately $1 5 billion cubic feet per day.
Speaker Change: And we will also include the Midland lateral which is expected to be a 42 mile 36 inch lateral to connect to energy transfer as Midland basin plants as well as third party processing plants in Martin and Midland counties to the <unk> pipeline.
Speaker Change: We continue to have discussions with producers regarding phase two of the project.
Speaker Change: Approved phase two would add compression to increase the capacity of the new pipeline to approximately $2 two bcf per day.
Speaker Change: <unk> cost of phase, one and phase III are expected to be approximately $2 7 billion.
Speaker Change: Completed project will be backed by long term fee based commitments with strong investment grade Counterparties. This project is expected to further establish energy transfer as the premier option to support pilot plant and data center growth in the state of Texas.
Speaker Change: At our Nederland terminal, we continue to make progress on the construction of our Flex Board expansion project. The project will expand our NGL export capacity and remains on schedule for an anticipated in service for ethane and propane in mid 2025. In addition, as the next phase of the project we are.
Speaker Change: Spect to began ethylene export service in the fourth quarter of this year.
Speaker Change: At Mont Belvieu construction of our ninth fractionator is underway, which has a design capacity of 165000 barrels per day is expected to be in service in the fourth quarter of 2026, and this will bring our total fractionation capacity at Mont Belvieu to more than one 3 million barrels per day.
Speaker Change: In December of 2024, we completed the initial phase of the Sabena do pipeline conversion from Mont Belvieu to Nederland. This project increased the pipeline's capacity for multiple products from approximately 25000 barrels per day to approximately 40000 barrels per day ultimately mid 2000 <unk>.
Speaker Change: Six we expect to expand the pipeline to approximately 70000 barrels to meet the growing demand for our natural gasoline products at.
Speaker Change: At our Marcus Hook terminal, we continue to see strong demand for our NGL exports out of this terminal construction continues on a 900000 barrel refrigerated ethane storage tank and the addition of approximately 20000 barrels per day of incremental ethane chilling capacity.
Speaker Change: This project will provide us with the ability to load vlccs much faster than we can today, which is very advantageous for many of our customers.
Speaker Change: Looking at our Permian processing expansions in 2024, we completed the 50 million cubic feet per day upgrades to our Orla East and Graywolf processing plant construction continues on upgrades to two other processing plants, which we expect will add incremental processing capacity in west Tex.
Speaker Change: <unk> of approximately 100 million cubic feet per day by the end of the first quarter of 2025.
Speaker Change: In addition, construction of the 200 million cubic foot per day Badger processing plant in the Permian Basin is underway.
Speaker Change: As a reminder, this plant which is expected to be in service in mid 2025, we will utilize the idled plant that we are relocating to the Delaware Basin also due to significant demand. We are moving forward with the construction of another processing plant in the Midland Basin, the Mustang draw plant.
Speaker Change: Have the capacity of approximately 275 million cubic feet per day and is expected to be in service in the first half of 2026.
Speaker Change: Also in December we announced a 20 year LNG sale and purchase agreement to supply two tons of LNG per annum to Chevron USA, Inc related to our Lake Charles LNG project, we continue to make progress towards full commercialization of this project, which we believe in.
Any of our customers believe is the most compelling LNG project on the Gulf Coast.
Speaker Change: Now for a brief update around our power generation opportunities since our last call the level of activity from demand pull customers has remained strong and we are in advanced discussions with several other facilities in close proximity to our footprint to supply store and transport natural gas for natural gas power.
Speaker Change: Your plants data centers, and industrial and onshore manufacturing.
Speaker Change: In the fourth quarter, we executed a deal on our.
Speaker Change: Pipeline for 90 million cubic foot per day.
Speaker Change: It is expected to come online in 2026, and we have recently completed several agreements with electric utilities in the Midwest to provide connections for new natural gas fired generation that is replacing coal fire generation.
Speaker Change: Yesterday, we were excited to announce that we have entered into a long term agreement with cloudburst data centers to provide natural gas to their flagship AI focused data center development in Central Texas.
Speaker Change: Subject to cloudburst, reaching FID with its customers' energy transfer would use its oasis pipeline to provide up to 450000 <unk> per day of firm natural gas supply to Cloudburst next.
Speaker Change: Next generation data center campus outside of San Marcos, Texas.
Speaker Change: The natural gas supply would be sufficient to generate up to approximately one two gigawatts of direct or behind the meter power. This project represents our first commercial arrangement to supply natural gas directly to a data center site and it will not be the last in.
Speaker Change: In aggregate, we have now received requests for potential connections to approximately 62 power plants that we do not currently serve in 13 states and up to 15 plants that we already serve today.
In addition, we have now received request from over 70 perspective data centers in 12 States given energy transfer has extensive natural gas infrastructure. We continue to believe that we are the best position to capitalize on the anticipated rise in natural gas demand.
Speaker Change: As a reminder to support our own operations and increased system reliability for energy transfer and our customers in Texas. We are constructing a 10 megawatt natural gas fired electric generation facilities. The first of these facilities was placed into service last week and the remainder expected to be in service throughout.
Speaker Change: 2025, and 2026 now turning to our adjusted EBITDA guidance, we expect our 2025 adjusted EBITDA to be between 16 $1 billion and $16 5 billion.
Speaker Change: Which is up approximately 5% from 2024 at the midpoint and supported by our industry leading business. We're currently executing on a large opportunity set of growth projects and we are excited to deploy capital on these impactful opportunities. They are expected to provide strong returns and a significant.
Trajectory through the end of the decade.
Speaker Change: Before we conclude I would like to reiterate the three main themes in the midstream sector that we see driving this critical growth.
Speaker Change: First we will continue to see strong volume growth out of the Permian Basin, where we will continue to invest capital in our midstream assets.
Speaker Change: This growth will continue to feed our intrastate segment, we have an expansion underway that will help meet power and data center demand in Texas as well as feed our downstream NGL business.
Speaker Change: Second the broader consensus combined with the number of inbounds, we're receiving suggests that natural gas fueled power demand will increase significantly in the future. We believe the growth needed to accommodate this demand will be significant and we are in a unique position to capitalize on this opportunity set as.
Speaker Change: Traded by Yesterdays press release regarding our new partnership with Cloudburst for their planned data center.
Speaker Change: Lastly, the global demand for U S. NGL production remains strong and continues to support further development of our NGL infrastructure.
Speaker Change: Our extensive asset base and the diversity of our product offering is allowing us to deploy capital across all three of these themes and this gives us great visibility into our ability to grow. This one of a kind franchise for years to come. This concludes our prepared remarks operator, please open the <unk>.
Speaker Change: Lines up for questions. Thank you we will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: Using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Anytime a your question has been addressed and you would like to withdraw. Your question. Please press Star then two we ask that you. Please limit yourself to one question and one follow up and if you have further questions. You may reenter the question queue and at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Theresa Chen with Barclays. Please go ahead.
Theresa Chen: Good afternoon, and thank you for taking my question.
Speaker Change: Pretty significant uptake in.
Speaker Change: The growth outlook as far as project backlog.
Speaker Change: Can you talk about the returns that youre seeing and how they.
Speaker Change: Alter changed at all with these incremental projects.
Speaker Change: Yes, Theresa Hello, This is mackie.
Speaker Change: Nothing has really changed over the last couple of years, we are always kind of targeting depending on the project that kind of that mid teens to upper teens rate of return.
Speaker Change: A lot of that depends on.
Speaker Change: How much synergistic benefits up and down but thats kind of the range that we look at these projects kind of a mid to upper teens.
Speaker Change: Okay and.
Speaker Change: Related to your intrastate project Q Princeton interesting that you put abeline as a marker as one of the talents that.
Speaker Change: On pipeline Brian directly through.
Speaker Change: Any reason for that that you want to articulate on and just look on the backlog of these kinds of demand pull projects for that pipeline that could push forward the second phase.
Speaker Change: Yes, let me start out by saying how excited we are without that project. It's been a while since we built a 42 inch for years, we were building one back.
Speaker Change: Every.
Speaker Change: Because we were building a new pipeline seem like but we're very excited about that the producers in the Permian basin needed desperately we've seen 10 Bcf of growth over the last four or five years out of that basin. We think will go up another six to seven over the next four or five years. So what a shot in the arm for them and then the market pull is significant not only in Texas.
Speaker Change: But other parts of the southeast.
Speaker Change: Our systems will ultimately feed into so we're extremely excited about that but it is interesting your question.
Speaker Change: <unk> been preparing for this call I got to think about you look at.
Where many of the data centers are growing, especially in Texas, but also throughout the south.
Speaker Change: Southeast in the Midwest.
Speaker Change: Midwest and it's almost as if.
Speaker Change: Energy transfer was work in years ago to figure out where the best spot to offer these data centers because if you look at them. The vast majority of them are within several miles of our pipeline. So we feel extremely fortunate all these assets that we've been all these pipelines that we built for the purpose of moving products from point a to point B.
Speaker Change: We've really never envision there'll be this kind of power plant demand growth both for data centers and others that are just right on top of.
Speaker Change: Significant board of our pipelines so yeah Abilene.
Speaker Change: Pressed with target, we do see that as a <unk>.
Speaker Change: Holly potential project for us.
Speaker Change: Very well positioned to provide whatever is necessary there and we have our team working on that as well as as Tom talked about numerous data center and power plant projects throughout the U S.
Speaker Change: Thank you.
Speaker Change: The next question will come from Keith Stanley with Wolfe Research. Please go ahead.
Speaker Change: Hi, good afternoon.
Speaker Change: I wanted to start on the $5 billion growth Capex for this year does that include any meaningful unsanctioned projects. We may not know about and then for the midstream piece $1 6 billion more than you've spent the past several years can you just give a little more detail on projects or where you're investing more.
Speaker Change: More than prior years in midstream.
Mackie: Yes. This is mackie again.
Mackie: The 5 billion those were project, we think they're moving forward great rate of return.
Mackie: Very very excited about that and.
Mackie: When you look at.
Mackie: What's driving a lot of that is midstream I mean midstream is kind of the call. It the heart, it's what starts everything where we gather and process and treat compress and then put it into our system. When it goes through a cryo and then the revenue goes into our intra and Interstate pipeline networks and of course, the Ngls go into Lone Star and feed all of that and then I'll have.
Mackie: Our crude business as well so it's a <unk>.
Mackie: Very viable important part in segment of our partnership and when you look at Mustang draw. If you look at these.
Mackie: These improvements were making it very inexpensively to some of the trials, we already have by increasing capacity.
Mackie: And we got banjo coming on as well this year.
Mackie: What's driving this theyre just.
Mackie: An insatiable need for more cryogenic processing plants in the Permian basin, and we are so well positioned to benefit from that across our.
Mackie: Entire enterprise.
Mackie: Putting all of our downstream assets.
Mackie: Thanks for that if.
Mackie: If I could pivot to the cloud versus announcement wanted to confirm this is going to go to supporting a new gas fired power plant not an existing.
Mackie: Plant and then can you talk about the ramp that you foresee for the project is should we assume this starts somewhat small and then you eventually ramp to the 450 million cubic feet, a day or how should we think about it.
Mackie: Yes.
Mackie: That question is excuse me.
Mackie: Is the.
Very germane in the sense that every single data center, we're talking to is a little bit difference has a little nuance to it. So this one in particular that you are asking about.
Mackie: They're very experienced their executive team has I believe theyre advertising over 150 years in data centers.
Mackie: U S and Europe, we're very pleased to be partnered up with them on this one.
Mackie: They had significant contact with the tenants or some of the owners as you all know who many of these are we.
Mackie: We are very optimistic that we'll get this to the finish line, but it is something that they'll have to scale.
Mackie: They.
Mackie: They do believe that they very likely could get as high as 450000, and that's why they secured debt amount of supply.
Mackie: And we'll know a lot more.
Mackie: We possibly could know a lot more by the end of the next quarter, but we'll see.
Mackie: We will continue to work closely with them and other developers, but were very excited about this first project. We're learning a lot about data centers data centers, we're learning a lot about the natural gas business and how critical as to what Theyre doing and man, we couldnt be more pleased and excited about this new business because.
Mackie: As I mentioned earlier and we've said in our opening remarks, there is no company in the United States is close to is well positioned to provide natural gas supply to many of these data centers, especially in Texas, and Oklahoma and Louisiana.
Mackie: Thank you.
Speaker Change: The next question will come from Jeremy Tonet with Jpmorgan. Please go ahead.
Speaker Change: Hi, good afternoon.
Speaker Change: Good afternoon Jeremy.
Speaker Change: Just wanted to follow up on the last one is cloud versus here. It seems like you have a lot of confidence in this project overall, having PR and just wondering if you could talk a bit more on how to quantify I guess, how you see the Tam what you expect for.
Speaker Change: Our win rate or just any way to frame with numbers I guess, what this could mean for energy transfer.
Speaker Change: Okay. We'll go as deep as we can considering we do have an NDA, but one thing we've learned is theirs.
Speaker Change: Five critical things for these data centers.
Speaker Change: The most important ones are energy and so for example, this one will not only be tied to ERCOT.
Speaker Change: Of course will be tied to us with significant gas supply backed up by storage for natural gas power generation and they're also going to have diesel powered backup generation. They are going to have backup battery power.
Speaker Change: Power is critical to these projects and.
Speaker Change: This particular company has significant amount of expertise as I just mentioned and they also have a very.
Speaker Change: Proprietary software system in.
Speaker Change: Because one of the most important variables has access to high bandwidth.
Speaker Change: Optical fibers and.
Speaker Change: With low latency I guess it is what it is and theirs.
Speaker Change: Theres not a thousand places in the U S are certainly in Texas that fit all of those variables, where you have a reliable energy supply.
Speaker Change: Have.
Speaker Change: Plenty of water for cooling or you have plenty of land and where you have.
Speaker Change: A bunch of redundancy.
Speaker Change: So.
Speaker Change: This fits so well with our assets and talking to them and kind of their expectations as they go to the the primary tenant they are chasing.
Speaker Change: Just to kind of a little bit more transparency that they do believe that some of these turbines for the sites are already ordered and in inventory.
Speaker Change: That could move this.
Speaker Change: Lot quicker than what we had said and so we're optimistic that we have.
Speaker Change: On this particular one.
Speaker Change: Find ourselves with a very strong company that knows what the heck. They are dealing with a lot of contacts out in the industry around data centers.
Speaker Change: And.
Speaker Change: We are optimistic that they will ramp this up or they go all way up to $4 50, or $3 50 remains to be seen but we believe this will be a very successful project.
Speaker Change: Got it makes sense and just wanted to I guess follow up with some of the comments on the prior call ending and just wondering with the new administration in place for a bit here in new policy is being rolled out just wondering if you could share how that impacts I guess, what you see as your opportunity set items, such as lake Charles or others, just any thoughts there.
Great. Thanks.
Speaker Change: Yes, not goodness, how wonderful as life. After this election, when we have a president.
Speaker Change: And in administration that love this country.
Speaker Change: <unk> fully recognizes how blessed we are with not only fossil fuel resources, but a lot of resources a lot of resources that are needed and ensure renewable push and we have a business man.
Speaker Change: Built his career on trading <unk> deal.
Speaker Change: Negotiating employee, creating numerous jobs throughout all the business that he has been associated with and what are incredible.
Speaker Change: The excitement we have around this administration of what it's going to do to mitigate just overwhelming regulation on all of these assets to streamline regulations to where yes, we're going to have regulations, but be sensible about it.
Speaker Change: Put it where it's not it doesn't take a great deal of time and can get products and can get resources and get energy to not only our domestic and our U S customers in and population, but also to the international market. So, yes, needless to say the energy transfer and our executive team in Vas.
Speaker Change: Majority of our employees are very excited about what's happening and we think it's going to be huge for our industry is huge for a partnership and huge for this country in the world.
Speaker Change: Got it any other updates on Lake Charles I guess.
Sure in fact, we have a team over in London right. Now has really good reports back so as everybody knows there were two things that were kind of waiting for us to get a good solid contract price that works and get that snowball going we did that with chevron.
Speaker Change: Back I believe in late November early December.
Speaker Change: Theyre actually an advocate of ours now had lunch with them last week. They do believe we have the best project and their.
Speaker Change: Pushing others to really take a close look at they arent already looking at a project. We have got over 20 million tonnes were negotiating with we have a really strong equity partner that we're now in negotiations with for a considerable amount of equity.
Speaker Change: Sorry, if I kind of want it and we got a lot of work to do we're not going to undersell that but we do have a project.
Speaker Change: Excellent location with.
Speaker Change: Pipeline infrastructure much of which is already there with a great terminal.
Speaker Change: With tanks that are already there with this brownfield projects. So we're very excited about it we're going to push hard and we certainly hope.
<unk>.
Speaker Change: Some time, probably in the fourth quarter of this year.
Speaker Change: Got it thank you.
Speaker Change: The next question will come from Manav Gupta with credit Suisse. Please go ahead.
Martin: Hi, it's Martin with UBS.
Speaker Change: Question.
Speaker Change: When you look at all the power demand, whether it's data center or it's coal to natural gas or even the incremental natural gas demand associated with LNG using your crystal ball.
Speaker Change: How much do you think the natural gas demand could grow in the next five or seven years.
Speaker Change: Oh.
Mackie: This is mackie again.
Mackie: All across the board you look at some of our peers look at some of the.
Mackie: Companies that do studies on this it's hard to predict.
Mackie: We've done this ourselves internally because at the end of the day what matters most to US is how much of that market, we capture and we believe over the next 18 to 24 months that will capture between.
Mackie: Three and four Bcf that may sound aggressive, but we're chasing right now about 150 power plants about half of which are either new power plants and or as we mentioned coal fired retirements that are going into it and then about half of those are maybe a little more our datacenters. So this isn't.
Mackie: Data center driven this is.
Mackie: Electricity needs for growing populations growing industry.
Mackie: Even ammonia facilities et cetera. So we're.
Mackie: <unk>.
Mackie: Well positioned to.
Mackie: Capture whatever the growth is but we certainly seen numbers north of 10 or 12 Bcf, but we don't know where its going to go. We just know it's going to be big and we're going to play a big role in that growth.
Speaker Change: We'll take my my quick follow up.
Mackie: Investors asking us.
Mackie: Obviously talking to a number of data centers you already got a lot of successes cloudburst.
Deep seek announcement in any shape or form.
Break back momentum audit, just something which did not even impact the level of discussions you are having and those discussions continue.
Mackie: Yes. This is mackie again.
Mackie: So.
Mackie: The way we would answer that is of course initially it did first day or so we saw in the video get hit pretty hard but no.
Mackie: No I think the answer to that in a.
Mackie: Collective conversation with all the developers, we're talking to and some of the tenants, we don't see that as a threat.
Mackie: It certainly competition.
Mackie: It kind of wakes up a lot of what's going on here in the U S, but gosh youre comparing a communist kind of type one country that whatever kind of data center AI that may come with we know it's not going to be factual, we know theyre going to have.
Mackie: Reality and facts that either they don't answer or that are biased or whatever so.
Mackie: It is America I think we will do a better job of this and talking with cloudburst and some of the others that we're talking about they don't see this in fact some of them have described this as a positive for different reasons some of it being waken us wake in the USF.
Mackie: To stay on top of this and being the leader in AI development.
Speaker Change: Thank you so much.
Spiro Denise: The next question will come from Spiro Denise with Citi. Please go ahead.
Speaker Change: Thanks, Operator afternoon, guys wanted to start with capital return.
Speaker Change: For a while you were getting a little bit closer to potentially do more on the buyback side, but obviously the equity has been strong and of course, a capex now it seems like it's crowding some of that out at the same time, Tom that you pointed to 5% EBIT growth year over year at the midpoint. So curious does all that kind of collectively point you towards maybe accelerating distribution growth more towards that $5.
<unk>, 3%, if not wait to get waiting to see to accelerate there.
Speaker Change: Yeah like I always like to say that that's a good a good question and a good day.
Speaker Change: Log to have around here is when you start talking about how.
Speaker Change: How larger growth is going to be but we're.
Speaker Change: We're still kind of staying with that three to five and I think with all these projects, we're talking about don't mind, saying, we'd love to see that.
Speaker Change: Moving up to the higher end of that range I think thats fair to say, but let's go back to the capital allocation a little bit.
Speaker Change: We always had that the balance sheet in other words the debt Paydown and then second we looked at the distribution growth and when we looked at the growth capital with those buybacks and there we still have all four of those on the radar screen.
Speaker Change: But with this.
Speaker Change: All of these great projects that we've been talking about today, you can see that.
Speaker Change: Now it makes a lot of SaaS to for the long term to continue to strengthen the footprint that we have in the asset base. We have so we are very very excited with what we have in front of us and absolutely.
Speaker Change: The distribution growth is is definitely very key here.
Speaker Change: Great Great and then second question still on the themes, just maybe focusing more on the capex here.
Speaker Change: M&A something you've been active in the last few years, just curious where that stands in light of the $5 billion of Capex I guess, if we look back and put Capex and M&A together that 5% doesn't look so so high anymore and so just curious if there is room to layer in more M&A here are $5 billion is kind of as comfortable as youre at right now.
Speaker Change: Let's start with the first part of it the M&A M&A is clearly.
Speaker Change: A very key part of our growth strategy here.
Speaker Change: It absolutely has helped us get to where we are right now on a lot of these growth projects that we're doing and a lot of the stuff that we're looking at so the strategy has worked well for us and we're going to continue to continue to focus on it as far as the number of targets you can see that it's getting.
Speaker Change: Fewer and fewer of us, but we still think that consolidation makes sense in the midstream space, we're going we're going to be going to be a player in and let's kind of go back to the second part I think on that one.
Speaker Change: On the $5 billion.
Speaker Change: I guess I would.
Speaker Change: First answer that look at that as a 2025 5 billion.
Speaker Change: Can't sit here and say right now that we've got.
Speaker Change: In the in the queue to continue to look out at.
Speaker Change: If that number is $5 billion, but if it is with these kind of returns we will surely.
Speaker Change: Keep looking at that but and in fairness.
Speaker Change: It's not one that were right now putting any guidance out. So we're going to continue the strategy here of both the M&A and the organic growth projects and we think we're go ahead and get a good complement in for.
Speaker Change: The team we have across the board.
Speaker Change: Integration is.
Speaker Change: Abilities are second to none.
Speaker Change: A great job of getting these integrated quickly and start looking at all the opportunities that we find once we integrate them. So the M&A. Once again, it's still plays a big role in our growth as we look out.
Speaker Change: Great I'll leave it there thanks Tom.
Speaker Change: Thank you.
Speaker Change: The next question will come from Jean Ann Salisbury with Bank of America. Please go ahead.
Speaker Change: Hi, there are more competitors really making investments to grow in the Permian NGL kind of pipeline frac and export space.
Speaker Change: There's a ton of NGL pipeline capacity coming on this year and it's more LPG export capacity recently announced by a new entrant.
Speaker Change: Getting too crowded and are you worried about returns following in the segment over the next few years and I guess as a follow up.
Speaker Change: Is there a need to be more consolidation in the NGL integrated and uba to stop that from happening.
Speaker Change: Start with the second part and I'll mail starting.
Mackie: This is mackie again.
Mackie: We're always going to see competition.
Mackie: Of course and we.
Mackie: Certainly don't dwell on a worry about what our competitors do or what their rates of return on what risks they might be taken we we focus on our customers. Our producers are markets and didnt build assets to fit the.
Mackie: The services they are asking for so we feel very good about everything we've announced we feel very good about slowly ramping up and filling up every asset that we have whether it's <unk> or our NGL pipelines.
Mackie: Certainly we look at that very closely so that we stay ahead of it if we see a year or two down the road, we're going to run into capacity problems, we certainly address that and youll see that from time to time, but new projects gathers.
Mackie: LPG project I guess, it's at Texas City, that's going to be built in four or five years, not really concerning because one of the advantages that we have.
Mackie: We've had a kind of volume since we started this company years ago is that once we build assets and we're able to provide some interim service for somebody that wants.
Mackie: That particular product for example.
Mackie: We can build on that so for example.
Mackie: As some of these new LPG.
Mackie: These are being built over the next four to five years will be negotiating and happening.
Mackie: Long extensions added to the existing business, we add in new business that we.
Mackie: We develop over the next three or four years. So you may not be a lot of market available for some of these projects that are coming online in 2829, because a lot of that is under contract, but once again, we don't worry about what they're doing we worried about our business our returns taking care of our customers and growing this partnership as we have consistently for the last.
Mackie: Many years.
Mackie: Okay got it quickly.
Mackie: I'll chime in quickly on the second part of your question as far as the consolidation.
Mackie: You were asking around the natural gas liquids.
Mackie: When we're looking at various opportunities and what Thats the beauty of once the energy.
Mackie: Energy transfer once again is where.
Mackie: We participate across all the commodities natural gas natural gas liquids and crude oil and I don't mind, telling you that when we look at this stuff we do as far as M&A goes we do look across all the commodities when we do it because.
Mackie: The fact that we.
Mackie: Can consolidate these things and find a lot of opportunities. So yes is the short answer to your question on the consolidation in the NGL space.
Mackie: Great. Thanks, a lot for that color.
Speaker Change: The next question will come from Michael Blum with Wells Fargo. Please go ahead.
Michael Blum: Thank you good afternoon, everyone.
Michael Blum: Wanted to go back to the data center strategy conversation.
Michael Blum: First question is really how much when you look at the opportunity set how much do you expect to be front of the meter versus behind the meter.
Michael Blum: Great question and were.
Michael Blum: Depending on the customer walking through that now for example, we've got actually one customer that intends to tie to ERCOT pretty large customer in the DFW area, but they will have 100% backup generation in the event they lose ERCOT power and that situation as all of the data centers, we have such an advantage because of our <unk>.
Michael Blum: Against pipe multiple big inch pipes in North, Texas, and our access to a significant amount of that.
Michael Blum: Storage so.
Michael Blum: That's one example, that's when we're talking about now is behind the meter, but I would say probably.
Michael Blum: Weighing it is going to be more of behind the meter where the natural gas power generation will be the primary source of electricity with a lot of redundant other sources of backup power, but that will be I would say the majority of them will be that type of <unk>.
Michael Blum: Project.
Michael Blum: Great.
Michael Blum: Helpful and then I guess for.
Michael Blum: Behind the meter is this cloud where steel representative the size of deals that youre seeing on average and would you consider also building the power.
Michael Blum: I would like to generation component.
Michael Blum: If a project if that opportunity presents itself.
Michael Blum: I'll start with the second half how we answer those questions. If there is nothing that someone would ask us that we won't look at so.
Michael Blum: Is that a line of business that we want to go build power plants, not really what we do other than the ones that we've announced publicly because they make sense from a reliability for our assets in critical areas.
Michael Blum: And shortage of electricity so.
Michael Blum: So yes, if someone came to us and it was a project that we've got our arms around it made sense had a great rate of return met the hurdle, we provide the natural gas may even help out with our electricity team of marketing any excess power sure we'll look at that.
Michael Blum: Forest.
Speaker Change: The typical hard to say I would say this is pretty representative it might be kind of on the high end if they really do approach two gigawatts.
Michael Blum: We certainly are chasing a number of them significantly less than that.
Michael Blum: I think probably a pretty good range as kind of the 600 megawatts to one two gigawatts is probably a pretty good range. There are some outlier.
Michael Blum: Smaller than that and even larger than two gigawatts, but thats, probably a fair representation of kind of in the fairway of with a lot of them.
Michael Blum: Great I appreciate it.
Speaker Change: The next question will come from Gabe Moreen with Mizuho. Please go ahead.
Gabe Moreen: Hey, good afternoon, everyone can I ask you about some of the buckets for 2025 guidance and you've got the commodity bucket and then the spread the spread sliver as well can you just maybe talk within those I think NGL prices in that gas prices clearly it's much better this year than last maybe what's the delta is in your guidance versus last year, and then to what extent.
Gabe Moreen: That may or may not be offset by one basis compressing going into 'twenty five.
Gabe Moreen: Yes.
So when we look at the guidance for this year like always we're looking out over the forward curves and I'll reason, though this will really set the basis there.
Gabe Moreen: Commodity price assumptions and so.
Gabe Moreen: I think as you as you alluded to one of the headwinds is that while our basis as we look out over the curves here.
Gabe Moreen: We don't see nearly the basis that we saw last year now obviously, that's going into our guide gives us.
Gabe Moreen: Some upside if things do get tight through the year and those spreads blowout that obviously pushes up there to the higher end of the range of that.
Speaker Change: Thanks, Bill and then maybe if I can ask about an update on the south Mississippi prospects and where that might stand.
Gabe Moreen: Yes, you bet.
We had a really good open season there've been a couple of other projects and now Fortunately the primary markets that we're targeting have nothing with those projects. So we are very bullish on that project happening at some point, it's not something that's going to be overnight. We do have significant customers that are willing to two.
Gabe Moreen: Step in today for material volumes. However, we don't have the kind of commitments to get us.
Gabe Moreen: Theres other projects other things that we're working on that will feed that project, but we are very optimistic that that project is much needed.
Gabe Moreen: Significant market pull and the southeast it will do nothing but grow like a lot of the markets in the south and we're very optimistic that that will start to pick up momentum certainly by the mid to the last half of this year.
Matt: Great. Thanks, Matt.
Gabe Moreen: Okay.
Gabe Moreen: The last question will come from <unk>.
Gabe Moreen: Jacky <unk> with Goldman Sachs. Please go ahead.
Gabe Moreen: Hi, Good afternoon. Thank you for your time.
Gabe Moreen: <unk> could you walk through more of the drivers there puts and takes at or better than guidance for 25.
Gabe Moreen: How much of that guide includes implied synergies or optimizations of recently acquired assets.
Gabe Moreen: Buck with potential.
Gabe Moreen: WPZ acquisition potentially starting to flow more meaningfully into Ngls. Thanks, Alright.
Gabe Moreen: Yes, so as we look out over the guide for this year.
Gabe Moreen: Thanks.
Gabe Moreen: We will include the full year of <unk>. So we got about extra six months of that.
Gabe Moreen: We do we do have some downstream synergies from that although.
Gabe Moreen: I think they don't materially ramp up here on the downstream synergies throughout 'twenty five and it thus far as we go down in 2006 and beyond that we really see the material ramp up in those downstream synergies.
Obviously, the fall full year impact there in midstream.
Gabe Moreen: Also pick up the full year extra four months of.
Gabe Moreen: <unk> that will come through our investment in Sunoco.
Gabe Moreen: A couple of out of the big Big drivers here.
Gabe Moreen: <unk> flex for coming on here in the back half of the year. So that'll start to start to contribute and really meaningfully ramp up as we get into the fourth quarter here. So.
Gabe Moreen: With growth projects like that coming on along with some additional permanent processing.
Gabe Moreen: Within the full year number you will see that really start to accelerate through the through the end of the year in the fourth quarter as these projects come on.
Speaker Change: Got it thanks, and just one last one on going back to Lake Charles you still have this SBA is from.
2019, 2020, how you think about the rate of those contracts given that we're in a new cost regime.
Speaker Change: Potentially billing about restructuring noticed with your customers.
Speaker Change: All are there.
Speaker Change: Yes, we don't like those prices. So yes, we are renegotiating those.
Speaker Change: There were 89 million tons, we had negotiated we are in negotiations with every one of those.
Speaker Change: To my knowledge not one of those is backed out yet.
Speaker Change: Nobody understands what the costs have risen and we are in.
Speaker Change: Continued negotiations with those to renegotiate their fees as well as.
Speaker Change: I mentioned earlier numerous other customers that are more in today's pricing realm of what worked for our project.
Stephanie: Alright, thanks, so much Stephanie.
Stephanie: This concludes our question and answer session I would like to turn the conference back over to Mr. Tom long for any closing remarks. Please go ahead Sir.
Speaker Change: <unk> make one quick comment I, just want to say because we got a lot of our E&C guys in here operating team in preparing for this and kind of looking what Kelsey leadership over all the years, what we build how you sit and look at our pipeline you look at our assets throughout the U S. How incredible is I know you all follow us and a lot of.
Stephanie: Our peers, but.
Stephanie: Thought about look this morning thinking golly, what if I was looking at the math. It just had a bunch of crude pipelines on it.
Stephanie: I was looking at a map they had a bunch of interstate gas pipelines that ran across the eastern seaboard or etsy.
Stephanie: Et cetera, et cetera, and I know you all appreciate it but man what a diverse group of assets that complement each other in so many ways throughout all of the major basins in the U S and how fun it is to kind of be the lead commercial.
Stephanie: With this partnership managed a lot of fun and we appreciate everything hereby does on this call to support us.
Stephanie: Yes, let me. Thank all of you for joining us today, and we look forward to any follow up questions. Thank you everyone.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].