Q2 2025 ONEOK Inc Earnings Call
Good morning, everyone, and welcome to the ONEOK conference call.
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please also note, today's event is being recorded
At this time I'd like to turn the floor over to Megan Patterson vice president investor relations. Ma'am. Please go ahead.
Thank you, Jamie.
Materials are available on our website. After our prepared, remarks management will be available to take your questions.
Statements made during this call, that might be in that might include 1 of those expectations or predictions, should be considered forward-looking statements and are covered under the Safe Harbor. Provision of the Securities Act of 1933 and 1934.
Actual results could differ materially from those projected and forward-looking statements.
Or discussion of factors that could cause actual results to differ, please refer to Our Success filing.
Just a reminder for Q&A, we ask that you limit yourself to 1 question and 1 follow-up to fit in as many of you as we can.
That I'll turn the call over to Pearson Norton. President Chief Executive Officer. Cheers.
Thanks, Megan. Uh, good morning and thank you for joining us.
On today's call is Walt Paul's, our Chief Financial Officer, treasure and Executive, Vice President, investor relations, and corporate development.
And shared in sports Executive, Vice President and chief commercial officer.
Also, on the call are Kevin Burke Executive Vice President and chief Enterprise service officer and Randy. Lynce our Executive Vice President and Chief Operating Officer.
Yesterday, we announced higher second quarter results and affirmed our 2025 Financial guidance ranges.
Which were originally provided in late February.
Our second quarter adjusted evida increased 12% compared with the first quarter highlighting, the continuation of incremental, Synergy capture, increasing supply, and demand strength.
As we exited the winner.
We saw accelerated volume momentum through the seasonal improvements across our operations driving. Sequential quarter growth in NGL and natural, gas processing volumes across all regions and increasing refined products, demand.
The sequential EVA dog growth we experienced this quarter was consistent with our expectations at the beginning of the year.
And begins to demonstrate the potential earnings.
Bringing these assets together.
As we continue to navigate and evolving macroeconomic landscape.
And shifting market dynamics, we believe that energy sector remains resilient with domestic, and Global demand for US Energy. Continuing to be well supported.
Producers across our acreage continued to execute their 2025 drilling plans and drive efficiencies in their Drilling and completion techniques.
We're monitoring the 2026 market dynamics closely.
While continue to execute on our growth strategy and support supply and demand Market needs.
Our focused Investments on high return organic projects, such as the bands, Elk Creek liquids pipeline.
West Texas, NGL Pipeline and Denver refined products pipeline expansions and the metric. Fraction East facility provides significant operating leverage and position us to capture incremental growth.
Across our Assets in the Wilston, Basin, the Powder, River, Midcontinent and permanent basis.
Today, we are announcing a final investment decision on a new natural. Gas processing. Plant in the Permian Delaware, basin,
For other expanding and enhancing our presence. And what is a key? Strategic area for 1 Oak.
Shelving will provide more details on this project and our permanent growth strategy in his remarks.
Our Acquisitions are delivering tangible benefits as we continue to make meaningful progress on acquisition related, synergies and organic growth.
Our continuously integrated assets Diversified business, mix and strong balance sheet provide flexibility enable opportunities even during changing market dynamics.
As always, we're remain intentional and disciplined and our approach and capital allocation as we evaluate future opportunities.
I'll now turn it over to Walt and Sheridan to provide their financial and Commercial updates. Well,
Thank you, beers.
Second quarter 2025, net income attributable, to 10 totaled, 841 million or 1 dollar, and 344 cents per share more than 30% increase, compared with the first quarter.
Second quarter, adjusted even Dodge on both 1.98 billion or 2 billion dollars. When excluding transaction costs of 21 million dollars which is consistent with the approach used in our guidance.
The Acquired and Linkedin Medallion assets. Delivered nearly 450 million dollars in adjusted Eva during the second quarter contributing to a strong year-over-year earnings growth.
the end of the second quarter with 97 million in cash and no borrowings outstanding under our 3.5 billion dollar credit facility
during the quarter, we reduced our senior notes by nearly 600 million including more than 400 million dollars of notes, paid at maturity,
Year to date, we've extinguished nearly 850 million in senior notes. Underscoring. Our proactive approach to managing debt and clear progress towards achieving. Our long-term leverage Target of 3.5 times which we expect to reach in 2026
Was yesterday's earnings announcement. We affirmed our 2025, Financial guidance, ranges, including net income attributable, to 10 of 3.1 billion dollars, to 3.6 billion dollars and adjusted. Even uh, range of 8 billion dollars to 8.45 billion dollars.
Our expectation to achieve results within our guidance ranges.
reflects current market conditions and the supported by producer performance recently, completed projects,
Increasing seasonal demand for refined products and the timing of acquisition related synergies.
While the market environment and commodity price outlook is different today than when we originally announced financial guidance in February, we continue to see resilience and producer activity across our operations and benefits from our integrated system.
We also remain on track to realize approximately 250 million dollars of synergy in 2025.
Consistent with our Guidance, with significant additional contributions expected in 2026.
Our 2026 Outlook also provided in February was based on commodity prices at the time.
Given current market conditions. We believe our 2026 outlook for adjusted Eva should be adjusted downward by approximately 2% or 200 million dollars to reflect current commodity prices and resulting spread differentials.
We continue to expect year-over-year mid to Upper single digit ibid dog, growth in 2026.
We are tempering our previous Outlook based on the cautious macro environment.
In addition to our future earnings growth. We also reviewed our tax position following the recent tax, legislation and expected. A benefit of more than 1.3 billion dollars in lower cash taxes over the next 5 years, due primarily to enhancements related to bonus, depreciation and interest expense deductibility.
Our commitment to investing in infrastructure that strikes and strengthens energy security, and resilience. The enhanced tax provisions and enable us to immediately expense the full cost of qualifying Investments.
We now don't expect to pay any meaningful cash taxes until 2028, which is a year later than our previous expectations.
Additionally, we expect our cash tax rate in 28 and 29 to be less than the full 15%, corporate Alternative Minimum Tax Rate, which is lower than our previous expectations.
This increase in expected free. Cash flow will enhance our flexibility as it relates to Capital. Allocation
Now, turn the call over to Sheridan for a commercial update.
Thank you, Walt. During the second quarter, we saw a significant rebound in volumes, falling normal and expected first quarter seasonality.
We experienced strong sequential quarter growth, coming out of the first quarter with higher natural, gas processing, volumes and double-digit NGL growth Pro across all regions.
Taking a closer look at the natural gas, liquid segment.
Total NGL Raw Feed, throughput volumes, increased 18%, compared with the first quarter.
Rocky, Mountain region volumes. Averaged, nearly 470 thousand barrels per day. A record for the region, driven by increased ethnic recovery, and higher Propane Plus volume. Compared with the first quarter of 2025,
Midcontinent and permanent NGL volumes both increase, 20% compared with the first quarter supported by a higher ethnic recovery levels, and proved seasonality and newly contracted volumes beginning to ramp up in the permanent basis.
During the quarter, we experienced lower fractionation utilization due to maintenance, which resulted in a $13 million impact in the second quarter from unfractionated in jails and inventory.
Fractionate these NGLs and recognize their earnings over the next two quarters.
We saw minimal impacts from ethane export disruptions during the quarter.
The importance of ethane to the global market was evident during this period. And it's clear, there is a strong demand for us ethane in the global market.
We continue to see opportunities for economic recovery across our system for the balance of the year.
To build out of connectivity, between our model view and Conway NGL platforms, and our strategic Houston, and mid-content, refined products assets remains on Pace.
All 3 critical Houston connections of Lena Park East Houston and our Pasadena MVP joint venture are expected to come online in the third quarter of this year.
We have a strong line of sight to these pipelines operating at high utilization and delivering earning contributions in the first quarter and in the fourth quarter of this year. With executed synergies rated to our liquid blending business, we expect record blending volumes in 2025 and 2026.
Our Texas City LPG. Export joint venture is also progressing as planned and we continue to have a lot of interest from customers on this strategically, positioned Wellhead to water solution.
Moving on to the refined products and crude segments.
Second quarter refined product volumes increased sequentially as seasonal, demand picked up.
We expect continued demand growth in the third quarter as we've entered Peak summer travel season.
Diesel and aviation fuel volumes have remained strong during the first half of the year, and we expect that to continue for the remainder of the year.
Regional supply disruptions in mid-competence tempered gasoline volumes during the quarter. However, long-term recovery followed the completion of refined REM maintenance in late spring.
Following the July tariff rate adjustments, we increase our refined products rate by mid-single digits, as expected.
Our refined products pipeline to the Denver area is on track for a mid 2026 completion. And we're currently seeing record jet fuel volumes into the Denver International Airport.
turning now to our recruitment business,
our gathering and Long Haul assets to continue to perform with Wellhead Gathering volumes on our Medallion assets up, approximately 20% year-over-year,
Decrease in crude volumes compared with the first quarter of 2025 was due primarily to low margin exchange volumes.
These volumes have significantly lower rates than, will that Gathering or a long haul shipments. So they're earning impact was not Material.
Moving on to the Natural Gas Gathering and Processing segments.
Volumes increased all regions compared with the first quarter 2025 with producers. Increasing activity, coming out of winter.
Looking first at the Permian Basin.
Falling 4% growth in volumes. In the second quarter, we reached 1.6 billion cubic feet per day. In July currently, we have 12 active rigs on our dedicated acreage for finding the line of sight to filling our existing processing capacity in the region and driving the need for additional capacity.
In addition to our already announced 150 million cubic feet per day, relocation to the Midlands and approximately 75 million cubic feet per day of low-cost expansion that exists at existing Delaware facilities. We've also reached fad on a construction of a new plant in the Delaware basin
The new Big Horn plant will have a capacity of 300 million cubic feet per day, with the ability to treat high CO2 gas.
The plan and treated the plant and treated are expected to cost epoxy 365 million.
Big Horn is supported by acreage dedication, and an expected to be completed in mid 2027.
These grow opportunities will increase 1 Oakes processing capacity in the Delaware Basin to 1.1 billion. Cubic feet per day with a little over 700 million, cubic feet per day. Currently and will position 1 0 for additional growth opportunities, is in the Basin crossed, our value chain.
The Permian Basin continues to be a key area, strategic growth for us. And we will continue to be actively engaged in intentional, and assessing opportunities to expand and enhance our integrated operations within the basin.
In the mid-content, there are 12 Rags running on our dedicated acreage in Oklahoma and a number of projects underway to connect and offer optimized Assets in the region.
Resilience.
Rocky Mountain region, processing volumes, averaged more than 1.6 BCF per day in the second quarter of 2025 at 4%, increase compared with the first first quarter.
We saw a ramp and welcome completions in the second coordinator compared with the first quarter and expect the same level in the third quarter, reflecting the normal seasonality, we see in this region.
There are currently 15 rigs on our dedicated Anchorage.
It's Pearson Walt noted that produces a cost or operation remains resilient, and the effectiveness they have gained in recent years are being highlighted in this environment.
I'll close with our natural gas pipeline segment, which continues to outperform compared with our guidance expectations.
Approximately 75% of the outperformance is tied to Legacy inlink assets and our ability to optimize that system.
As demand for natural, gas continued to rise, particularly ready to power generation and Industrial demand. Our footprint is uniquely positioned to meet that growth and where an active conversation with customers to support project developments through direct connections. We are also welcome positioned to benefit from increased demand, demand tied to LNG exports in Louisiana.
Fears that concludes my remarks.
Thank you, Sheridan and Walt. Uh, I want to begin by thanking all of our employees.
Their efforts and commitment to Bringing together our assets teams and ideas as evident in the strength of our day-to-day operations.
Solid results. We continue to deliver.
1 of remains. Well, positioned in today's market environment to continue, delivering long-term value, to our stakeholders.
The balance sheet.
Stable and long-standing customer base.
The Diversified earnings across our integrated value chain.
And the dedication of our experienced and Innovations employees. We're focused on running our business sufficiently and providing essential products and services that make a difference.
Just as important as what we do is how we do it with a steadfast commitment to safety.
Integrity and responsibility.
In that spirit, I am pleased to share that our 17th annual corporate sustainability report.
Will be published on our website this week.
I encourage you to take a look and see the measurable progress we've made on our sustainability Journey.
While our Workforce and operations have grown significantly in recent years.
Our commitment to our core values is never wavered.
Together. We're delivering the energy. That makes a difference in how we live
We move communicate and learn across the US and around the world.
Shared purpose that creates value for all of our stakeholders.
Operator. We're now ready for questions?
Operator, can you hear us?
And ladies and gentlemen, at this time, we'll begin the question-and-answer session.
To ask.
A star and then 1 on your touchtone phones, if you are using a speaker-phone, would you ask me please? Pick up the handset prior to pressing the keys to withdraw your questions. You may press star and 2
We ask that you please limit yourselves to 1 question in a single follow-up. At this time, we will pause momentarily to assemble our roster.
In our first question today comes from Spirit. Please go ahead with your question.
Hey, thanks. Operator morning everybody. Um, first question, maybe just start with the 2026 Outlook. Uh, can certainly sympathize with the uh changing the environments since February. And well, I guess I'm curious. How lean you described this. This revised Outlook. I think you said mid to high single digits, and if you could, maybe just provide a little bit more color on. How much of that growth is hardwired by either contractual volumes synergies cost Savings. In other words, things that don't necessarily rely on volume growth.
Oh uh, this is Pierce. Let me
Uh, take a shot at that first, and then I'll pass it to the wall. I'll have some additional color, but I think you hit on it, which is, you know, when the volatility in the market, uh, the spread differentials that uh, have tightened, uh, in comparison to those that we used as assumptions that we use for that 2026, Eva Outlook,
Uh, as we said in the script, we continue to work with our producers and understand their 26 plans as well. You know, in a kind of up and down, commodity Market specialist related to oil prices. So, given both of these factors, you know, we did lower our 26, uh, you know, or 26 Outlook by around 2%, or that 200 million dollars as well. Said, in his in his remarks, I'll turn it over to him for
Yes, Sparrow. The, the uh,
the, the
Strength here in our 2026, uh, Outlook really comes from the fact that we have a number of projects that come on, uh, in 2026, including the refined products, uh, expansion. Um, we'll start to see the ramp on the west, Texas LPG, um, but more importantly, the connections of East and and the, uh, some of the other connections between our, uh, refined products and NGL business,
those, uh,
connections are expected to provide more of the incremental uh, increase over 2025 than producer activity. So it's really, uh, a benefit from these, uh, ongoing synergies layering in and then, uh, producer activity on top of that.
Right. That's that's helpful color. Uh second 1 maybe just go into natural gas. Uh Sheridan. Like you said, oh seems to be a bright spot especially now with with these enlink Assets in there and I guess I'm just curious 2 part question here. 1, just give us a little bit more color on exactly what's driving that. And if it's become something readable enough to maybe start including in the forward guidance, and then you also mentioned data centers, and and Ai and power Demand. On the back of your comments there, uh, still in in discussions, just curious, you know where you are, maybe Innings wise and those discussions and when we should expect an announcement on that front.
Levels. But what we've learned through that is, it's not done till it's done, but we are actively in the participating. In some Southern, we think are further along than others. But we've been in this business long enough that they can change on a dime. So, we we're still very optimistic about that on the industrial side. We have actually contracted some people over on the, um, Mississippi River quarter, where we think, we have a big Advantage having that last pipe in there, and that will start coming on over the next couple of years and none of them are huge. But you do enough of these little ones, they make it, they can make a
A pretty big difference. Then when we look at the inlink assets, we just know, as we continue to to, uh, um, integrate and look at how by bringing in a different mindset to their assets and looking at it differently and how we utilize those assets, we are starting to see some proof, pretty big, um opportunities as you're seeing coming out. Um as we continue to grow that, uh some of that can be a little bit related to spread other ones are going to be volume. And we continue to the team continues to work on that. And to bring more of it to a steady state that we can continue to protect out over over the next couple of years. So I think you'll see that. You'll see that in our guidance, when we come out in 26, but that that's we've been very. We've been very, um, excited about the natural gas business. I think I said early on that. Um, we did put a whole lot of weight on the Louisiana side of the natural gas business we bought in link and it it as you can see from the numbers it's really starting to perform
Right. Helpful color. I'll leave it there for today. Thanks everyone.
Our next question comes from Jeremy tene. From JP Morgan. Please go ahead with your question.
Hi, good morning.
Morning, Jeremy. Jeremy.
Uh, I know in in the commentary describe Synergy capture picking up in the back, half of 25. I was wondering if you could provide a bit more color on specific opportunities in how that I guess uh you know, feeds into confidence in the guidance range but any, you know, kind of a concrete examples. There in in, what's coming together? Would be helpful, thanks.
Chairman shared it. So, you know, we bought the Eastern Assets in 2024, and we came out and said we were going to be connecting or in jail.
Assets, that won't build you into the refining products assets, that we bought from the jail and, and you're seeing that starting to come through that's going to be done here at the end of this quarter and that's going to do 2 things for us. That's going to create more volume for us to be more NGL volumes to blend and also be able to reduce our cost to be able to blend which even creates more value.
When you to be able to blend, if the, if the spreads are there. So that's what you're seeing in the Eastern assets. Also in the Eastern assets. If you think about going into, uh, MVP and Galena Park will be able to actually sell that product to some of our customers at that location, giving them a better product at that location, a better service offering. And obviously, they'll move a lot more volume in there. So we're going to see some pickup in in both blending and, um,
Tariff as those assets come back on, then as we look into 2026, we're also doing this same thing up in the mid continent, where we're connecting our Conway assets into our mid-content refining assets. So, once again, we can make sure we have the right amount of volume there. When the blend opportunity is there, we can reduce the cost of getting that butane to that location, which allows us even to push it out further on our system. And these are kind of the last big projects that we have of the blending. Um, aspect of the melan acquisition. We've done other ones and put them in service. And if you remember in my comments, I said, right now, in 2025, we're expecting record. Blend volume on our system in 2026, we everything. Looks like we will beat that volume as well. The 25 volume and 26.
Got it. That's helpful. Thank you. And then just wanted to Pivot towards Bridge text here. I was wondering if you could provide a bit more color on, um, you know, economics there in you know, synergies as as well. Uh, and will you be consolidating Bridge Tech.
Well, Jeremy, you know, we were opting opportunistic here. We had the opportunity to increase our Holdings from 30% up to 60% and very attractive multiples. Compared to recent transactions in the marketplace. Um, you know, given the connectivity to, uh, her Medallion, uh assets. We really thought that that made a lot of sense to to continue to to uh get more of that, that business. Um, no, we will not be consolidating it uh, going forward because we still have a a governance structure. Um with our, our other partner there that uh, keeps it, more of a 50/50 type of, uh governance.
Thanks.
And ladies and gentlemen, our next question comes from, Teresa Chen from Barkley's, please go ahead with your question.
Morning. Um, looking at the downstream, uh, side of things on NGL, your largest competitor in perion, NGL infrastructure. Um, has publicly disparaged the economics of new LPG, export facilities, do you care to respond to this and how has the commercialization progress been for your JV, Texas, City terminal?
What I'd say is what we said earlier. If we're not going to talk about infield contracts or whatever, but we have had a lot of interest in our doc
I'm going forward and this is out of the 2028 and and the big reason for this interest is really our by far premium location. Um, outside of the Houston Ship Channel right next to an hour away, hour or 2 hours away from buoy zero. It's a much better logistic location. So right now, we are seeing rates in line with what our estimated economic source. So we are still very excited about this project going forward.
Teresa this is Pierce. The only thing I would add to that is
You know, if you look at the LNG exports, you look at the AI demand uh that additional volume.
And whatever that number is going to be whether or not that's 14 BC up a day or higher. Um, a significant amount of that is actually going to come with liquids and you can actually calculate, you know how much liquids it's going to come with that additional volume. And we do think there's going to be plenty of propane and butane out there to, uh, to ship globally.
It's a very helpful. Thank you. And looking at the volatility that we've seen, um, year to date and commodity prices, would you expand a bit more on the activity and expectations? You have on GMP following, um, by Basin and what those conversations with your producers look like at this point.
Sure Teresa, um, what I'm saying is in in the Balkan right now or Vlog, we're still looking to be in our guidance range but overall Rick pants have stayed steady this past year and producers are continuing to drill the longer laterals.
Um, we're using the, which reduces the number of Wells, we need to connect to hold, or grow our volumes. And, uh, the other day we were in line with, with about 30% of our well, connects being 3, Mile laterals. And we still continue to have very active discussions with producers or where they are and trying to wait and see where they come out, where they're going to be in, uh, 2026. But obviously we've seen some pretty good ramp up from first quarter to second quarter.
if we go down, look into Oklahoma, we're still seeing strong activity across our footprint, specially in the Cherokee formation and you saw that we were up 9% um, first quarter to second quarter and we continue to benefit from bringing the inlink and and like the 1st and the synergies we're driving through there that helps us expand, not only on our footprint out there, but be able to access some of our um,
All of our capacity in our system, and especially being able to prioritize our higher efficiency capacity at the end.
Did you did you move to the to the premium you were seeing volume ramp to the second quarter? Obviously, we kind of, as we said, last time we were a little slow kind of coming out of the gate, but we caught up pretty quickly. And that 1.6 BCF. We're in line where we thought we'd be at this time. And and, and continue to move forward. There are a couple less rigs in the Midland right now, but the Delaware seems to really be ramping up and obviously we're moving in. That's why we FID to this new plan, as well as some new expansions, uh, low-cost expansions out in the Delaware. Some
Out there. We see a very long runway for for growth. And, um, so here coming up pretty soon, we'll have all the new expansions
uh, in the Midland with that new plant coming down, that's backed by acreage dedication and
And falling from existing producers. And then here in 2027, we'll see the new Delaware King plant coming online. So even though we're seeing a lot of volatility in the market, producers for right now seem to be fairly steady or fairly resilient.
Excellent. Thank you for that. Detailed answer Sheridan.
And our next question comes from Michael Blue from Wells Fargo. Please ahead with your question.
Michael, we, we, uh, continue to see the volume on that increase as we continue to go forward. Obviously, that it, it heads that pipeline heads right into our East Houston facilities. So it also feeds our Downstream assets as well. Um, we continue to see growth and and crude oil volume out of the permit. So we think they'll continue to lead to more volume on the system and also with has having a larger share. We're also makes it more advantageous to us to direct our going.
Our going coming off of our field Gap Gathering to that system as well. With some of that wine was going down some other pipelines. So, obviously, we wouldn't have increased our stake in there. And unless we were very excited about what we see going forward. And and I think you're you're seeing the benefit of our integrated assets with the melanin and Inland crude systems together. Being able to feed the pipelines of their choice and not just go into the um other third-party pipelines that we capture more value. Not only get it on our pipeline, as I said, but also feeds into our East Houston and big crude oil Distribution Center where we get additional value Downstream.
Got it and then wondering if you can uh give us an update on West, Texas, LPG, uh kind of where it is volume utilization stand today and and how do you see the path? Uh, filling that up? And is this latest uh, processing plant, you announced part of that. Thanks.
Michael, if you remember on that West, Texas, LPG, when we, we contracted that with a base set of volumes that did not fill up the pipeline, that gave us a nice rate of return. And we're continuing to hook up, plants, it was coming online and delivering it as well. Obviously, as we bring on the shadowfax, um, plant that's moved out of the Barnett into the Midland, that will add more bombs, still volume, onto our NGL pipeline, the 70 million a day, 7075 million a day of low cost expansion in the Delaware, where add more ngls to the pipeline and this new plant, or also add more angels to the 5 flag. But we're also still in discussions with a lot of third-party plants to uh, continue to contract them up as well.
As we've said before, we think we have a pretty long Runway with this uh very cheap capacity coming out of the out of the, um, permanent. And then you add on that when we get the Metro fractionator up, which is is very low cost.
NGL fractionation capacity expansion. We continue to be able to not only maintain our market share out there but grow it, not only on the G&P side but on the Intel side.
Thank you.
And our next question comes from Gann Salisbury from Bank of America. Please go ahead with your question.
Hi, good morning. Um, rex have come down a bit in the back and I was just wondering if you have a sense of whether producers are high grading to oilier acreage, um, in the current environment, um, or or if you would actually kind of expect gas to oil ratio to, to increase, um, over the next year, and kind of offset uh perhaps some of the lower growth.
Well, I I think we'll, as we said, I think we'll always continue to see gas oil. Ratios continue to tick up as a system naturally of all the bases that will continue to have happen. Um, we are with some consolidations up. There we are seeing some people making sure um, where they're going to drill and what they're going to go forward and where they're looking at it. And obviously, we're in conversations with that. But what, you know, really they drill in? Now takes more of a bigger impact and the next year, before it's a world where we're in the conversation with those continue to look forward. But some go down some go up. Um,
As we continue to go forward but uh that's still a very much a a basin that a lot of The Producers up there. It's a very key Basin for them and they're going to continue to want to play an active part in that area.
That makes sense. Uh, thank you. Uh, and then, um, obviously 1 of the major synergies from the mellan acquisition has been butane blending. I know this comes off on every call, um, but could you just give a little bit more detail on kind of broadly? How much of it is just recurring? Almost Midstream Revenue? That wasn't there before. And how much of it is a more volatile marketing, uh,
Spread that's based on the the spread of pricing.
Well.
Um, what I would tell you is is in in 2025, where you can see that we're not seeing the same level of spread.
Compression. We've seen, we've been in makeup and going which gives you a great option as far as spreads continue to widen, you'll see an upsize in earnings when those spreads are more at a wider level.
That's, that's super helpful. Thank you.
Our next question comes from Manov Gupta from UBS. Please go ahead with your question.
Good afternoon. I just wanted to go back and check on the delivered basing GV. I think you closed the important remaining 409.9% for $94 million. Can you talk about the benefits of this transaction at this point in time?
Sure. Well, we, we clearly have a, uh, a strong interest in growing, our Delaware position. Um, uh, We've made a move their announced on this call so, uh, adding another plant in the Delaware. So it, it made a lot of sense to, uh, go ahead and buy in that joint venture Partners piece. Um, I think clearly we, uh, uh,
Didn't expect to do it quite as quickly as we did, but the joint venture partner, you know, was ready to move on, be private equity. They had been in it for quite some time. Uh, so we went ahead and did that at an attractive multiple, and it now gives us the flexibility to grow that business, making our own decisions, allocating capital where we want.
To when we want to, how we want to. So it's really, uh, uh, enhanced our flexibility, built the business, and set the platform for growth going forward.
Thank you. And I'm sorry for asking this to address a minute of silence on my phone. For some reason, I'm having technical difficulties. If somebody's already asked this, can you talk about the LA Creek pipeline expansion? Is it still scheduled? And when should we expect that to help at full capacity? Thank you.
The Oak Creek pipeline expansion is fully completed. We are at, um, over 400,000 barrels a day. I think it's 435,000 barrels a day; that's the capacity on the Oak Creek Pipeline. When you combine that with the Balkan pipeline, we're at 575,000 barrels a day. So that project is completed; we're completely done.
Thank you.
Our next question comes from Keith Stanley from Wolfe Research. Please go ahead with your question.
Hi uh, good morning. Want to start with a clarification question. So while you you said Q2 sequential growth was in line with your expectations. I think you said q1 was in line as well. So would you say the midpoint of 2025, IID dog? Guidance, range is still the base case and and what needs to happen to get there.
well, if this is Pierce, uh, we still see
A path to our midpoint. There are kind of two keys to that. We've talked a lot today about spreads, so one of those keys for us to kind of get to that midpoint, maybe even exceed it, is to have some widening of those spreads, especially in our refined products.
Business. Um,
And as, you know, I mean recruited is is down at all. So affects the ARB pricing. Uh, so it kind of squeezes that spread between the the butane and Arbok. And then also just making sure that our producers uh, continue to execute on their 2025 drilling plants. We think that's that's uh, that's in line. Uh, we think that's going to continue to happen. Why don't you do anything to add to that? No, I think that's absolutely right. We see a clear path, the the we could get there but there's also, you know, obviously some volatility in the marketplace with true prices bouncing around. Um, so uh, uh,
need a couple of things to to follow the right direction but we're uh uh
Cautiously optimistic.
Okay.
Thanks for that.
Uh, my second question, I wanted to ask on
The LPG export facility — can you give a sense of how contracted that capacity is at this point and what you're seeing as far as market pricing for LPG exports? Right now, one of your competitors had a somewhat bearish tone the other day.
but,
We definitely think about our locations. Why we went down there has really given us an advantage.
Thank you.
Our next question comes from Brandon Bingham from Scotia Bank. Please go ahead with your question.
Hey, thanks for taking the questions here. I just wanted to ask uh, on capex on the capex front and light of the FID of the processing plant. How much of that, if any is going to be heading 2025 and then just kind of how we should think about 26 verse 25 uh growth spend
Yeah, a very little of it. Uh, is going to, uh, really be hitting 25. I mean, we'll, we'll start the construction but given where we are in the year. Um, you know, you'll definitely see a bigger spend in 26, than you would in 25. Um, you know, capex will give our, uh, our our guidance, uh, as we come out in February. Um, but I think the system with what we've said in the past, we've got, uh, uh, a bunch of larger projects, uh, kind of rolling off, uh, here in, uh, in 26. Um, the Medford project. Uh, you know, spend will start winding down our, uh, Colorado. Uh, refined products project will come to completion. Um, so we'll see, uh, capex starting to Trail.
Downward a little bit from that 26 period in forward.
Okay, thanks, that's helpful. Um, and then maybe kind of a roundabout way of looking at synergies. You've discussed some of the, the bigger things as far as the Eastern system, uh, and and the integration plays there, but just kind of curious if there's any maybe more singles, doubles things that aren't being highlighted, that, that you're seeing,
Uh, could kind of Stack Up and, and really Drive some of that uh, significant capture that you're you're discussing year-over-year.
We're seeing a lot of that we from from all 3 of the Acquisitions. You know, we've talked about some of those um, publicly about how even with Mel and we were willing to spend a little more capital on some smaller projects that had high return but not guaranteed Returns on that. But very high. Those have been in place and are doing quite well, a lot of those little ones you get to mellin and in like we've had synergies between the 2 in Lincoln Miguel and by disconnecting those 2 systems out in the, um,
Out in the Midland where we now have trucks uh crew trucks that were driving past. And in like um station to get to a medallion station or driving past The Medallion stations get to an end link station. So we've reduced those costs to being able to come down. We've uh been we've
Some of the things we do just involve a different mindset. We're buying more of the product on the Medallion system to be able to feed and fill our other pipelines. Our long-haul pipelines were part of the Mellon acquisition to get down into our East Houston terminal, where we have a big distribution system going out and also have an export dock in that area. We continue to go that way in the legacy of the G&P. We're up in the mid. Those assets are sitting a lot on top of each other. We've already had a lot of success where.
Uh, in leak, may have a contract that are, well, comes up, that's a long ways away from them. That would take a lot of extra Capital to get there and they even could be economical. And the Legacy 1 Oak system was close by that. They could hook that system in there and get very attractive rates. We've been able to hide the systems together to open up more capacity that we don't have to spend any additional capital and that makes you more competitive in the marketplace to be able to access, um, more of a going forward. So yeah, there's there's a long list. There's, there's actually probably more little, um, singles and doubles than than the big ones. It's just that they're kind of the same thing and and they're kind of down to the minutiae. But I think you can see by our our what we've been able to do with these assets and our and our results that we are getting a large share of the synergies.
Awesome. Great. Thanks so much.
And our next question comes from senil. Sidal from Seaport Global Securities, please, go ahead with your question.
Yeah. Hi, good morning everybody. So uh,
How does that compare with say previous years?
Typically you don't talk about for competitive or even how much we have has, I would say, we're we're in line where we were uh, last year at this time on the edging activity, we're very opportunistic on that 1 of the from the last question, 1 of the synergies that we have with medal with mellin is that because of our access to normal butane we don't have to lock it in when we buy the normal butane to lock the spread and we can be more opportunistic and see when the normal to arop. Spreads that a level that we like
Then we can lock it in because with our NGL assets, we kind of have butane on demand. That whenever the, our blender see the time to build, they can just call our NGL and they'll put the uh, they'll get the butane form. They'll so they are involved against it. Continue to go forward. So we, we can be very opportunistic on that just overall the spreads have been a lot narrower where they were last year. We still have the opportunity this year, to be able to, um, store product, go from to. So we we don't have to sell it right when we blend it right, when we actually make the blend, we can look out for and see if there's another time to sell it at that time to continue to go forth. So, we still have all those opportunities as we can go forth that we've had last year. And, like I said, we're, we're, we're, we're in line with where we were last year on, um, catching that.
Yeah, one thing I would add is that we spent a lot of time talking about spreads here on this call. I think it's important to put them in context. I mean, we're talking about, um, you know, maybe $100 million to $200 million on, you know, $8 billion plus. So we're talking about 2% variability. It's just when you get to a midpoint, uh, you know, that's putting a pin in the, uh, in the number, a very large number. So variability on our overall earnings of any of these spread relationships.
It's really a material. It's just kind of the noise at the end of the, uh, at the end of the spear. So.
okay, thanks for that. And then on the new processing plan that you've mentioned in in permanent, uh, I think you mentioned uh, 365 million or so of capex later to that. So that's on building the plan and the related infrastructure also to fill up that plan and then how should we be thinking about economics on that? Obviously you know, with your integrated footprint, economics improves. But if you think about, you know, on a standalone basis, how how should we be thinking about economics on that investment?
$365 million is for the cryo.
For the cryo plant, which includes residue compression and other processes, as well as a large CO2 traitor, we are seeing an increase in CO2 levels in the Delaware that needs to be treated. That's an important part. So, we are putting in not just the cryo and the compression at the plant, but also the additional systems to manage this issue.
Also uh, CO2 as well CO2, um, treaty.
There will be, obviously, additional capital that will be spent in routine growth for hooking up wells and stuff like that. But we have that throughout our system, and that's our continual process. We go through.
Continued Capital, go.
Okay, and then, then returns twice anything to highlight.
Could you repeat that? Sorry. Yeah. So I I was wondering, you know, when you think about, you know, return on that investment in that processing plant. Obviously, you got integrated economics, but I was curious, you know,
Just on the processing side, how do the returns on these kinds of investments stack up?
No, we we don't ever get into the specific Returns on on a particular asset, but I think you touched on the key point there is that, you know, the benefit of having, uh, the unlink business, is part of the 1D value, all the way from the field, uh, throughout our our value chain. So, um, you know, it it incrementally is quite profitable.
Got it. Thank you.
And we have a follow-up question from Jeremy today. From J.P. Morgan, please go ahead with your follow-up.
Hi. Thanks for letting me back in just a quick 1. If I could uh as early as the 2026 Outlook, would you be able to share any color on commodity price? Uh, expectations that underpin uh, that backdrop there and is it kind of on the strip and and current spreads or any other uh color you could provide. Thanks.
I'm sure Jeremy. We don't want to set a press it and if you double dip in here but we'll let you in this time. Um you know, basically uh you know, the update, we gave you adjusting that down 2% or the $200 million was bringing it to current market.
So, uh, that's kind of a... as we look through that, that 65-66 approved range.
And with that, ladies and gentlemen, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Megan Patterson for closing remarks.
Thank you. Jamie, our quiet period for the third quarter starts when we close our books in October and extends until we release earnings in late October. We'll provide details for that conference call at a later date. As always, our IR team will be available throughout the day for any follow-ups. Thank you, everyone, for joining, and have a good day.
and ladies and gentlemen, with that we'll conclude today's
Thank you for joining the conference call and presentation. You may now disconnect your lines.